The ongoing conflict between Nigerian banks and telecommunication companies (telcos) over Unstructured Supplementary Service Data (USSD) services has raised concerns about the future of mobile banking and financial transactions in the country.
While the telcos have obtained approval from the Nigerian Communications Commission (NCC) and start issuing notices to banks, how they respond this time remains highly uncertain considering the circumstances sorrounding the lingering saga.
Debt Accumulation and Disconnection Threats
Nigerian telcos, including MTN, Glo, Airtel, and 9mobile, claim that banks owe them a significant debt of N120 billion for using USSD to provide financial services.
Frustrated by the outstanding payments, telcos sought approval from the industry regulator to disconnect Deposit Money Banks (DMBs) in the country.
This move puts the banks at risk of losing access to USSD services, which could disrupt banking operations and inconvenience customers who heavily rely on USSD for transactions.
According to the Chairman, Association of Licensed Telecommunications Operators of Nigeria, Gbenga Adebayo, serving the banks’ notices is part of the withdrawal process.
“We have not disconnected yet, but notices have been given to the banks.
“The duration of this notice is dependent on the terms of the agreement with the operators. Disconnection is a function of if they respond with payment.
“If they respond with payment, we won’t see disconnections. If they don’t, we would start disconnections over the next few days or weeks or months,” he said.
Are Banks Owing Telcos or not?
However, in the past, some Nigerian financial institutions had debunked that they were indebted to the telcos. This could have also been one of the reasons the loggerheads keep soaring.
One of the big wigs in the banking sector that refuted the claim by telcos was Herbert Wigwe, Chief Executive Officer of Access Bank Plc.
During an investor call, he said: “There is no such thing as an obligation due from banks to telcos.
“We chose not to make a public statement out of it because it is not appropriate for us to be found fighting with telcos in public. It is true that they continue to provide this service but this service has nothing to do with the banks.”
The Clumsy Technology Debate
There is another concerning scenario recently, when the CEO of Guaranty Trust Holding Company Plc, Segun Agbaje, characterized USSD as a “clumsy technology” and argued that the conflict between banks and telcos diverts attention from the issue of high data costs in Nigeria.
While USSD has proven to be a convenient and interactive channel for banking transactions, Agbaje’s criticism raises questions about the long-term viability and potential limitations of USSD technology.
This debate highlights the need for continuous innovation and improvement in Nigeria’s digital financial infrastructure.
Impact on Nigerian Users
Despite the criticisms from GTB Chief, the USSD hitherto plays a crucial role in Nigeria’s financial infrastructure, particularly for individuals without smartphones or access to mobile data.
With only 44 percent of Nigerians having smartphones, USSD provides an inclusive and accessible platform for banking transactions, allowing customers to perform simple transactions in a matter of seconds.
The potential disconnection of USSD services could disproportionately affect these users, hindering their ability to engage with the banking sector and potentially exacerbating financial exclusion.
USSD’s Growing Importance
USSD transactions in Nigeria have witnessed significant growth, with the value of transfers increasing from approximately N30 billion in January 2020 to N551 billion by December 2020.
The figures released by the Nigeria Inter-Bank Settlement Systems (NIBSS) further emphasize the potential of USSD as a critical channel for electronic transactions.
Numerous local banks integrate USSD through various channels, making it an essential tool for banking services. The conflict between banks and telcos threatens to disrupt this growing ecosystem and hinder the progress of digital financial inclusion.
Fingers Crossed
The conflict between Nigerian banks and telcos over USSD services raises concerns about the future of mobile banking and financial accessibility in the country.
The accumulated debt and disconnection threats pose challenges to both banks and customers, potentially impeding financial operations and excluding users from essential banking services.
While USSD has demonstrated its value and convenience, criticism from industry leaders raises valid questions about its limitations and the need for continuous innovation.
To ensure a sustainable and inclusive digital financial ecosystem, banks and telcos must reach an amicable solution that considers the interests of all stakeholders while promoting financial inclusion and technological advancement in Nigeria.
