Page 196 - ITU-T Focus Group Digital Financial Services – Technology, innovation and competition

ITU-T Focus Group Digital Financial Services
Technology, Innovation and Competition

eventually lead to declines in transaction volumes. To provide for richer service options and to compensate
105
for customer input errors, menu trees could be increased to allow for example, a separate stage that prompts
re-entry of an account number.
106
5.2.5.2 Competition aspects

USSD menu trees may be restricted by MNOs to a maximum number of stages. As noted earlier, MNOs cite
the ‘opportunity cost’ inherent in providing USSD to third parties, since the GSM system design may mean that
use of the USSD (signaling) channel may block revenue-generating incoming and outgoing voice calls for the
duration of the live USSD session. MNOs indicate that increasing the number of menu stages would put a load
on their signaling infrastructure and any increase in the number of stages contemplated is either practically
impossible or should be accompanied by a commensurate increase in the ceiling tariff for USSD sessions.
107

5.2.5.3 Country example
India

The TRAI in India has pushed back against linking the number of menu trees to an increase in USSD access
costs, citing evidence that MNOs may, for their own customers, have more menus than they allow DFS SPs
to have. In November 2016, TRAI mandated an increase in the ceiling on number of menu stages from five
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to eight per USSD session and also reduced USSD pricing. The outcome followed a consultation process
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initiated in August 2016. 110

5.2.6 USSD pricing

5.2.6.1 Overview

While MNOs may grant third parties access to their USSD gateway facilities, the issue of USSD-related pricing
often percolates. In some cases the USSD session is charged to the customer at a fixed rate no matter the
length of the session; or the TSP or PSP is charged at wholesale rates for a transaction, no matter the length,
or pro rata; or is charged via a percentage of the transaction value. The MNO may also charge the SP a setup
fee for access to its USSD gateway, and/or a monthly facilities charge on top of any USSD session charges.

While some TSPs and PSPs absorb the USSD charge, others will recoup the USSD cost incurred by directly
debiting the customers’ wallet with the charge. 111

Often pricing is a commercial negotiation that satisfies all parties, but sometimes disputes are escalated to
a sectoral regulator or the courts. For regulators looking to regulate USSD charges, determining the ‘correct’
price level has not been an easy exercise, requiring sophisticated cost analysis measures. Other regulators,
112

105 The TRAI consultation paper indicated that, for example, while making a funds transfer using recipient’s account number and
IFSC code of the recipient’s bank branch, the customer has to input about 23-29 digits (IFSC code-11 digits, account number-
12-18 digits) in a single stage because the other four stages are used for (i) selecting bank; (ii) selecting transaction type; (iii)
entering amount of money to be transferred; and (iv) entering mPIN. In general, input error is quite frequent when a customer is
prompted to enter both the account number and IFSC code in one single stage. See TRAI (2016b) ibid; and TRAI (2016c) ibid
106 As noted by TRAI, the lack of extended ability to correct mistakes during a USSD session has resulted in the success rate of USSD
transactions being below expectations, particularly for P2P transfers. If customers have a number of transaction declines in their
first few transactions, they may lose trust in the service and are unlikely to use USSD-based DFS service again. TRAI (2016a) ibid
107 TRAI (2016a) ibid
108 First Post (2016) ibid
109 TRAI (2016b) ibid
110 First Post (2016) ibid
111 Mazer, P & Rowan, P (2016) Competition in Mobile Financial Services: Lessons from Kenya & Tanzania, available at https:// goo. gl/
osF8Mo
112 See below on the Bangladesh country example.

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