E-business
The feud between telecoms operators and banks over non-remittance of proceeds from the Unstructured Supplementary Service Data (USSD) code has attracted the concerns of their regulators, who are making efforts to address the issue. Emma Okonji writes
Last week, the Minister of Communications and Digital Economy, Dr. Isa Ibrahim Pantami, called stakeholders meeting to resolve the disagreement that ensued from an earlier agreement reached between telecoms operators (Telcos) and Deposit Money Banks (DMBs) over the use of USSD code by banks to offer services to their customers. The USSD is a critical channel for delivering financial services, particularly for the underserved and the financially excluded, offered by telecoms operators to banks. Banks use different USSD codes to support transfer of money through the use of mobile devices, without internet data connectivity. One of the banks for instance, uses *737*1* to transfer money to customers of the same bank from a mobile phone and uses *737*2* to transfer money to other banks’ customers from a mobile phone that is not connected to the internet.
At that meeting the regulators of the feuding parties, the Nigerian Communications Commission (NCC), which regulates the telecoms sector, and the Central Bank of Nigeria (CBN), which regulates the financial sector, agreed to address the issue of the USSD pricing that has lingered since 2019, resulting to an accumulated N42 billion debt, which the banks were supposed to remit to telcos over a period of time. The banks are however disputing the amount, and insisted there had never been accumulation of any money, while wondering how the telcos arrived at N42 billion. The telcos are insisting that the N42 billion was an accumulation of monies due to telcos from the USSD agreement, but were not remitted by the banks since 2019, and they have threatened to withdraw the USSD code from the banks.
In order to address the issue amicably both regulators decided to fix a new flat rate of N6.98k per transaction on USSD service offering. They also agreed to sign a Memorandum of Understanding (MoU) that will capture a new payment plan to offset any outstanding fees that were not remitted to the telcos since 2019.
The Disagreement
In order to accelerate the adoption of financial services on USSD, the Financial Service Providers (FSPs) partnered with telcos to zero-rate the USSD access to end-users, while they bore the cost for the provision of service. Based on the arrangement, the banks took on the responsibility of billing customers and paid telcos for use of the USSD infrastructure from the service fees deducted from the customer’s bank account.
Chairman of the Association of Licensed Telecoms Operators of Nigeria (ALTON), Mr. Gbenga Adebayo, in an earlier statement he issued, said, “Following the issuance of the USSD pricing determination by the Nigerian Communications Commission (NCC) which resulted in a price review of USSD service by our members, the banks decided that they would no longer pay for USSD service delivered to their customers and requested our members to charge customers directly for use of the USSD channel.
“This billing methodology where the Financial Service Providers customer is directly charged USSD access fees by our members irrespective of the service charges that the bank may subsequently apply to the customers’ bank account is called ‘End-User Billing’, which the banks specifically demanded that all our members implement. The banks, however, provided no assurances to our members that such service fees charged to customers’ bank accounts for access to bank services through the USSD channel would be discontinued post implementation of end-user billing by our members.
“The removal of these service fees by the Financial Service Providers (FSPs) would have meant that if bank customers were charged only the USSD costs communicated by our members per USSD session, bank customers will be paying far less than what they are currently being charged by the Financial Service Providers (FSPs) which in some instances are as high as N50. Additionally the banks and telcos will be applauded for collaborating towards the financial inclusion objectives of the Federal Government.”
The statement further said it had been more than eight months since the NCC issued an updated pricing methodology for USSD services for financial transactions in Nigeria, and the methodology explicitly restricts Mobile Network Operators (MNO’s) from charging the end user for the services and mandates the banking sector to enter into negotiations to settle outstanding obligations and agree individual pricing mechanisms to be applied going forwards.
Adebayo, in the statement, said: “During this time, Mobile Network Operators have continued to provide access to USSD infrastructure and our members have continued to pay all bank charges and fees to access the banking industries assets and customers, despite the fact that obligations due from banks to telecoms companies for USSD services has reached over N42 billion.
“ALTON members have continued to provide these services because our primary concern is that the millions of Nigerian customers who access financial services through our USSD infrastructure every day should be able to continue conducting their transactions. This was given greater importance when customers’ became further reliant on these services due to COVID movement restrictions. Unfortunately, as it has been impossible to agree on a structure for these payments with the banks that do not involve the end-user being asked to pay, the government has been forced to intervene to ensure that a sustainable cost-sharing solution is agreed, that does not disadvantage the consumer in the long-term.”
ALTON said its members deeply regret that they have reached a point where the withdrawal of these services has become unavoidable, but however promised they would remain committed to working closely with the relevant ministries and regulators to resolve the issue as quickly as possible. ALTON however said it would disconnect debtor Financial Service Providers from USSD services, until the huge debt is paid.
“Our members are initiating a phased process of withdrawal of USSD services, starting with the most significant debtors within the Financial Service Providers effective Monday March 15, 2021,” the statement further said. ALTON therefore advised all telecoms subscribers to explore alternative channels with their banks, while the withdrawal of USSD service is in place.
Warning Signal
The Minister of Communications and Digital Economy, Dr. Isa Ibrahim Pantami, had initially written to CBN governor, Mr. Godwin Emefiele, highlighting the impending danger of the disagreement and stressing the need for banks to pay the accumulated debt or risk suspension of the USSD code.
The letter dated March 3rd, 2021, and addressed to the CBN Governor, Mr. Godwin Emefiele, reminded him of the USSD pricing issued by NCC on July 23, 2019, as well as the subsequent amendment on July 24, 2020. Pantami, in his letter, told the CBN Governor that the determination was issued in order to address the lingering matter of the impasse in the rendering of USSD services to banks and other financial institutions by Mobile Network Operators (MNOs). He said the determination would sought to establish a cost-based premise for commercial negotiations between all parties and also prohibit the application of an end-user billing pricing model and restate the existing directive on corporate user billing. He expressed his displeasure that those noble objectives were not realizable and blamed it on the failure of commercial banks to abide by the terms of the USSD determination and the lingering incidence of indebtedness to telecoms operators from the USSD service they offered banks. The Minister however pleaded with the CBN Governor to facilitate compliance and ensure that all parties act in good faith.
Emefiele, who spoke to the issue recently on the Morning Show of ARISE NEWS Channel, the broadcast arm of THISDAY Newspapers, said: “Five months ago, I held a meeting with the telecoms operators and the leading banks in Nigeria at the Central Bank of Nigeria in Lagos, and the issue of the cost of USSD came up. The banks are the ones that offer the USSD service to customers, even though the telecoms operators provided the USSD code to banks. Based on this understanding, I left the banks and the telecoms companies to engage and find a common ground for USSD fees charged by banks and the percentage of remittances to telecoms operators.”
The decision of CBN to allow telcos and banks to address the issue themselves, did not yield good result, hence the intervention strategy by the Minister of Communications and Digital Economy, Dr. Isa Ibrahim Pantami.
The Intervention
Worried about the consequences, should telecoms operators make do their threat to withdraw the USDD service from banks, Pantami, last week, chaired a meeting of key stakeholders to resolve the issue. The various MNOs, Association of Licensed Telecoms Operators (ALTON), Association of Telecoms Companies of Nigeria (ATCON), the Banks and the sector regulators, the Central Bank of Nigeria (CBN) and the Nigerian Communications Commission (NCC), were present at the meeting.
A communique issued after the meeting, which was jointly signed by the Acting Director, Corporate Communications at CBN, Osita Nwanisobi and the Director, Public Affairs at NCC, Dr. Ikechukwu Adinde, gave details of the resolution reached at the meeting. According to the communique, with effect from March 16, 2021, USSD services for financial transactions conducted at DMBs and all CBN- licensed institutions will be charged a flat rate of N6.98k per transaction.
This replaces the current per session billing structure, ensuring a much cheaper average cost for customers to ensure financial inclusion.
The communique further revealed: “To promote transparency the new USSD charges will be collected on behalf of MNOs directly from customers’ bank accounts. Banks shall not impose additional charges on customers for the use of USSD channel. A settlement plan for outstanding payments incurred for USSD services previously rendered by the MNOs is being worked out by all parties in a bid to ensure that the matter is fully resolved. MNOs and DMBs shall agree on the operational modalities for the implementation of the new USSD pricing framework, including sharing of Application Programme Interface (API), to enable seamless, direct and transparent customer billing.”
It was then resolved that the impending suspension of DMBs from USSD channel be vacated. All parties also agreed that DMBs shall no longer be disconnected from the USSD channel.
The general public was reminded that the USSD channel remained optional, as several alternative channels such as mobile apps, internet banking and Automated Teller Machines (ATMs) May be used for financial transactions.
“The CBN and NCC shall continue to engage relevant operators and all stakeholders to promote cheaper, seamless access to mobile and financial services to all Nigerians,” the communique further said.
MoU Signing
Following the resolution reached at the meeting, the NCC and the CBN are expected to sign Memorandum of Understanding (MoU) this week, to determine the sharing formula of the new USSD flat rate of N6.98k, as well as the modalities for payment of the accumulated outstanding fees.
THISDAY gathered that a draft agreement had already been written, subject to approval by the CBN and the NCC, before the MoU signing this week.
Although the MoU will be centred on the sharing formula for the new USSD rate and the modalities for payment of outstanding fees, THISDAY gathered that the banks at the meeting, refused to accept the accumulated N42 billion outstanding fees, and denied charging customers for USSD transactions since the argument started in 2019, but user experience showed that banks have been charging customers between N10 and N20 per transaction.
Benefits of New USSD Flat Rate
Having arrived at a flat rate N6.98k for USSD charges, which will be collected from customers’ bank account by the banks, Adebayo is of the view that the new rate is far cheaper than the previous rate, which he said would further help to deepen financial inclusion by enabling more people access the code and do seamless financial transactions at low cost.
Adebayo who spoke last week on News Night of ARISE NEWS Channel, the broadcast arm of THISDAY Newspapers, said the new rate would further enhance the financial inclusion drive of the country. According to Adebayo, “What is important is that the new rate as approved by the two regulators, is far cheaper than what was initially charged by the banks and it is believed that this will help deepen financial inclusion in the country because more people will gain access to the USSD code, which is designed to drive financial inclusion in Nigeria.”
According to him, before now, banks charge their customers N1.63k per session in every transaction carried out with the USSD code, and it takes about five sessions or more to complete each transaction, which amounts to N8.15k per transaction of five sessions. So with the new flat rate of N6.98k per transaction, irrespective of the number of sessions it took the customer to complete the transaction, it is far cheaper for customers who will now pay less per transaction, compared to what was obtainable in the past.
“Given the number of people who are using the USSD code for financial transactions with feature phones that are not connected to the internet, it goes to show that those outside the financial inclusion pyramid, will become part of the pyramid, because more of the low income earners who use feature phones that are not internet enabled, will still be able to do online transactions using the USSD code,” Adebayo said.
Asked if the recent resolution to fix a flat rate of N6.98k would mean debt forgiveness of the N42 billion outstanding that is accruable to telecoms operators, Adebayo said the resolution does not mean cancellation of the accumulated debt. According to him, the telcos and the banks will have some form of settlement agreements on how the accumulated debt would be paid. He said an MoU would be signed by NCC and the CBN on behalf of telecoms operators and the banks respectively, to determine modalities for payment.
“There is no case of debt forgiveness, debt has been incurred and the money has to be paid,” Adebayo insisted.
Although the disagreement between telecoms operators and the banks has reached its peak, it is believed that the planned MoU signing between the CBN and the NCC on behalf of telcos and financial service providers, will put an end to the lingering issues.
