By Sonny Aragba-Akpore
Despite the hype around financial inclusion which telecommunications regulator, the Nigerian Communications Commission (NCC) puts at 70%, the controversy surrounding the over N120billion debt owed by Deposit Money Banks (DMBs) for Unstructured Supplementary Service Data(USSD) is far from being over.
USSD is the platform for financial transactions by customers of banks from the comfort of their homes, offices, cars, among others. These transactions are powered by the telecommunications companies (Telcos) from their networks with interface with the banking applications (Apps) in that regard.
The dispute arose after telcos served notice that they were no longer comfortable with the huge debts owed them by banks and threatened to disconnect all USSD platforms from their networks. Although, the NCC is believed to have intervened, industry sources claimed that the regulator’s intervention does not in anyway translate to the debts being paid as the banks have not shown enough good fate to addressing the problem.
“The dispute is far from being resolved”, one industry player said.
Another player familiar with the situation explained that contrary to reports in a section of the media
there is no resolution yet.
“The CBN and NCC set up a joint advisory committee to examine, evaluate and work out modalities to resolve the issues at stake.” According to this player, “meetings are being held by that committee but no conclusions yet on the way forward. This is contrary to what is being peddled in the media.”
“It is instructive to note that the two regulators agreed on this committee constitution on how the debts could be mitigated and resolved”.
“Although, the decision is a business agreement between banks and telecom operators with specific terms for which one party has defaulted and so we accepted the third party intervention because we want a resolution as quickly as possible.”
He said the debts were not in dispute and the USSD prices remain as they were, just that “we have agreed on the mitigation process but the committee is yet to conclude on how this could be achieved.”
He added that the advisory committee does not have a timeline for the resolution.
“Meetings are ongoing, and we are optimistic of a resolution very soon.”
Early in June 2023, telecommunications operators served notice of disconnection of USSD on banks but despite a tripartite arrangement made up of the banks/CBN, the NCC and telecom operators, no head way has been achieved yet.
NCC Chief Executive, Prof Umar Danbatta, said in Lagos last week that the situation has reasonably been resolved through the intervention of the Central Bank (CBN) but didn’t give details.
“The USSD service is being provided to the banks, who in turn provide the service to their customers. The question was who should be paying for the service.”
“The banks wanted end-user billing, but we said the service is being provided to the banks, not to their customers. The banks charge their customers for the service, and they are to pay the telcos in the form of corporate billing, which is neat.”
“Then along the way, there was a misunderstanding and the debt kept piling until it reached a humongous amount of over N100 billion. Even at that, the service was still being provided to customers by the banks using the telecom infrastructure and the telcos were being paid nothing. “
Danbatta at the Telecom Executives and Regulators Forum (TERF) held in Lagos said the banks, after the intervention of the Acting Governor of the CBN, Folashodun Shonubi, have agreed to clear the accumulated debt and continue to pay for the USSD service going forward under the corporate billing term.
He was, however silent on the advisory committee which CBN and NCC set up to work out modalities for resolving the debts.
“The end-user billing option was inappropriate so we said the service is being provided to the banks, not to their customers. The banks charge their customers for the service, and they are to pay the telcos in the form of corporate billing”.
“Digital financial inclusion index or penetration is currently about 70 per cent because it is telco driven.
And as such, there shouldn’t be any problem paying for the service. No service is free. Pay the telcos that is all we ask. Okay, and as we’re saying, Now, pay them for the debt, the accumulated debt, and then pay them for the service they are rendering as we speak.”
“At a meeting between the acting CBN governor, the NCC, the telcos and the banks, it was acknowledged that the debt exists, that going forward, the service has to be paid for by the banks through corporate billing. It is an important development for the telecoms industry that we have found an amicable resolution to the problem because we’re all serving the same government. We do not want to disrupt financial services in the country.
“We want to see the financial inclusion penetration to even go higher”, Danbatta boasted.
But Mr. Segun Agbaje, group chief executive officer of Guaranty Trust Holding Company (GTCO), opposed the notion that continuous use of USSD for transactions would strengthen Nigeria’s cashless policy as pursued by the Central Bank of Nigeria (CBN).
He said the controversy over USSD is a distraction engendered by telecommunications companies. He asserted that banks are advocating for the protection of their customers, insisting that they should only pay for successful transactions and not for transactions that were not calculated on their accounts.
The GTCO boss objected to the extensive use of USSD while expressing his belief that the technology driving USSD banking is costly and clumsy, adding that internet banking is a more robust and technologically advanced alternative.
“The banks are protecting their customers and saying to all of you, pay for successful transactions, do not pay for transactions that were not calculated on your account. What if you, as customers, want to take a swim? Perhaps we’ll let you pay, but I keep telling everybody, who would listen, USSD is not the answer,’’ Agbaje argued.
He further stressed the need to reduce the cost of data, thereby making it more affordable as the future of financial inclusion and increased literacy lies therein. He further urged for a transitioning into mobile banking, which he considered as more advanced and user-friendly, requiring less data consumption.
Citing the India example, Agbaje explained that India has achieved significant progress in financial growth, and reiterated the urgency to reduce the cost of data in Nigeria, pointing out the disparity between data costs in Nigeria and India.
“All of you, who use less data, or mobile banking, which is more advanced, which is easier to use, you need to get the cost of data down in Nigeria. The cost of data, when compared to India, shows we are being exploited,” he added.
Agbaje emphasized the need to reduce the cost of data as this would enhance financial inclusion and increase interest in the country.
“We should have the cost of data down so that we can increase inclusion, or we can increase our interest. So, I’m not going to get into this. If you want, you can pay the telcos for USSD. For me, my clamour is that it should be technology at lower cost of data,” he added.
A manager in one of the banks agreed with Agbaje’s statements concerning embracing mobile banking as opposed to the use of USSD for financial transactions, which, according to her, contributes to the high charges on transactions lamented by bank customers
“USSD is one of the reasons for high charges. Whether your transaction is successful or not, you will be charged N6.98k for using USSD, then you will be charged for transfers depending on the amount involved, the SMS alert charge is also included. That’s about three different charges for one transaction.
“Another way people incur extra charges is when they check their account balance. Every time you check your account balance via USSD, you will be charged N6.98k for USSD transaction and N4 for SMS alert.
“In a situation whereby you check your account balance five times a day, you have accumulated N20 SMS alert charge just in a day and N34.90k USSD charge in a day. To solve this problem, you can use your email to receive alerts and to confirm transactions instead of SMS. This way, you are charged for just ATM maintenance, ATM withdrawals after withdrawing thrice on another bank’s ATM and Electronic transfer levy.
“This is what I tell people, once you have a smartphone, it’s advisable to use the mobile application for transactions instead of USSD. USSD banking is expensive when compared with mobile banking, what the banks are clamoring against is charging our customers for unsuccessful transactions. All we are trying to do is to protect our customers against high charges,” she said.
Mobile Network Operators (MOs) blamed the ongoing deadlock between banks and telcos on political interference.
Gbenga Adebayo, Association of Licenced Telecommunications Companies of Nigeria (ALTON) Chairman, raised his concerns during the Nigeria Telecoms Indigenous Content Expo (NTICE 2023) held in Lagos, pointing out that political interference has aggravated the issue, turning what should be a straightforward commercial agreement into a prolonged and controversial issue.
The NCC and CBN, it appears, are playing politics with the matter. Each is trying to protect what they regulate without looking at the main issues involved.Third party involvement is not necessary especially when what obtains is pure business decision through MoU between banks and telcos, so why should NCC and CBN be playing to the gallery as if they have any role to play, a knowledgeable source said.
Recall that the working paper to all Deposit Money Banks, Switches, Mobile Money Operators, Payment Solution Service Providers, Micro Finance Banks & Others from the CBN on April 17, 2018 on USSD regulatory framework on the Nigerian Financial System stated that the Central Bank of Nigeria (CBN), in furtherance of its mandate to develop and enhance the security of the eiectronic payments system in Nigeria, released the Regulatory Framework for the use of USSD in the Nigerian Financial System.The implementation took off June 1, 2018.
The guidelines specifically stated the modalities and how things should be done and penalties thereto.
▪︎ Aragba-Akpore, an analyst on telecom trends, lives in Abuja and sent this via WhatsApp
