Ask the average Nigerian how often he makes Unstructured Supplementary Service Data transactions and he or she will mostly likely tell you that they don’t. But mention USSD transactions and their faces will light up with recognition.
USSD is shorthand for Unstructured Supplementary Service Data and it refers to banking transactions that enable a customer to initiate and conclude a financial transaction through the use of short codes without the need for Internet connectivity. Because USSD transactions by-pass the often patchy internet connections, they are more convenient, efficient, secure and seamless.
So, if these advantages exist, why are USSD transactions not the preferred mode in the Nigerian financial ecosystem? It boils down to awareness and habit. Most customers are not aware of the range of transactions they can make via USSD while those who may be aware have become so used to their cheque books, ATM cards, bank specific short codes which present no charges that they are reluctant to change and adopt new methods. For many others it boils down to a fear of technology.
WHAT IS USSD?
USSD transactions and short codes were first introduced into Nigeria by telecom providers and they were initially used to check credit balances and carry out automated transactions on the various telecom networks.
But then the banks stepped in. Adoption was slow until GTBank launched their hugely successful *737# campaign and suddenly USSD became the rave. Today, bank customers are familiar with not just with GTbank’s *737# but *966# for Zenith, *894# for First bank, *901# for Access (Diamond), and *919# for UBA amongst others.
GROWTH IN MOBILE MONEY TRANSACTIONS?
Recent figures provided by the Nigeria Inter-Bank Settlement System Plc (NIBSS) indicate a sea change. “Electronic payment transactions in Nigeria rose to N387 trillion in 2022, hitting an all-time high as more Nigerians embrace cashless payments following the launch of e-Nigeria and issues from the currency redesign.
According to the data released by the NIBSS, the value recorded on the NIBSS Instant Payment (NIP) last year was 42 per cent higher than the N272 trillion recorded in 2021.”
A report by Nairametrics also notes that N12.8 trillion worth of mobile transactions were recorded in Nigeria between January and September 2022. This was more than double the amount recorded in the same period for the previous year and far beyond the figures for 2020.
What it fails to mention is the huge revuenue accruing to mobile network operators and switching companies.
The growth, the publication continues, has been consistent year on year rising from N216.4 billion in 2018 to N461.4 billion in 2019 and then to N1.89 trillion in 2020 and N5.01 trillion in 2021
The report also added that “there is diminishing interest in transactions on other instant payment platforms like bank tellers, Internet banking, Automated Teller Machines, vendor merchants and others.”
A February 24, 2019 story in The Punch reported analysts at NIBSS as saying that, “Recently, we have observed that USSD has made the most gains with regards to channel acceptance. While mobile apps still remain the most preferred channel, USSD is closely catching up.”
This is remarkable in a financial system with 69.7 Million individual account holders as at 2018 and a telecom space with 173,749,601 subscribers. What this implies is that there are more phone users than account holders and converting those phones into payment platforms portends a huge market for interbank transactions especially as USSD transactions grow.
THE MPESA EXAMPLE
And this is not peculiar. In Kenya, Mobile Money transactions from Mpesa has changed the financial services ecosystem and expanded financial inclusion to the benefit of low-income earners who were hitherto financially excluded. According to figures from 2021 Communications Commission of Kenya there were 29.1 million M-Pesa customers in Kenya, making up 63% of the population. Mpesa transactions were north of KSh 5.1 trillion (about $47 billion) in the three months ended in September 2021. M-Pesa has also empowered Kenyans by creating over 185,000 jobs.
In Nigeria USSD transactions are leading the mobile money adoption. NIBBS notes that more Nigerians are using “electronic channels such as bank applications and USSD to pay for items that normally would have been cash-based” leading to a 70% rise in the volume of mobile money transactions between January and February 2023 from 108.13 million to 183.69 million.
“The latest data released by NIBSS showed that while the volume of transactions rose by 70 percent, value of transactions rose by 7.8 percent. Volume had risen from 108.13 million transactions with a value of N2.37 trillion in January, to 183.69 million transactions with a value of N2.55 trillion.”
The USSD imperative is further underscored by the fact that there are just 198,000 deployed POS machines in Nigeria while the total number of operational ATM machines comes to 18,321 with total transaction value put at N4.76 Trillion according to figures from NIBBS. The use of USSD will by-pass use of ATM machines as well as ATM cards.
INTRODUCING CORALPAY
What does this mean for Nigerian banks and their customers? It portends big opportunities and convenience as well as more safe, secure and seamless transactions especially with a larger population, larger pool of bank customers and almost 200 million telecom subscribers.
The ecosystem is changing rapidly as more innovative solutions are provided and the emergence of companies like CoralPay whose C’Gate switching and payment gate way is providing fresh innovations in the space is widening the scope to include payments for goods and services that run the gamut from utility bills to airline tickets, church tithes and toll gate payments as well as sundry government levies and taxes.
CoralGate has deployed the first interoperable Unstructured Supplementary Service Data (USSD) and mobile payment platform for Nigerians who desire a more efficient, seamless and secure payment solution which provides bank customers irrespective of their individual banks with enhanced interoperability amongst stakeholders in the payment ecosystem.
The CBN has thrown its weight behind the USSD revolution as captured in its “Regulatory Framework For The Use Of Unstructured Supplementary Service Data (USSD)” issued on April 18, 2018 where the apex bank highlighted the characteristics of USSD services which it described as “a session based, real time messaging communication technology, which is accessed through a string, which starts normally with asterisk (*) and ends with a hash (#). It is implemented as an interactive menu driven service or command service. It has a shorter turnaround time than SMS, and unlike SMS, it does not operate by store and forward which indicates that data are neither stored on the mobile phone nor on the application. USSD technology is considered cost effective, more user-friendly, faster in concluding transactions, and handset agnostic.”