Leading influencer marketing platform Humanz has teamed up with Afreximbank to give the opportunity for three lucky social entrepreneurs to exhibit at Canex at…
USSD (Unstructured Supplementary Service Data), has enormous potential to deliver new products and services to mobile customers in sub-Saharan Africa, but has yet to come into its own as a mature, fully-fledged service.
Like SMS, USSD has a low barrier to entry for subscribers and customers. It is intuitive, menu-driven and works across all handsets, yet unlike SMS, USSD services and availability varies greatly across Mobile Network Operators (MNOs) and regions in sub-Saharan Africa.
“Just about every handset made in the last 10 years handles USSD sessions and menus, and all GSM handsets will at least handle basic USSD, which is why this is a popular service for top-ups and balance inquiries” said Tjaart van der Walt, MD of TruTeq.
“It requires no special handset functionality, so customers don’t need expensive java-enabled smartphones, or pre-loaded Sim-cards. From a mobile customer point of view, it is ready out the box”.
The USSD offering in South Africa is mature, making it an exception in the sub-continent. It is used in South Africa to great effect to deliver a range of sophisticated MNO and third-party customer services including banking and airtime recharge. In Tanzania, MPesa is driven by USSD (unlike Kenya where it is an embedded Sim-Card application), while in Nigeria, USSD (at the time of writing) is limited to fairly basic “on network” services such as call-me-back and airtime top-up services, across the four operators.
For those not familiar with USSD, it is a GSM technology originally designed to extend limited network functionality to handsets. Early “Phase 1” USSD services were only able to pass information from the handset to the USSD application and get a confirmation in return. “Phase 2” USSD is a whole different ballgame with session capability, instead of a simple once-off send/receive. This means that the handset and the USSD application combined now pass real-time information back and forth, that allows for a two-way exchange of a sequence of data, making it vastly more responsive and flexible than SMS. Most handsets also support “USSD Push” which allows the network to send instructions to the handset.
This creates many opportunities, mostly in banking and financial services, but also for third party content services including news, geo-location services, directory, financial and entertainment products.
To see USSD’s real potential, one only has to look as far as what First National Bank, Standard Bank, and more recently, ABSA have done in South Africa, and where they are now looking beyond traditional banking transactions to third party payments and pre-paid services.
So if USSD is so great why is it not in greater use across sub-Saharan Africa, both as a mobile banking platform and as a provider of third-party content services?
The answer lies in the juggling act that most MNOs perform between competing priorities and revenue.
One of the biggest challenges that a number of MNOs across sub-Saharan Africa face is they simply don’t have the billing systems to charge their subscribers for time-based USSD usage. In Nigeria for instance, at the time of writing, the four largest MNOs, (MTN, Glo, Airtel and Etisalat), have robust USSD platforms, but are limited in what they can offer their customers because they can’t charge their customers for time-based USSD usage. MNOs either charge their customers a fixed cost per response, per connection, or limit their USSD offerings to free on-network, call-me-back or airtime-recharge services.
The ability to recover costs for time-based billing is critical to the growth of USSD. Because of the way USSD shares network resources with voice calls. This represents an opportunity cost for MNOs. If MNOs cannot bill for USSD sessions on their network, then they are losing money on voice revenue, and conversely, what is the compelling business case to take away capacity from their voice networks by allocating it to USSD? If operators receive little direct revenue from USSD, they have no capital to reinvest in upgrading their infrastructure. In addition, many MNOs also currently don’t have the ability to route large numbers of service codes (eg *120*) to large numbers of applications and this limits their ability to grow traffic by exposing the bearer to application or content providers
“Experience has shown that the most effective method to build a sustainable value proposition is to do time-based USSD billing”, says Tjaart van der Walt whose company has supplied USSD technology to 13 sub-Saharan operators. Consequently, third-party content providers (such as WASPs) are unwilling to invest and provision new USSD applications and services in the region, because they are not commercially incentivised to do so for as long as there is no way of charging and making money without premium rated billing.
“As we have seen in SA, opening the door for a new layer of service providers, able to challenge the status quo, creates new and evolving relationships, will ultimately lead to a wider range of USSD services”.
So the juggling act for mobile network operators in sub-Saharan Africa is recognize USSD’s potential beyond the provision of basic, on-network functionality by opening up USSD gateways and functionality to partners, and to ensure their own role in the value chain by building the right strategic partnerships with third-party operators and lastly to ensure that the opportunity cost for offering USSD does not outweigh the benefits through efficient time-based USSD billing systems.