N42billion Debt: Telcos threaten to withdraw USSD services to banks

N42billion Debt: Telcos threaten to withdraw USSD services to banks

TECH DIGEST – Mobile Network Operators (MNOs) in Nigeria have threatened to withdraw Unstructured Supplementary Service Data (USSD) services to Financial Service Providers (FSPs).

This is not unconnected with the inability of the FSPs to pay whopping N42billion debt they owe the telecommunication service companies.

The MNOs under the umbrella of the Association of Licensed Telecommunications Operators of Nigeria (ALTON), announced their plans to withdraw the services in a statement signed by the Chairman, Engr. Gbenga Adebayo​​​​​​ and the Head of Operations, Gbolahan Awonuga.

​​​​​​​The debt is huge, but telcos shouldn’t withdraw services – NCC

The Executive Vice Chairman of the Nigerian Communications Commission (NCC), Prof. Umar Danbatta, had in this report disclosed that Deposit Money Banks owe the sum of N42bn for services provided by the mobile network operators through the USSD.

According to Danbatta, indebtedness of the banks to mobile network operators had been an issue over time, but stressed that the NCC was working hard to address the concern.

He said: “The issue of the USSD has become an issue between the telcos and the banks. The telecommunication companies provide the infrastructure which the banks leverage on to provide banking services of all kinds.

“Therefore it is expected that for this service someone should pay. No service is free. The investment in infrastructure that is driving the USSD service is a huge investment that the telcos made.

Despite the glaring indebtedness of Financial Service Providers to telecoms, the EVC said: “The telecommunications companies cannot unilaterally withdraw this service because it will be seen as a subversive act, undermining the digital inclusion strategy of the present government.

We are compelled to withdraw services – ALTON

In response to that ALTON said they are aware of the letter issued by the Minister of Communications and Digital Economy to the Central Bank of Nigeria, seeking a resolution to the on-going dispute between the banking sector (Financial Service Providers (FSPs)) and the telecoms sector over the appropriate methodology to use to charge for USSD services.

ALTON continues: “The background to this problem was that in order to accelerate the adoption of financial services on USSD, the Financial Service Providers (FSPs) partnered with our members to zero-rate the USSD access to end-users, while they bore the cost for the provision of service. Based on this arrangement, the banks took on the responsibility of billing customers and paid our members for use of the USSD infrastructure from the service fees deducted from the customer’s bank account.

“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 (FSPs) 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.

“​It has been more than eight (8) months since the Nigerian Communications Commission (NCC) issued an updated pricing methodology for USSD services for financial transactions in Nigeria. 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.

“During this time, Mobile Network Operators (MNO’s) 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 Forty-Two Billion (N42B) Naira.

“​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.

“​We deeply regret that we have reached a point where the withdrawal of these services has become unavoidable, however, we remain committed to working closely with the relevant Ministries and regulators to resolve this issue as quickly as possible. To minimise the disruption to customers, and with the concurrence of the Honourable Minster of Communications and Digital Economy and the Nigerian Communications Commission, on the huge debt to the Network operators; Mobile Network Operators will disconnect debtor Financial Service Providers (FSPs) from USSD services, until the huge debt is paid.

“Therefore, our members are initiating a phased process of withdrawal of USSD services, starting with the most significant debtors within the Financial Service Providers (FSPs) effective Monday March 15, 2021.

“While the withdrawal of USSD service is in place, we encourage our subscribers to kindly explore alternative channels with their Banks”, the statement concludes.

As at the time of filing this report, the Financial Service Providers (“Banks) are yet to issue statements regarding the huge debts and threats by telcos to withdraw USSD related services.