Much Ado about Telecom Operators’ USSD Services with Banks Over N250bn Debt

The ongoing dispute between telecom operators and banks over the staggering N250 billion debt related to Unstructured Supplementary Service Data (USSD) services has made headlines in recent months. The issue, which has been festering for years, revolves around the payments banks owe telecom companies for the use of USSD channels for financial transactions. This has created a tumultuous relationship between both industries, which have had to navigate through regulatory interventions, public outcry, and numerous negotiations.

A Deep Dive into the Crisis

Telecom operators have long been a critical infrastructure for financial institutions, providing USSD services for mobile banking, money transfers, bill payments, and other financial operations. However, the charges for these services have been a bone of contention. Banks, as service users, have accused telecom companies of charging exorbitantly for each transaction, which has escalated the overall cost to a staggering N250 billion over time.

In turn, telecom operators claim that the banks have not paid for these services, leaving them in financial distress. The conflict has resulted in the Nigerian Communications Commission (NCC) stepping in on multiple occasions, attempting to mediate between the two parties and ensuring that the public is not unduly affected by any disruption in services.

Case Study 1: The Bank-Specific Disputes

One of the most significant flashpoints in this dispute occurred when a group of commercial banks in Nigeria was accused of owing significant sums to telecom companies for the usage of USSD channels. Banks like Access Bank, Zenith Bank, and First Bank were reportedly involved in the most significant share of the debt. According to industry insiders, the telecom operators had to repeatedly challenge the banks to settle their debts or risk a suspension of their USSD services.

In response, the banks claimed that the charges were inflated and unaffordable, given their own financial constraints. They further argued that the telecom companies were not transparent with their billing processes. Despite the NCC’s efforts to mediate, the situation only worsened as banks continued to reject the proposed pricing models for USSD transactions, citing unsustainable costs.

Case Study 2: Regulatory Push for Resolution

The situation reached a head when the Central Bank of Nigeria (CBN) and the NCC met with key stakeholders to address the mounting USSD service debts. The meeting was convened to prevent further service disruptions, which were adversely impacting millions of mobile banking users. The discussions resulted in the proposal of a new tariff structure for USSD services aimed at making the charges more transparent and manageable for both banks and telecom operators.

Despite the recommendations, it took several months before a resolution was reached. Telecom companies and banks agreed on a new, mutually beneficial framework that saw the reduction in debt accumulation and a more formalized payment plan. This agreement temporarily eased tensions but did not eliminate the underlying financial concerns, with both sides still wary of the long-term impact of USSD services on their bottom lines.

Flashback to a Growing Problem

The USSD issue dates back over a decade when the mobile banking revolution began in Nigeria. Banks were eager to reach the unbanked population and provide digital services through mobile phones, leveraging the existing telecom infrastructure. However, this rapid expansion was never accompanied by clear financial agreements between the two sectors.

As the mobile banking industry flourished, telecom companies quickly realized they were providing critical infrastructure, but without any sustainable revenue model from their banking partners. This imbalance led to the first calls for compensation for telecom operators, which were initially met with resistance from financial institutions.

Over the years, the problem intensified, with new layers of complexity added by new players in the fintech space and digital banking regulations. The debt continued to grow as the usage of USSD services expanded, far outpacing the revenue generated for telecom operators.

The Bigger Picture

Beyond the financial numbers, the USSD crisis illustrates a larger challenge in Nigeria’s financial ecosystem: the need for cohesive, transparent, and sustainable partnerships between key sectors. The telecom industry has become the backbone of digital financial services, but the relationship between telecom operators and financial institutions has remained strained.

Ultimately, the solution lies in long-term collaborations that prioritize fair pricing, transparency, and joint responsibility in providing services to millions of Nigerians. The story of telecom operators’ USSD services and their relationship with the banking sector serves as both a cautionary tale and a call to action for all stakeholders to rethink their business models and align their goals for the greater good of the economy.

Looking back, it is clear that this issue has served as a major learning curve for both sectors. The initial lack of agreement and foresight in establishing a sustainable payment system for USSD services has created long-term financial and reputational problems for both telecom operators and banks. However, the crisis has also opened the door for regulatory bodies to take a more active role in addressing such issues early on.

As the debt continues to be cleared and services move toward a more regulated pricing model, the hope is that this dispute will pave the way for a more structured and mutually beneficial financial ecosystem.