Furore over USSD Charges on Financial Transactions

Godwin Emefiele
Godwin Emefiele

The recent move by MTN to charge N4 on every Unstructured Supplementary Service Data access it offers its customers to transact banking services, has been described as a step in the wrong direction, writes Emma Okonji

Early this week, the Central Bank of Nigeria (CBN), the Chief Executive Officers (CEOs) of money deposit banks, and the Ministry of Communications reacted to the planned move by MTN Nigeria to implement the N4 charge for every Unstructured Supplementary Service Data (USSD) access that it offers its customers to transact banking services.

While the CEOs of banks completely dissociated themselves from MTN over the planned implementation of the USSD charges, the Ministry of Communications directed MTN through the Nigerian Communications Commission to ensure that MTN suspends the plan with immediate effect.

The CBN, however, called on money deposit banks and other financial institutions under its regulation to shun any move by all telecoms operators to impose USSD charges on financial transactions.
Subscribers from across telecoms networks also joined CBN, bank CEOs and the ministry in condemning the planned implementation of the charges on financial transactions by MTN.
Some of the subscribers, who spoke to THISDAY, said any additional charges on bank transactions would be resisted because it would affect CBN’s financial inclusion strategy to make Nigeria a cashless economy like other nations of the world.

Telecoms stakeholders, however, saw the public anger over the planned implementation of USSD charges by MTN as a litmus test for CBN in managing its financial inclusion strategies.
The stakeholders were of the view that CBN must act fast to address the current situation, insisting that that position of CBN will either make or mar financial inclusion growth in the country.

MTN’s move
Last week, MTN Nigeria released a text message to its subscribers, informing them of its plan to begin the implementation of N4 charge for every USSD access to banking services. USSD is a communications service controlled by mobile network operators, which is a critical piece of infrastructure used to provide mobile financial services through the mobile phone and it is linked to the SIM card of the mobile phone.

The message read: “Ye’llo Please note that from October 21, we will charge N4 per 20 seconds for USSD access to banking services. Thank you.”
The text message from MTN, which went viral and triggered public anger because of its implication on the growth of cashless policy, compelled the CBN, Bank CEOs and the Ministry of Communications to react in one direction, condemning the telcos’ plan to implement USSD charges on every financial transaction.

General Condemnation
CBN Governor, Mr. Godwin Emefiele, while reacting to the move by MTN, directed commercial banks and other financial institutions under its regulation to shun the move by telecommunication companies to impose charges on USSD services.

Emefiele said banks had been directed to move their services to telecoms operators (telcos) that are willing to offer such service at the lowest or even zero charges.

Emefiele said: “You are all aware that there is a drive for us to deepen financial inclusion in Nigeria. I had made my commitments to Bill Gates Foundation as well as Queen Maxima that we would deepen financial inclusion and that by 2020 the rate of financial inclusion would have accelerated to about 80 per cent.

“At this time, we are close to about 65 per cent. We moved from about 42 per cent to 65 per cent in about 18 months and we believe that we can achieve this 80 per cent if everybody, that is the banks and telecoms companies cooperate with us.

“About five months ago, I held a meeting with some telecoms companies and leading banks in Nigeria at the CBN in Lagos and the issue on cost of USSD came up. We came to a conclusion that the use of USSD is a sunk cost, meaning that it is not an additional cost on the infrastructure of the telecoms companies. But the telecoms companies disagreed with us and said it was an additional investment in infrastructure and that for that reason, they needed to impose the charge. I appealed to them to please review this downwards and they refused.

“I understand that about three to four weeks ago, rather than reduce it, they went ahead to increase by 300 per cent. I opposed it and I have told the banks that we would not allow this to happen. The banks are the people who give these businesses to the telecoms companies and I leave the banks and the telecoms companies to engage.

“I have told the banks that they have to move their business and move their traffic to a telecoms company that is ready to provide it at the lowest possible and if not at zero cost and that is where we stand and we must achieve it.”
While CBN was reacting to the planned implementation of USSD charges, the Minister of Communications, Dr. Isa Ibrahim Pantami also directed the NCC to immediately call on MTN to suspend its plan to implement additional charges.

Pantami, in the statement signed by his spokesperson, Mrs. Uwa Suleiman, said: “The office of the Honourable Minister of Communications, Dr. Isa Pantami, is unaware of this development and has hereby directed the sector regulator, the NCC, ensures the operator suspends such plans until the Honourable Minister is fully and properly briefed.”

In the same vein, the CEOs of commercial banks, on Monday, issued a statement, denying involvement in the Short Message Service (SMS) by MTN Nigeria .
According to the statement, “The banks did not ask MTN to start charging customers as contained in the text message.

“The decision on whether and what amount to charge a customer for accessing USSD code is entirely that of the telco company, just in the same way a customer is billed for calls, SMS and data.
“MTN is the only telco that is yet to implement end-user billing which is the standard practice for customer-initiated transactions.

“This is despite the fact that the banks working with the CBN, have engaged MTN over a period of more than one year to try and bring down the cost of USSD to aid financial inclusion.
“The banks are determined to pursue the National Financial Inclusion Strategy of the Federal Government of Nigeria and will continue to advocate that telcos identify wholeheartedly with this laudable initiative and implement transparent and low pricing model in the use of USSD access codes.
“We wish to re-iterate that financial transaction charges are regulated by the CBN as stipulated in the bankers tariff, and that the charges for financial transactions carried out with banks remain unchanged.”

MTN’s position
Worried about the public anger that greeted its planned implementation of the USSD charges, a source close to MTN said the public anger was not justified because other operators had quietly implemented the USSD charges without informing their subscribers, and wondered why MTN’s plan to implement same charges should raise a lot of dust.
The source further said the telecoms company did not need the support of banks to implement the USSD charges because the USSD code platform belongs to MTN and operated by MTN to provide financial transaction services to bank customers.
“Banks still charge N50 per transaction, yet the banks do not own the USSD platform that enables the transaction, and no regulator is seeing anything wrong in it,” the source further said.
Reacting to the accusation of bank CEOs, that only MTN among other operators, is yet to implement the end-user billing, which is the standard practice for customer-initiated transfer, the source explained that it was so because MTN did not want to join other telcos in the implementation process, since it comes with extra cost on the subscriber.

MTN bows to pressure
Following the reactions from different angles opposing the planned implementation of USSD charges by MTN, the telecoms company on Tuesday, finally bowed to such pressures and decided to stay action on it.
According to a statement issued by BHM, the agency managing MTN Nigeria, and signed by the Acting Lead Consultant, BHM Consulting, Precious Nwachukwu, “After the Minister’s directive on Sunday, October 20, MTN stayed action on implementing the proposed charges. However, a few platforms have still published reports of non-compliance from the ICT company.

“We will like to correct the error in the reports, as well as confirm that MTN has indeed stayed action on the charges as directed by the Minister of Communications. In addition, we would like to reiterate that MTN has not implemented charges for USSD following the Federal Government directive; MTN’s proposed charge of N4 for every 20-second session is currently the lowest in the industry as other network operators currently charge above that rate; Other network providers implemented these charges a long time ago without notifying their subscribers; the banks still deduct an average of N50 for USSD transactions despite the fact that the infrastructure for such transactions are provided and maintained by the network operators; It would be nice to ascertain if other network service providers have complied with FG’s directive as MTN has done.”

ATCON’s position

Commenting on the public reactions to MTN’s plan, the President of the Association of Telecoms Companies of Nigeria (ATCON), Mr. Olusola Teniola, told THISDAY that the whole reactions could be described as a litmus test for the CBN in the proper management of the situation and still remain focused on its financial inclusion strategies, designed to deepen financial inclusion across the country.
He is of the view that if the situation was not properly managed, it could stifle financial inclusion growth across the country.

To avoid such scenario, Teniola called on the CBN to quickly hold a strategic meeting with the NCC, the Ministry of Communications and the telecoms operators and develop a framework that is acceptable to mobile network operators (MNOs) on bank charges, using USSD code.
“The CBN and the banks have to understand and accept that technology has come to stay in the financial services industry in rolling out technology solutions that provide access to banking services, and must see telcos as a major player and contributor to financial inclusion growth in the country,” Teniola said.

Given details of the USSD code issues playing up in financial transaction processes, Teniola said: “USSD code is predominantly used for 2G networks and feature phones that have 2G capabilities. USSD is a feature of GSM Phase 1, which is an old technology used to offer free GSM services all over the world, because it is a supplementary service used over and beyond voice.

“However, because Nigeria still largely operates 2G network, those subscribers with feature phones that are not smart and digital, cannot access bank services, unlike smartphone users who can access bank services because smartphones use 3G and 4G data and Voice over Long Term Evolution (VoLTE) technology to access bank services directly. So for 2G network users with feature phones, they need USSD code to access bank services and the USSD code is owned, managed and provided by telcos, who have insisted that they must charge customers with 2G phones, when they provide them with the USSD code.”

Teniola further explained that the situation became so glaring because over 25 per cent of the 176 million subscribers across all networks, still use feature phones with 2G network.