Explainer: What Happened Between MTN and the Banks with USSD
Yesterday, I wanted to take a Zoom class on blockchain. About 10 minutes to the time, I checked my data usage only to find out that I was running out of data and would need a recharge if I am to get through the class. So I hurriedly went to my GTB app to load airtime to use to purchase data via *131#. To my surprise, GTB said the service is not available. I hurried to my Access Bank app, same thing. Then First Bank. All to no avail.
At this point, I was already in panic mode. What is happening? Why is this happening to me now? Not willing to sit down and answer the questions, I asked someone to call someone to call someone to send me paper airtime via Whatsapp. A lot of stress but a minute to my class, all was sorted.
After the class, I went in search of the answer to what could have caused me great embarrassment. I offer my findings to you now.
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Apparently, the commercial banks conspired against MTN. While I noticed this yesterday, it’s been going on since the start of the weekend.
All Nigerian banks, except Zenith Bank, cut off the largest telecom operator in Africa after the latter decided to cut back on the commissions it pays out to banks on the sales of airtime and data.
MTN subscribers could not recharge their lines or buy data from the mobile apps of their banks. When they tried, they got the following message,
“Dear Customer, this service is temporarily unavailable. Kindly contact your Telecom service provider.”
Why Did the Banks Do This?
You see, when you use USSD? MTN (and other networks) charge you 4 naira. That money is shared between the networks and the commercial banks. Banks have complained that MTN pays the lowest among the telcos (3.5%). But MTN didn’t really care. With 45% of the total telecommunication market share in the country, MTN has over 77 million subscribers. It’s probably right that they allow MTN get away with it since they provide the most revenue to them anyway.
But then MTN did something that angered the banks: They reduced the banks’ commission to 2.5%. MTN said it did this as a result of “industry realities and would ensure commensurate recognition and reward for each partner’s performance.” Whatever this means.
Complaining of lack of proper engagement, the banks had a meeting and decided to yank MTN off their platforms.
The Banks and Their Dirty Hands
The USSD issue between the banks and the telcos has come up before. Telcos (MTN, Airtel, Glo, etc) complained that the banks owe them a combined N42 billion from USSD transactions. In other words, the banks deducted these funds from customers like you and me but refused to pay the banks their share of the funds. When the telcos raised alarm and threatened to disable USSD on their platforms, the banks proposed that the USSD fee be raised. On March 16, the Central Bank of Nigeria released a statement announcing that the fee has been increased from N4 to N6.98. That’s an increase of more than 70%. In a joint statement with the Nigerian Communciations Commissions, the CBN said the new fee was part of the agreement reached when banks and telecommunications operators met to discuss the N42 billion debt owed to mobile operators by the commercial banks.
In other words, instead of giving the telcos their share of the funds taken from their customers, they connived to collect more from the same customers to cover their debts. The regulators, banks and the telcos colluded to exploit the customers they are meant to serve.
Earlier on Tosin Adeoti, I shared the list of the top banks in Nigeria by account maintenance revenue in 2020. Access bank made N15.1 billion on account maintenance alone. First Bank made N12.8bn. Zenith bank, which made the most from this channel in 2020, made N60m a day from this charge. Sterling Bank made over 15% of its profit (after tax) from account maintenance. It’s incredible, really.
MTN’s Response…
Seeing this gang-up, MTN has swung into action. While the Minister of Communications says it’s trying to resolve the issues between MTN and banks (possibly resolved as you read this), MTN has told its subscribers that they have been able to negotiate other payment solutions for the USSD service.
The following platforms have been empowered to carry out the services commercial banks were in charge of: Flutterwave, Jumia Pay, OPay, Kuda, Carbon and BillsnPay.
It also says that customers could recharge airtime by dialling *904# and *606#.
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I wager there is still a lot of drama to come…
