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New USSD pricing model, a setback for financial inclusion

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Analysts at the investment banking group, United Capital, review the pricing arrangement between banks and telecom firms on the use of USSD for mobile banking and concluded that the review charges will not weigh on the volume of transactions


The Executive Vice Chairman of the National Communications Commission (NCC) in Q1-2021 disclosed that Deposit Money Banks (DMBs) owed Telcos N42 billion in accrued fees for unpaid Unstructured Supplementary Service Data (USSD) charges provided to banks by Telcos.

These accrued fees followed protracted disagreements over the pricing structure of USSD payments between Telcos and banks, after a revised template, released by the NCC in Aug-2020, stated that the USSD fee should be a corporate charge between the financial institutions and the network providers. Thus, customers should not be involved.

Before 2019, Nigeria operated a bank-led mobile money system, which differs from the telco-led mobile money model practised in Ghana and Kenya.

The critical difference between both models is that in a bank-led model, Telcos provide the underlying infrastructure for USSD services, whilst the banks leverage this infrastructure to provide the banking services.

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However, since 2019, the Central Bank of Nigeria (CBN) began issuing, Mobile money and Payment Service Bank licenses to Telcos, enabling Telcos and other larger institutions to offer payment and related services.

Effectively, Nigeria now operates a mixed model. However, banks and potential new entrants will still rely on the telco infrastructure to provide mobile money services. Nevertheless, disagreements continued to linger between both parties. 

In Q1-2021, the Association of Licensed Telecommunications Operators of Nigeria (ALTON) threatened to phase out their USSD service offering to DMBs if their outstanding debts were not settled.

In Mar-2021, following several engagements, a joint statement between the CBN and the NCC announced plans to hike USSD charges from N4.00 to N6.88, a 72.1 percent increase.

Notably, in the new pricing template, the banks will now collect the customer accounts’ charges on behalf of the Telcos.

This means the customer will bear the full effect of this price increase.

That said, while we consider the new charge a headwind to the overarching objective of financial inclusion, we do not think this will weigh on mobile money transaction volume growth. 

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