Banks vs telcos N120bn USSD debt crisis may soon be over as banks finally submit repayment plan

Telecom companies are deliberating over a repayment proposal put forth by Deposit Money Banks to resolve the lingering N120 billion debt related to the Unstructured Supplementary Service Data (USSD) service, Punch Newspapers has reported.

The Central Bank of Nigeria (CBN) is stepping in to mediate the dispute and has organised a forthcoming meeting involving both parties, the newspapers said.

According to a representative from the Association of Licenced Telecommunications Operators of Nigeria, the primary body representing telcos, progress is being made in addressing the issue.

“Work is going on and we would soon have a meeting with the telcos. We are going to talk about what the banks have told us. Modalities for payments, the banks are ready to pay,” the representative shared.

The CBN’s intervention underscores its commitment to resolving the matter, and the source expressed optimism about finding a solution. “The CBN has called all of us to try to resolve the matter. We are looking at a way of fulfilling the promise. Banks have made commitments to pay.”

The source noted that the debt had continued to increase in 2023, due to continued patronage of the USSD channel.

Read also: Here is a list of all the new USSD codes for MTN, Airtel and Glo

What you should know about the Telcos, DMBs USSD debt

Since 2019, telecom companies and banks have been embroiled in a disagreement regarding the debt payment. The dispute had hung on payment of arrears and a pricing model that the service providers failed to agree on.

The inter-industry disagreement dated back to October 2019 when MTN sent messages to its subscribers informing them they will henceforth be charged for using the USSD after the bank failed to comply with the initial agreement. That decision led to the telcos’ move to implement a N4.00 per 20-second session access to USSD services charge, escalating the dispute.

In reaction to the news, Subscribers rejected the newly introduced charges through a loud backlash that got the attention of the then Minister of Communication and Digital Economy, Dr Isa Pantami.

The Minister then directed the Nigeria Communication Commission (NCC) to investigate the matter for necessary action. However, before the investigation was concluded, ALTON forwarded a letter to Dr Pantami, explaining the genesis of the disagreement and why the telcos decided to introduce the charges.

According to the letter, they highlighted their transition from end-user billing to corporate billing in collaboration with the banks, wherein the latter absorbed the USSD platform deployment costs. They reveal that rates paid by banks to telecom providers ranged from 0.85k to N2 per 20-second session, significantly lower than the charges banks levied on their customers, resulting in substantial bank revenues.

The telcos also underscored the substantial impact of banks’ diverse services on their network resources, necessitating continuous investments to accommodate the heightened traffic. With banking-related activities accounting for approximately 90% of the total USSD channel usage, telecom providers expressed concerns over the strain this places on their infrastructure.

Excerpts of the letter read:

“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 platforms for financial services.

“We state that the rates paid by the banks to our members following the change to corporate billing averaged as low as 0.85k per 20-second session to as high as N2 per 20-second session depending on the transaction volumes generated by the banks. The banks however in turn charged their customers for the same services between the range of N10-N50 depending on the bank and the service accessed by their customers.

“Consequently, rather than open new banking locations and deploying more 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, fund transfers, account opening for tier one customers and other services unique to each bank’s 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.

“These new services continued to place a strain on our members’ network resources which resulted in our continued and further investments to ensure that the SDCCH channel was dimensioned to handle the increased traffic as a result of the new banking services being deployed on it. Services provided by the banks constitute a minimum of 90% of the total traffic on the USSD channels of our members.”

In response, Dr Pantami, at the conclusion of his investigation into the matter directed telcos not to proceed with their plan to charge subscribers since the banks are deducting the charges from customers’ accounts. The telcos agreed to comply with the directive on one condition; the banks must pay the outstanding N17 billion debt which accrued since 2019 and must agree to pay subsequent charges in due time.

Also, Prof. Umar Danbatta, the Executive Vice Chairman of the NCC confirmed that the banks are N17 billion indebted to telcos as of then. Vanguard reported that Danbatta promised to work out modalities with the Communication Minister and stakeholders at the bank for the payment.

However, the banks did not clear the debts and the USSD transactions were not halted. In this period, the telcos now assert that the banks owed them a substantial N32 billion, which stemmed from providing financial services through USSD.

In May 2023, the telcos announced that they would withdraw their Unstructured Supplementary Service Data (USSD) to banks until the financial service providers clear a total of N120 billion ($259 million) debt they accumulated in about nine years.

Read also: Nigerians may lose access to USSD transactions soon

According to Gbenga Adebayo, Chairman of ALTON, the debt had risen from N42 billion to N80 billion, with the banks showing no readiness to pay. He indicated that the telcos’ decision to withdraw the USSD services was borne of frustration.

“We have engaged them severally but they refuse to do anything,” Adebayo told Bloomberg. “If we withdraw the service and they feel the impact, maybe they will come to find a way to resolve it.”

As the telecom industry and banks explore options for resolving the lingering USSD debt, stakeholders are hopeful that the proposed repayment plan could mark a turning point in this prolonged issue.