Segun Agbaje – CEO of GTCO – believes internet-based mobile banking, not USSD technology, is crucial for financial inclusion in Nigeria. He also believes telcos should lower the data subscription rates to accommodate everyone in a bid to drive adoption of mobile banking.
While announcing GTCO’s financial statement, the veteran banker revealed the company’s USSD value dropped by 22%. The reason for this poor performance, according to Agbaje is that “the N6.98 charge is a punitive cost and most people do not want to pay that just to use the USSD. That’s why it has stopped growing.”
Although USSD is used for other purposes like airtime recharge or data bundle purchases, many commercial banks have liberated the technology to optimize delivery and bridge the gap between customers and basic financial services. Instead of visiting the nearest branch for a basic reason like an account balance check, individuals just have to input their bank short code and voila.
While Nigerians everywhere have used USSD at some point, it’s mostly popular in remote areas where access to fast internet is limited. It doesn’t require an internet connection, meaning even basic phones can run this service using a cellular network. USSD played a significant role in helping M-Pesa – a mobile money service – succeed in Kenya. It has since expanded to other markets.
Despite USSD’s impact, Agbaje believes banks’ mobile apps should take center stage because they’re modern and superior.
“USSD is a clumsy technology. It’s not state-of-the-art. The best way to have financial inclusion is to crash the cost of data so that data becomes more affordable. Then we can use what is a superior technology,”
Segun Agbaje, GTCO CEO
Read also: Why the world’s cheapest and most expensive broadband are both in Africa
A case for the ‘superior technology’
USSD can be termed a mobile banking offering because it works on a phone and allows users to perform transactions. Ben Lyon – CEO and Co-founder of Stax – agrees. “Mobile banking tends to refer to an electronic (mobile) channel for accessing and managing a bank account. When you check your GTBank balance via SMS, USSD, or a mobile app, for example, you’re participating in mobile banking.”
However, while USSD transactions aren’t Internet-based, access to mobile banking apps requires a stable connection to the Internet. This means only smartphone users can use this service, a condition that currently doesn’t scream “inclusion”.
Nigeria currently has a smartphone penetration of 35% which, coupled with rising device and data costs, complicates the switch from feature phones. Agbaje, however, believes the major issue is the high cost of internet access. According to research from Cable, the average data package in Nigeria costs nearly N32,000 while the cheapest plan is around N15,000.
Last October, telcos hiked their data bundle fees by 10% as part of measures to cushion the effect of an economic downturn. Although it was later reversed following an order from the country’s regulatory commission, the above figures indicate that data is expensive here.
“If you want financial inclusion, then you need to bring down the cost of data…if you compare the cost of data in Nigeria to elsewhere, you’d realize that we are being exploited,”
Segun Agbaje
Beyond data cost, the issue of data depletion has triggered many conversations among Nigerian telecom consumers. Even after buying data bundles for high amounts, many subscribers claim that they “exhaust” their balance days or weeks before the expiry date. While telcos often say data depletion is a direct result of customers’ data usage, the latter feel it’s a deceptive tactic to gain profit while sacrificing user satisfaction.
Paying a closer eye to the financial inclusion story
Agbaje’s calls for USSD’s end can be connected to the service’s poor outing last year, but there seems to be more. Last week, telcos gained the approval of the NCC to cut off banks from USSD usage because of an unpaid debt worth N120 million.
However, the banks claim that the debt includes failed USSD transactions which they cannot pay for. Early this year, many customers reported tons of unsettled transactions in the heat of cash scarcity.
This reality seems to support the argument that USSD needs to be replaced, but to do that, Nigeria must increase its smartphone and broadband penetration. According to the NCC, the latter stands at 48.49%. Telcos should also review their subscription costs and strive to deliver more value for every naira spent on data.
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