When regulators in many developing countries have cut down USSD pricessignificantly to boost financial inclusion, then mobile network operators (MNOs) in Bangladesh are demanding higher prices from mobile financial services (MFS) operators.
This has created an uncomfortable situation in the country's mobile banking landscape as industry experts say the high cost of USSD price would hit millions of poor people of Bangladesh who are using MFS service to improve their living standard under the financial inclusion of Digital Bangladesh programme of the present government.
Unstructured supplementary service data (USSD), a communications service controlled by MNOs, is believed to be a critical piece of infrastructure used to provide MFS on nearly any phone, at low cost, and without requiring access to the user's SIM card. MFS operators use Unstructured Supplementary Service Data (USSD) as their primary mechanism for communication between customers and their mobile payments platform.
MNOs have proposed higher USSD pricing model which, industry people say, will increase cost of mobile banking nearly 300 per cent than the existing level which ultimately hit millions of poor people. Countries like India and Kenya, regulators have forced MNOs recently to cut USSD price significantly to facilitate the poor unbanked to enjoy payment services at their affordable costs, they mentioned.
The good news is that the telecommunication ministry is talking to MNOs over their price hike proposal has taken the issue, according to the report published in The Daily Observer on Tuesday. A tag of war between MNO and MFS is still exist over the USSD pricing issue which began when the government allowed only banks to operate payment business under the strict supervision of Bangladesh Bank. As MNOs are regulated by another body, so the tag of war over USSD pricing policy is now the big concern for MFS providers.
Leading MFS operators have expressed their concern over the MNO proposal saying that the poor customers will bear the brunt of higher USSD price, which is detrimental to financial inclusion. They have urged the regulatory authority to intervene the market and introduce a conducive pricing model for USSD service for the interest of millions of poor.
Currently, MFS operators pay 7 per cent of income to MNOs for USSD service under revenue share model. If a MFS customer cashes out Tk1,000, s/he will pay 18.50 taka a cash out fee. Mobile operators get 7% of BDT 18.50 taka (i.e. BDT 1.3) for providing the network and service providers(i.e. bKash) get BDT 2.63 and the agents and distributors get the rest.
But MNOs are not happy with their income from MFS services and they want to increase the price. They want to introduce session-based pricing for USSD where an MNO will charge 1.50 taka for a 90-second USSD session and 0.20 taka for each SMS excluding VAT.
"When transaction cost will go up, unbanked and poor people will return to their old days to put their cash in home", said a senior executive working at a MFS company. "This will also hit the growing MFS industry which is struggling with a small portion of revenue income-only 8-18% to run their business as they give 75-85% to retail agents and distributors, who are poor people".
The argument from the MNOs side is different. "Under the existing model, MNO are not getting fair return for the usage of their resources", said Nurul Kabir, Secretary of Association of Mobile Telecom Operators of Bangladesh (AMTOB), the apex body of all mobile operator companies.
To solve the pricing disputes, Bangladesh Bank formed a committee comprising of stake holders of both sides along with officials at the central bank. "The committee sat several times, but the dispute is still pending. Industry experts see the conflict between the MNOs and MFS over the USSD price has virtually ignited a war which is not conducive to industry and economic growth. MFS providers say the pricing model proposed by MNOs would increase USSD price at least 300% more than the existing level.
Explaining the session based pricing model, the CEO of a recently born MFS company said this will hit millions of poor the cost of service would be too higher for them. If we consider that a garment worker made three transactions, as per current pricing of leading MFS provider, total service charge paid for the 3 transactions will be 23.5 taka where MNO charge is 1.65 taka. In the new session-based pricing model, MNO charge will be 6.56 taka, which is 300% more than existing charge. This must have a serious impact on end-customer service price and consequent decline of service usage and financial inclusion.
So, industry experts say there is a need to reconsider the premise for regulatory involvement in the market for USSD as nearly 50 million people mostly who are poor, low income workers and a large number of women entrepreneurs are using this service and involved in this business. And regulatory coordination between the telecommunications, financial, and competition regulators is critical when evaluating the USSD issue.
Here, the role of the government should be pragmatic and pro-poor. Because, higher USSD price will hit financial inclusion and prevent millions of poor to enjoy mobile financial services improve the standard of living.