USSD Charge Issue Shows Nigerian Banks Are Not So Comfortable Sharing Their Turf With Telcos

By  |  October 23, 2019

USSD Charges: The Banks Didn’t “Ask” But They Certainly Recommended It

Okay, it’s all clear now. Nigerian banks didn’t exactly “ask” telecom operators in the country to charge subscribers for accessing banking services via USSD, at least, not explicitly.

But it was certainly the idea of the banks, it was all their idea. And it all started when the telcos demanded a fair piece of the pie. The banks, not wanting to share, basically advised the telcos to go get their own pie from the same source. That’s pretty much the story.

The Backstory

Over the weekend, millions of telecom subscribers, particularly MTN users, received two messages from their network provider which stated that they will now be charged directly for using USSD to access banking services from October 21.

In fact, a second message came through which read that MTN will be charging subscribers NGN 4.00 per 20 seconds for USSD access. The telco also left a line that indicated that the new USSD charge was as directed by the banks used by their subscribers. Then, it asked subscribers to contact their banks for more info.

Nigerians devoted to the better parts of Sunday, October 21, to venting against the policy on social media.

Then, the Office of the Communications Minister directed the Nigerian Communications Commission (NCC) to ensure that none of the telcos go through with a policy that the Minister, Dr. Isa Ali Pantami, claimed to have no knowledge of.


On Tuesday, October 22, the Body of Banks’ Chief Executive Officers (BOBCEO) issued a statement in which it distanced itself from the actions of the telco. The banks basically said MTN was acting on its own and they (the banks) had not asked telcos to charge customers.

They said the decision “on whether, and what amount, to charge a customer for accessing USSD is entirely that of the telco company, in the same way a customer is billed for calls, SMS, and data”.

Actually, It Was All The Banks’ Idea

It baffled Nigerians how the telco could have been acting entirely of its volition on such a sensitive matter. And anybody who was sceptical about the denial from the banks would have had their doubts justified when a document obtained by The Cable in the later hours of that same Tuesday showed that idea of end-user USSD billing was actually from the banks.

Not to get too hung up on semantics, but even though they didn’t “ask” the telcos to go ahead with it, they sure as hell came up with it.

As reported by The Cable, in a letter to the Association of Licensed Telecommunications Operators of Nigeria (ALTON) by the BOBCEO dated September 16, 2019, the bank MDs had proposed an “orderly implementation” of end-user billing for bank customers, “aligning with the standard practice for USSD billing.” That letter was signed by 13 banks.

And why did the banks propose this? Simple. The telcos, who provide the platform for the USSD service, had proposed to take a cut of NGN 4.50 per 20 seconds from the charges paid by customers to the banks.

It is well known that instant funds transfer (intra-bank) cost between nothing to as much as NGN 20.00 plus VAT for some Nigerian banks. While interbank transfers attract a charge of up to NGN 52.00 plus VAT. The telcos simply wanted the banks to give them a share of that money.

Essentially, the banks kicked against it, alleging that it would raise the cost by 450 percent. By their reckoning, this would crush the financial inclusion strides made by banks which has “helped to include almost 20 million more citizens in the financial system by building services that run on USSD.”

The above is quite a decent argument but what is not decent, however, is the idea of passing on the burden to the end-users.

We are proposing an orderly implementation end-user billing for bank customers, aligning with the standard practice for USSD billing,” reads a part of the letter from the banks to the telcos.

It also reads:

“We trust that on understanding our concern, and the perilous impact that your stated actions will have on the National Financial Inclusion Strategy, you will implement end-user billing to ensure customers have a fair deal and a choice.”

The banks argued that reverse billing by multinational telcos has no visibility on actual sessions used which would cause bans to pay for failed sessions and leave them exposed to “spurious USSD usage that would increase costs.”

Again, another fair point. But then, again, what’s not fair is thinking it would be fair for customers to bear that burden.

Could There Be More To This Than USSD Charges?

Perhaps the whole USSD back-and-forth is just a smokescreen for the actual problems. Maybe banks are not too happy with telcos throwing their weight about in the financial services space which they once thought was entirely their turf.

It could be that the banks left the real reason behind their resistance to the demands of the telcos in the closing statement of the letter which reads: “If USSD services are used to ransom banks into exiting our financial inclusion goals, everybody will lose out – most notably the vulnerable, financially-excluded Nigerian.”

In that sentence, the banks may have stated their real fears — telcos getting too comfortable in their turf. The banks essentially played the victim and implicitly accused the telcos of trying to undermine all its work in the aspect of financial inclusion.

In line with National Financial Inclusion Strategy, the Central Bank of Nigeria (CBN) has identified telcos in Nigeria as the next path for bringing financial services to Nigerians who appear to be left out by banks.

Image result for nigeria's financial inclusion data 2019 images
Source: StearsNG

The apex bank is well aware of the reach of the telcos and is betting on them using their networks to reach the vast number of Nigerians excluded from financial services. 

For one, MTN Nigeria acquired a super-agent license in July and launched its mobile money service (MoMo Agent) shortly after, while still awaiting a PSB license from the CBN. Other telcos in Nigeria seem to be positioning for similar moves.

It could be that the banks fear that the financial services market is about to get even more cut-throat and are now doubling down by resisting the demand of the telcos, which would see them give up precious funds in addition to potentially giving up territory.

Where Things Stand

ALTON had since responded to the letter from the BOBCEO. In a letter dated October 18, the telcos refuted what was proposed in the earlier-mentioned letter which the banks titled: “Anti-Competitive Practices on Reverse Corporate Billing for Bank USSD Services.”

The lengthy letter from the telcos basically disagreed with everything the banks were concerned about, except the part where it was stated that a continued mutual association between both is necessary to achieve the common goal: financial inclusion.

Both parties seemed to have reached an impasse until those two messages from MTN to its subscribers sparked outrage over the weekend and forced the banks to deny they had anything to do with it. But they did have something to do with it.

Well-played, Point Telcos! What a way to bring a matter to the fore and trigger quicker resolution.

Apparently, financial inclusion is the common goal. But the banks and telcos haven’t quite agreed on how to get there. And maybe the CBN should step in to dictate everyone’s roles, especially as both banks and telcos play complementary roles in the financial inclusion drive.

Featured Image Courtesy: Tekedia

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