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Over 30% financial service providers charge excess USSD fees – report

N120 billion USSD controversy: Time for high-level intervention

Ignorant customers bear the brunt as more than 30 percent financial service providers charge excess fees for Unstructured Supplementary Service Data (USSD) services, then the regulatory approved premium, according to a joint study by Innovations for Poverty Action (IPA) and Inclusion for All initiative.

In a joint statement issued on March 16, 2021 by the Central Bank of Nigeria (CBN) and the Nigerian Communications Commission (NCC), financial service providers were directed to charge N6.98k per transaction for USSD services.

To assess compliance with this directive, the report compared identical transactions carried out with the same provider, one via the USSD menu and the other via a mobile application.

The result showed that while more than half charged no USSD premium and 11 percent charged approximately the regulated N6.98k (N7) extra, more than 30 percent of providers charged a premium higher than the regulated N7

On airtime charges, the CBN and NCC’s joint statement regarding USSD fees notes that the extra fee “will be collected on behalf of Mobile Network Operators (MNOs) directly from customers’ bank accounts.”

“We interpret this to mean that mobile network operators may not directly charge customers additional fees by making deductions from customers airtime balances. While this was not the focus of our study, we found multiple instances where this rule was not followed – airtime was deducted by Telcos when we made USSD transactions,” the report stated.

Innovations for Poverty Action (IPA) and the Inclusion for All initiative on Tuesday launched a new report titled, ‘Measuring Fees and Transparency in Nigeria’s Digital Financial Services’.

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The joint study examines compliance levels with existing fee structures, compliance with price transparency requirements, the reliability of transactions and the consistency of information available from customer service channels – highlighting a series of barriers that impact consumer trust in financial services.

Nigeria’s digital financial services ecosystem has rapidly evolved over the last decade due to increased broadband and mobile penetration and digital payments, which boost financial access in urban, rural, and hard-to-reach areas across the country.

This progress provides underbanked populations with greater access to digital banking products, mobile payments, savings and credit facilities – transforming the financial inclusion landscape. However, between 2018 and 2020, financial exclusion in Nigeria decreased by only 1 percentage point, from 37 percent in 2018 to 36 percent in 2020.

The cost of financial services remains a major barrier to access for price-sensitive consumers, especially within marginalised, vulnerable, and lower-income segments of society. In addition, any lack of transparency on product pricing, departures from regulated pricing and limits trust between customers and service providers.

A new collaboration between Innovations for Poverty Action (IPA) and the Inclusion for All initiative aims to address the challenges and understand the ease of accessing accurate price information from providers and their levels of compliance with the revised pricing guidelines.

High-profile speakers and panellists opened the virtual launch of the report with a discussion to understand the practical implications of the audit findings and how regulators and providers can cooperate to enhance customer experience.

In a keynote speech, Rashida Monguno, director, Consumer Protection Department, CBN, commended IPA and Inclusion for All for the study.

“This ground-breaking research provides new evidence and insights on one of the most critical aspects of consumer protection which is pricing transparency.

Consumers’ right to easily access and understand the cost of services they use is one of the most fundamental rights of consumers. The research provides a baseline for future audits and identifies several areas which require improvement. I trust that the results will be instrumental in exploring new conversations that will result in tangible changes in the digital financial services marketplace,” she said.

IPA is a research and policy non-profit organisation with a long-term presence in 22 countries in Africa, Asia, and Latin America, while Inclusion for All initiative is a multi-faceted advocacy programme that seeks to deepen our knowledge and understanding of the impact of exclusion on marginalised communities, and on Nigeria as a whole.