The Real Reasons for the Banks vs. Telcos Conflict as N42bn USSD Tussle continues
The Real Reasons for the Banks vs. Telcos Conflict as N42bn USSD Tussle Continues
When Nigeria's mobile network operators threatened to discontinue Unstructured Supplementary Service Data (USSD) services in March, it demonstrated that the dispute with banks had festered in the shadows. The controversy over the telcos' claim that banks owed more than N42 billion in USSD debt was not resolved.
It took the intervention of sector regulators, the Central Bank of Nigeria (CBN), and the Nigerian Communications Commission (NCC) for telecom operators to reconsider their decision to suspend USSD services.
However, the two-year USSD dispute between telcos and banks remains unresolved, as telcos have now accused banks of breaching the debt settlement agreement reached two years ago.
“Who do they expect to pay and how much did they deduct from their customers for the USSD services for which you and I were charged?” he added.
However, Access Bank CEO Herbert Wigwe reportedly stated that banks are not indebted to telcos in any way. As was the case in March, industry stakeholders are pleading with the NCC and CBN to intervene once more.
Are Banks Indebted to Telcos?
It's almost comical that there is even a debate about whether banks owe telcos money or not. To put things in context, the NCC and CBN issued a joint official statement in March stating that “a settlement plan for outstanding payments incurred for USSD services previously rendered by the MNOs is being worked out by all parties in an effort to ensure that the matter is resolved completely.”
Why would there be a settlement plan if the banks had no accumulated debt? Banks invariably owe the telcos, and the plan outlined how they would repay the N42 billion debt.
Recall that banks were initially required to pay telcos up to N4.89k per USSD session in fees levied on customer transactions in 2019. This was then increased to N1.63k last year following an amendment to the USSD pricing structure.
New USSD Costs
Nigerians to bear new USSD costs ranging from N0 to N6.98K
With the CBN and NCC agreeing that Nigerians will now pay N6.98k per transaction for USSD services, the cost burden will fall directly on over 40 million people who use USSD services. Banks will deduct the N6.98k charge directly from customers' accounts on behalf of telcos.
USSD services are primarily used by individuals with feature phones, particularly those who live in areas with limited access to banks or banking agents. Because USSD was free at the time, more people began to use it. Indeed, USSD transactions are expected to increase by 80 percent to 762 million in 2020.
When the new N6.98K charge is considered, only those with smartphones capable of accessing banking apps/fintech platforms or those who can afford to pay for USSD transactions will be impacted.
Without an alternative to USSD, it is obvious that those without one will be unable to access financial services.
Going Forward
The USSD saga appears to continue until banks begin repaying the accumulated N42 billion debt in accordance with the terms of the most recent agreement. However, the terms and conditions of the "settlement plan" are not disclosed in publicly available information.
Regulators can be expected to engage all stakeholders to resolve, but the possibility of telcos completely discontinuing the USSD service looms large if parties cannot reach an agreement.
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