Real Issues Behind the Banks vs Telcos War as N42bn USSD Tussle Drags on

What You Should Know as Tussle between Banks and Telcos over N42bn USSD Debt Drags on

When Nigeria’s mobile network operators threatened to withdraw Unstructured Supplementary Service Data (USSD) services in March, it proved that the dispute with banks had continued to fester away from the public eye. Clearly, the controversy over what telcos claimed was more than N42 billion USSD debt owed by banks had not been ironed out.

It took the intervention of sector regulators, the Central Bank of Nigeria (CBN) and the Nigerian Communications Commission (NCC) for telecom operators to cease going ahead with the suspension of USSD services.

The two-year ussd controversy between telcos and banks, however, remains unresolved as telcos have now accused banks of reneging on the debt settlement agreement reached.

The over N42bn debt remains outstanding and the banks have to pay the telcos. It has become a moral obligation because the banks used the services, debited their customer accounts and now not paying the telcos.

Gbenga Adebayo, Chairman, Association of Licensed Telecommunications Operators of Nigeria (ALTON)

“Who do they expect to pay and what were the deductions made from their customers for USSD services, which you and I were debited for?” he added.

But, Access bank CEO, Herbert Wigwe has reportedly stated that banks are not in any way indebted to telcos. Just as in March, the NCC and CBN are being called upon by industry stakeholders to intervene again.

Are Banks Indebted to Telcos?

It is almost laughable that there is even an argument over whether the banks owe telcos or not. For context, according to the joint official statement by the NCC and CBN in March, “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.”

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Why would there be a settlement plan if there were no accumulated debt on the part of the banks? Invariably, banks owe the telcos and the plan was drawn up to detail how they would go about offsetting the N42 billion debt.

Recall that in 2019 banks had at first been mandated to pay telcos up to N4.89k per USSD session from charges levied on customer transactions. Then this was reviewed to N1.63k last year after USSD pricing was amended.

N0 to N6.98K, Nigerians to bear new USSD Costs

With the CBN and NCC reaching a consensus that Nigerians will now pay N6.98k per transaction for USSD services, the consequence is that over 40 million people who use USSD services will directly bear the cost burden. On behalf of telcos, the banks will collect the N6.98k charge directly from customers’ accounts.

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Over 40 million Nigerians use USSD services

USSD services are largely used by people with feature phones especially those living in underserved areas with limited access to banks or banking agents. More people started using USSD because it was free at the time. In fact, USSD transactions grew by 80% to 762 million in 2020.

However, factor in the new N6.98K charge, and only those who have smartphones to access banking apps/fintech platforms, or who can afford to pay for USSD transactions will not be affected.

NewsZoo estimates that only about 26 million of 100 million unique mobile subscribers in Nigeria have smartphones, and a fairly used smartphone costs about N6,000 – 20% of the N30,000 minimum wage. 40% of Nigerians earn less than 38% (N11,500) of the minimum wage.

For those without an alternative to USSD, it is clear that they may find themselves shut out from being able to access financial services.

Going Forward

The USSD tussle appears set to go on until banks actually begin to pay off the accumulated N42 billion debt according to the terms of the latest agreement. However, from publicly available information, the terms and conditions of the “settlement plan” are not disclosed.

Thus, we can’t ascertain if there are details such as the debt fee agreed and timespan over which payment will be made. For instance, if banks were supposed to pay 10% of say N42bn in the past 1 month, and they didn’t, then it becomes clear that they have defaulted on their own end.

Regulators can be expected to engage all stakeholders for a resolution, but the possibility of telcos entirely shutting down the USSD service if parties are unable to reach a compromise looms very large.

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