An agreement between the deposit money banks (DMBs) and the Central Bank of Nigeria (CBN) has resulted in new USSD rate borne by mobile phone users in Nigeria.
The Unstructured Supplementary Service Data (USSD) system is a convenient channel that aids the delivery of financial services, especially for individuals without access to the internet or other physical banking infrastructure.
In October 2019, MTN Nigeria, a network service provider, moved to charge N4 for every USSD transaction made by customers. Still, there have been contentions regarding who should be the cost bearer for the service. Banks and telecommunication companies have had a zero-sum resolve about who should bear the cost for the USSD service provided by the telecoms companies, and the dispute lingered for a while.
The Nigerian Communications Commission (NCC) soon took centre stage to address the scuffle between the banks and the tech firms, setting the charge at N4.98 for each USSD session, estimated to last for 20 seconds.
However, this new charge could not be effected due to the NCCs suspension of MTN Nigeria, which resumed the new pricing arrangement without proper notification to the concerned parties.
By March 15, 2021, a new official fee set at N6.98 for USSD transactions was announced.
”This replaces the current per session billing structure, ensuring a much cheaper average cost for customers to enhance financial inclusion. This approach is transparent and will ensure the amount remains the same, regardless of the number of sessions per transaction,” a statement by CBN and NCC reads.
The USSD service is praised for being a game-changer in improving financial inclusion in the country. It allows those without bank apps or the internet to enjoy bank balance checks, cash transfers, and bill payments.
In June 2020 alone, N390 billion in transaction value due to USSD service was recorded.
Those in favour of the upward review of the service charge maintain a positive outlook for the new price era. They believe that dissatisfied individuals have the option to patronise other service channels such as mobile bank apps, internet banking, and ATMs to offer the same solutions the USSD platform provides.
However, not everybody is happy with this new fee. Many Nigerians believe that the new pricing scheme is set to negatively impact the drive towards financial inclusion rather than positively promote it. Experts also believe that Nigeria’s thinning economy may worsen since key macroeconomic indicators show a weakening posture of the country.
With an increase in electricity tariff from N2.00 per Kilowatt hour to N4.00 per Kilowatt hour, inflation rate reaching as high as 18 per cent and exchange rate depreciating more frequently than expected, the cost of living for the average Nigerian have indeed soared, and the least expected policy decision by government is another hike in prices.
It is believed that the frequency and volume of USSD based transactions may significantly reduce, especially among the low-end or low-income earning individuals. Unlike the high net-worth individuals who perform large transactions per session, the low-income earners usually employ the USSD service for airtime or mobile data purchases.
With a thinning of the economy through high living costs and a consequent lowering of living standard for most Nigerians, the newly introduced USSD charge is expected to expand the financial exclusion net; the number of low-end user’s transactions will decline and expected revenue surplus would be lost.
Alternative platforms such as mobile bank application services and internet banking services also come with their attendant costs. Accessing the internet requires out of pocket expenses to purchase data, and usage will require data consumption, whose cost many describe nowadays as overbearing and unnecessarily high. Therefore, exploring internet-based platforms may not be an efficient alternative to the low-income earner.
Automated Teller Machines (ATMs), which also provide the same services as the USSD platform, attract intra-bank charges, depending on the service demanded and the number of transactions carried out. Access to working ATMs, internet service availability and security of customers are other challenges to consider while using the machine’s banking platform.
With these challenges in mind, it is easier to think about the convenience that the USSD platform offers and the advantages that accrue to users and providers of the service in the country. Incremental charges on the service platform, especially at this time, can signal a moody user-provider atmosphere. It may not be too long before service providers appreciate the importance of low-end patronage in a large informal driven economy like Nigeria.
