Can competition replicate Ecobank’s zero charge on USSD transaction?

The raging debate on who deserves to collect charges on USSD transactions between banks and telcos may not have been the theme of the Nigerian Fintech Week, 2019, that held recently, but it certainly became its most memorable highlights.

The chief operating officer of Ecobank, Patrick Akinwuntan seized an opportunity as a member of a panel to announce that the pan-african bank would henceforth offer every Nigerian zero cost for using the bank’s USSD codes for financial services. Although no one is yet to confirm the service is now working as at the time of filing this report, the bank’s COO certainly stirred the dust.

Prior to that Tuesday, 29 October, the banks and operators in the telecommunication had been locked in some form of stalemate over the pricing of USSD transactions.

It started from a text message MTN sent to its subscribers which a few banks picked up and also pushed to their customers, informing them of plans to charge N4 for every 20 seconds of USSD transactions. As a result of the CBN and NCC’S rejection of the charge, the bank CEOS group promptly issued a statement denying it gave telcos the go-ahead to charge their customers. The telcos responded that they were within their rights to collect a fee for the service.

The telcos have since suspended the charge until the regulators determine the way forward.

The Ecobank announcement however opens a new chapter in the discussion. Importantly, it raises the question whether banks and telcos can forgo the USSD as part of contribution to driving financial inclusion?

While reacting to the reports of MTN’S text, the CBN governor Godwin Emefiele said he had asked the telcos in a meeting with big banks in May 2019, to consider the USSD charge as “sunk” cost, which means forgone cost, for the sake of financial inclusion. But the telcos had kicked against the suggestion.

“We should not be having a debate of what excludes Nigerians from what I will say is the financial human rights to participate in the economy,” Akinwuntan said.

Since it appears Ecobank has taken up the CBN challenge, would other banks be open to see their USSD charge as “foregone” for the greater good of financial inclusion?

“I think it is possible for us to offer every Nigerian zero cost for using short codes for financial services,” the Ecobank COO said. “I know the debate has been on if it is the banks or telcos charging. But with the opportunity of 200 million Nigerians and trying to lift Nigerians out of poverty, this is the time to take action.”

It should be noted that while Ecobank is the first to announce zero charge on all USSD transactions to every customer using its bank codes, it is not the only bank to offer zero-ussd.

Gtbank, on same Tuesday in another forum, also said henceforth it will cover all charges on transfers, USSD transactions and bank alerts for holders of its Gtcrea8 Account.

The Gtcrea8 targets young undergraduates between the ages of 16-25 years.

Although the USSD service is widely seen as instrumental to delivering the CBN’S financial inclusion vision, its administration has left many very worried. In terms of banking, USSD codes run by all the banks can only function efficiently by customers with accounts domiciled in the banks.

This raises difficulties for the over 40 million Nigerians without a bank account and who are not financially included. Experts in fintech have reiterated that growing inclusion numbers may require services that doesn’t necessarily require people creating a bank account. In that light, digital banks like Paga and Kudabank have created solutions that offer financial transactions without a bank account. In most cases, all a customer needs is a phone number.

USSD charges have often been put forward as a disincentive for financial inclusion, which makes the move by Ecobank even more remarkable.

A senior level executive in the banking sector who pleaded anonymity to speak freely, said it is highly unlikely all the banks will want to follow in the footsteps of Ecobank.

“They would probably pricing sign an industry agreed pricing,” he said. “Maybe N1 per USSD session.”