New USSD charge leaves bank customers with new headache

From March 16, users who carry out transactions through the Unstructured Supplementary System Data (USSD) would have to pay a flat fee of N6.98 per transaction to network operators, according to the new pricing regime agreed by the telecom operators and commercial banks.

It is a big win for the telcos that have waited over a year to get their fair share of the thriving USSD market. Banks also get to win because by agreeing to the new regime, they wouldn’t have to bear the burden of paying for the N42 billion telcos say has accrued to them.

While the operators clink glasses, existing users and millions of financially excluded Nigerians would have more to worry about.

“I think this is a good start for both parties. This framework at least established that USSD cannot continue to be free. Free services are not sustainable in any industry,” said a stakeholder who pleaded anonymity to be able to speak freely.

“However, the cost may be too high if passed on to the consumers in addition to all the existing transaction and notification fees,” the person said.

How it started

It had started October 20, 2019 when MTN Nigeria sent a text message to its subscribers informing them of plans to charge N4 for every 20 seconds of USSD transactions. A few of the telco’s partner banks picked up the message and pushed it to customers.

Almost immediately, bank customers expressed their disappointment at the charge which many classified as ‘insensitive’ and an extra burden on the many bank charges they were subjected to.

Godwin Emefiele, governor of the Central Bank of Nigeria, who was attending a conference in faraway Washington, was forced to issue a statement condemning the plan by MTN which would not be allowed to happen.

The CBN governor went to disclose that the apex bank had, in a meeting with some telecommunication companies and big banks sometime in May, “agreed” that the use of USSD was a “sunk” cost. A sunk cost is an additional cost on the infrastructure of the telecom company.

“But the telecom companies disagreed with us,” Emefiele had said. “They said it was an additional investment in infrastructure and for that reason, they needed to impose it.”

The CBN governor said the big banks and telcos were later asked to come up with an option since imposing charges on users was not an option for the bank regulator. The CBN has the objective of making USSD services as seamless and affordable as possible because of financial inclusion.

Ali Isa Pantami, who was then barely four months into his tenure as minister of Communication and Digital Economy, quickly issued a statement ordering the suspension of the planned fee pending an agreement with banks on a way forward.

But all that may be in the past now, at least for the telcos and the banks.

The agreement and its flaws

The decisive meeting which took place on March 15, 2021 reached some resolutions, including that the USSD services for transactions conducted by financial institutions will be charged N6.98 and this price replaces the current per session billing structure. The Nigerian Communications Commission (NCC) claims this will ensure a much cheaper average cost for customers to enhance financial inclusion.

Many people, however, misunderstand the use of the words “transaction” and “session”, says Samuel Orogun, a USSD expert.

“People have taken this word ‘transaction’ to mean activities that involve the transfer of money and ‘session’ to mean any activity which occurs via USSD codes. But this could not be further from the truth,” Orogun said.

A session of a USSD transaction is every 20 seconds spent on a USSD service while a transaction is the total time spent on each interaction with the USSD application. If a user, for example, is checking his or her balance or just accidentally dialled the USSD code or is transferring money or buying airtime, anything that involves a bank’s USSD code is classified as a transaction and the user will be debited N6.98 for it. The money is debited by the bank and sent to the originating telco.

The N6.98 notwithstanding, the banks will continue to charge their transaction fees. In other words, USSD users will be double-billed for each transaction.

The CBN had in 2019 revised the transaction fees for electronic transfers with transactions below N5,000 attracting N10, N5,001 to N50,000 attract N25, while transactions above N50,000 attract N50.

With the new price regime, people making transfers via USSD will pay these fees plus the N6.98 charge that belongs to telcos. If there is a timeout, they will pay the N6.98 charge the same way users still pay for calls when the network is not performing optimally.

The new pricing further pushes away the possibility of increasing the number of Nigerians with access to financial services, contrary to the claim that it would enhance financial inclusion. Bank charges constitute a big barrier to access to financial services.

Ajibola Olude, general secretary, Association of Telecommunications Operators of Nigeria (ATCON), however, said the new price is not expensive considering the efficiency and speed of the USSD service the telcos provide.