Premium Times (Abuja)

By Mojeed Alabi

In spite of the suspension order by the government, the controversy continues over MTN's alert to its customers on the decision to commence end-user billing for banking services conducted through its network.

The telecommunication giant said it would bill customers N4 per 20 seconds for the use of the Unstructured Supplementary Service Data (USSD) for financial transactions involving their banks.

Since the announcement was not backed by any explanation, many saw the decision as another ploy by the telecommunication companies to rip them off.
The criticisms may have further been influenced by the increasing complaints of Nigerians against arbitrary charges, strange deductions and disappearances of either their airtime or data.

But documents obtained exclusively by PREMIUM TIMES have revealed that while the anger vented against the mobile network operators may not be totally misplaced, the real 'beneficiaries' in the USSD business are the financial institutions.
Rather than cautioning the banks' excesses, the Central Bank of Nigeria (CBN), the industry's regulator, has surprisingly continued to pat them on the back.

Banks' adoption of USSD traced to 2014
The term USSD may be strange to many Nigerians but its usage has been deployed by every mobile phone user since mobile telephony was introduced to the country.
Either to make balance enquiry, call customer centre, purchase airtime or access data services, USSD has always been used. But such USSD services are regarded as zero-rated, that is, they attract no cost.

However, documents available to PREMIUM TIMES including NCC's legal determination of USSD cost pricing, which was published on July 23, 2019, and others containing the catalogue of activities and communications between the network providers and financial institutions, shows the adoption of USSD for financial services dated back to 2014.

Towards enhancing Nigeria's crave for financial inclusion through digital operations, and to curb incessant attacks and criminality against physical banking institutions, the banks had applied to the Nigerian Communications Commission (NCC)- the regulator of the country's mobile network operators, for USSD codes for their mobile transactions.

Various banks, thereafter, independently approached the network providers for what was meant to be mutually beneficial business partnerships

In its account of the development, the Association of Licenced Telecommunication Operators of Nigeria (ALTON)- the umbrella for mobile network providers, said the financial transactions discussed by the banks at the time largely concerned airtime sale.

The service to be provided by the banks, according to ALTON's administrative head, Gbolahan Awonuga, dictated the charges demanded from the banks by the telecommunication companies.

He said; "At the nascent stage of USSD development for the financial services sector, the billing mode adopted by our members was to charge the telecommunications service consumer directly, which is referred to as end-user billing. Following complaints by our customers with regard to disappearing/illegal airtime deductions, there was a consensus with the banks to implement corporate billing where the banks absorbed the costs associated with deploying the USSD platform for financial services."

According to Mr Awonuga, following the change to corporate billing, "banks were paying network providers between 0.85k and N2 per 20-second session depending on the transaction volumes generated."

How alliance collapsed
Not long into the contractual arrangement, investigations revealed that the successes recorded through their digital operations, and specifically with the adoption of USSD, the banks introduced new services which increased both their customer base and financial gains.

Confirming the development, a deputy governor at CBN, Folashodun Shonubi, disclosed in a recent lecture he delivered, that transactions done in the physical bank branches within the last three years averaged less than 10 per cent compared to more than 90 per cent achieved via virtual channels.

Mr Shonubi, whose lecture was titled; "Bank Branches and the Future: The Regulator's Perspective," was quoted to have revealed this at a summit held in Lagos, recently.

He said the ratio is a confirmation that digital and virtual banking has taken over the financial services industry in the last few years.

For instance, in terms of naira and kobo, data obtained through the Nigeria Inter-Bank Settlement System Plc. (NIBSS), Nigeria's e-payment clearinghouse and custodian of e-payment data, show that as at March, 2019, Nigerian banks' USSD users' enrolment stood at 2.3 million out of total banks' customer base of 68.5 million.
NIBSS further noted that these 2.3 million USSD customers engaged in 41.4 million transactions amounting to N810.1 billion within the first quarter of January to March, 2019.

Going by this figure, assuming that an average of between N10 and N50 is charged by the banks on each USSD transaction, then the total gains made by the banks and operators averages about N1.2 billion within the same period as charges.
However, based on the claims by the mobile operators that the highest pay they received from the banks was N2 per 20 seconds per session with a maximum of three sessions per transaction, the conservative analysis would mean that the mobile operators take home an average N248.4 million per quarter.
This is roughly 20 per cent of the gains while 80 per cent goes to the banks.

Telecommunications companies kick
Having realised the volume of transactions and money raked in by the financial institutions through the use of USSD, the network operators demanded increase in their share.

The discussions heightened between 2016 and 2017 but the banks insisted that they were responsible for the services rendered. The conclusion was that the percentage offered the network operators was fair enough for providing the channels for the services.

But the network operators insisted that without their channel, there would have been no service to render.

In a letter addressed to the Minister of Communication and Digital Economy, Isa Pantami, last Monday, which was sighted by PREMIUM TIMES, ALTON stated its position.

"... rather than open new banking locations and deploying more Automated Teller Machines (ATMs), the banks increasingly used the USSD platform to provide a bouquet of services not initially contemplated by our members, which included account balance enquiries, funds transfers, account opening for tier-one customers and other services unique to each banks' portfolio of services. The banks also used this channel to grow significant revenues running into billions of naira in view of the large disparity between the cost charged by our members and the charge imposed by the banks on their customers."

The letter, which was signed ALTON's chairman and the executive secretary, Gbenga Adebayo and Kazeem Ladepo, respectively, apart from chronicling the activities leading to its members' decision, sought audience with the minister for a resolution.
Not swayed by the telecom operators' argument, the banks insisted there was no going back on the existing sharing formulae.

NCC's intervention
Bothered by the likely consequences of an eventual collapse of the relationship between the parties, the NCC said it resolved to secure evidence-based but customer-friendly charges for the USSD services.

The agency said it derives its power from Section 4 (a) of the NCC Act 2003 establishing it, by ensuring "the protection and promotion of the interests of consumers against unfair practices, including but not limited to matters relating to tariffs and charges; and availability and quality of communications services, equipment and facilities."

The body said after a series of meetings with concerned stakeholders, it, in 2017, commissioned PricewaterhouseCoopers (PwC) "to assist it understand, and determine the cost of USSD services."

The decision, NCC's Director of Public Affairs, Henry Nkemadu, said, was also aimed at replicating how the agency arrived at the N4 charge for one-page text message instead of N15 earlier charged by the operators.

In its approved USSD price determination document, which it described as a law that must be strictly obeyed by the mobile network operators, the NCC said it was based on the PWC research conducted between 2017 and 2018, and submitted in June 2018.
NCC's verdict states that the determination USSD session is 20 seconds while the cost of a USSD session is N1.63k. However, while it noted that the price floor for a 20 seconds USSD service is N1.63k, it added that the price cap should be N4.89k.

The agency, therefore, advised operators to price at cost plus margin, even as it emphasised that the "determination does not apply to the currently zero-rated USSD services such as customer service, balance enquiry, purchase of airtime and data services, among others."

Apart from meeting with operators many times before arriving at the conclusions, NCC noted that in May 2019, stakeholder engagement was held with relevant participants drawn from CBN, NIBSS, Wireless Application Service Providers Association of Nigeria (WASPAN), Enhancing Financial Innovation and Access (EFInA), among others, for considerations.

To achieve total transparency in the USSD charges, the NCC called on other stakeholders especially banks and licenced mobile financial services providers to ensure that their charges reflect their true cost structures.

"It is expected that this determination will enable such transparent cost application in that sector. The Commission looks forward to action by the other regulators in this regard to achieve fair pricing to the benefit of consumers, the different players in the ecosystem, and Nigeria as a whole," the agency said.

According to Mr Nkemadu, the document was shared with all relevant stakeholders including CBN and the financial service providers, for compliance.

'Banks ignored directives'
Dissatisfied with the NCC's conclusion, and without any response from their regulator, that is, the CBN, the financial institutions declined to obey the determination advice.

Through a letter addressed to the various mobile network operators on September 16, the banks under the umbrella of Body of Banks' Chief Executive Officers (BOBCEO), said the new price determination was an attempt to truncate Nigeria's financial inclusive drive, and insisted it could not pay the mobile network providers the new rates.

As a suggestion, therefore, the banks insisted that mobile network operators should charge their subscribers separately while they continue to charge their customers the existing rate.

Following the backlash that trailed MTN's decision, the banks quickly denied ever making such a suggestion.

Minister orders operators to suspend action, CBN goads banks
Apparently worried by the spontaneous reaction of many Nigerians across various platforms including social media, Mr Pantami ordered immediate suspension of action by the mobile network operators and mandated NCC to sanction any erring operator.

Asked whether the minister was aware of the details of activities leading to the development, and particularly the price determination by the NCC, his spokeswoman, Uwa Suleiman, said such questions could not be answered offhand.

However, rather than responding to questions shared with her on WhatsApp and e-mail as instructed, the minister's aide sought more time for response, claiming her boss was out of the country. But as at the time of filing this report, no response has been received.

But speaking on the sideline of an event in Washington DC, recently, the CBN governor, Godwin Emefiele, said he had instructed the banks to move their business to other operators that may be ready to provide USSD service at the lowest possible "and if not at zero cost."

Mr Emefiele insisted that the status quo ante should remain.
When the spokesperson for the apex bank, Emeka Okoroafor, was contacted by our reporter, he declined further comment on the matter, saying the governor's comment on the issue was all he could refer us to.

"My brother, I can't say more than that on this matter. Just take the position of the governor for it," Mr Okoroafor told our reporter on the phone.

Efforts to get the reaction of the chairman of banks' CEOs' committee, Herbert Wigwe of Access Bank Plc. on the matter, were unsuccessful.

His spokesman, who doubles as the spokesman for the bank, Abdul Imoyo, who had initially agreed to speak on any matter concerning the USSD, quickly retracted as soon as the issue of justification for the current rate by the banks was raised.
"You know I only speak for Access Bank and our CEO when it is demanded. But on this issue, I will need to send you the contact of an appropriate person to talk to."

More than 72 hours after, Mr Imoyo did not send the contact, and neither did he respond to a text message sent to his mobile line and through Whatsapp.
Meanwhile, the President of the National Association of Telecoms Subscribers, Deolu Ogunbanjo, has challenged the banks to come up with the rationale for what he described as "exorbitant charges" imposed on USSD users.

According to Mr Ogunbanjo, the current crisis is bank-driven and the solution should be in the reduction of the charges.

"The banks want to eat their cakes and have it. This is a bank-driven crisis but because Nigerians are too complacent, they take things as they come. Do you know what we went through to force the telecoms industry to reduce tariffs and endorse per seconds billing? But on the part of banks, they are very callous, and we are very dismayed by the way they cheat us," he said.

credit: Premium Times