The Hidden Cost of USSD

When Chinyere, a petty trader in Lagos, dialed her bank’s USSD code to send N5,000 to her supplier, she expected a smooth transfer that would take only seconds. Instead, the process stalled. She tried again, thinking the first attempt was just a glitch. The second attempt also failed. But when she checked her balance, she realized she had been charged N6.98 twice, even though the money never reached her supplier.

Her experience is one that millions of Nigerians have endured. While USSD was designed to make financial transactions simple and accessible, the reality has become frustrating. People are being charged for failed sessions, paying small amounts that add up to a huge burden, especially for low-income earners who rely heavily on the service.

This issue has sparked growing concerns about whether the system is truly serving the people it was meant to help or if it has quietly become a hidden drain on their pockets.

According to Yusuf Adeyemo, the National Vice President of the Association of Mobile Money and Bank Agents in Nigeria (AMMBAN), these recurring charges are beginning to undermine financial inclusion efforts in the country. Many Nigerians still rely on USSD because they do not own smartphones or have reliable internet access, but the fear of losing money on failed transactions is discouraging them from using the channel.

Adeyemo explained that while the N6.98 per attempt might appear small to some, repeated charges with no value delivered make banking through USSD more expensive than it should be. In his words, “Affordability is the basis of financial inclusion. When it is no longer affordable to carry out financial transactions, people get discouraged.”

He also pointed out that losses are not limited to money transfers. Customers get debited even when simple transactions like checking BVN or retrieving NIN fail. For rural dwellers and low-income earners, these small amounts represent money that could have been used for food, transport, or other necessities.

Adeyemo believes the key question is accountability. If a transaction fails, who ensures that the customer is refunded? He stressed the need for banks, telecom operators, regulators, and consumer groups to sit together and find a sustainable solution.

The issue of failed USSD transactions has reignited the blame game between banks and telecom operators. Until June 2025, banks deducted the USSD service fee directly from customers’ accounts. But under the new “end-user billing” model introduced by the Nigerian Communications Commission (NCC), telecom operators now charge customers directly through airtime deductions.

This shift, according to the Association of Licensed Telecommunications Operators of Nigeria (ALTON), makes it clear that telcos are not at fault. Engr. Gbenga Adebayo, chairman of ALTON, insists that telecom operators fulfill their role by connecting customers to their banks. What happens inside the bank’s system, he argues, is beyond the control of telcos.

Using an everyday analogy, Adebayo likened telcos to drivers who take customers to the bank. If an ATM inside the bank is out of cash, it is unfair to blame the driver for not dispensing money. Similarly, telcos transmit the request but cannot guarantee the outcome once the bank’s server processes it.

On the other hand, some bank officials disagree. One senior banker, who requested anonymity, argued that since telcos now deduct the money directly from customers’ airtime, they are responsible for refunds. He acknowledged that banks sometimes face technical hitches, but he emphasized that institutions have invested heavily in digital infrastructure to minimize service disruptions. “How can you blame the banks for money they are not collecting?” he asked.

For the average Nigerian, the back-and-forth between banks and telcos means little. What matters most is that money is deducted for services never received, and there is usually no clear path to reclaim it. Complaints often drag on for weeks without resolution, leaving customers feeling helpless.

Elvis Eromosele, a journalist and editor of TheNumbersNG, has personally experienced failed USSD deductions. He blames telecom operators for not refunding users automatically when a session terminates prematurely. Eromosele believes the entire framework of USSD billing needs an overhaul.

According to him, the solution lies in ensuring that charges apply only after a transaction is successful. He also recommended that telcos set up user-friendly platforms for dispute resolution, where customers can lodge complaints and receive refunds within a specific timeframe. Just as banks notify customers when a failed transfer is reversed, he suggested telcos should issue reversal alerts when airtime deductions go wrong.

Eromosele also emphasized the need for public awareness campaigns. Many Nigerians, he noted, are still unaware of the new billing model and do not know how to seek redress when cheated. For him, regulators like the NCC and the Central Bank of Nigeria must step in to protect consumers.

Sources at the Nigerian Communications Commission have confirmed that the regulator is aware of the complaints and has begun looking into possible solutions. Although details are yet to be made public, industry insiders believe the NCC will soon roll out guidelines to address unfair deductions and strengthen consumer protection.

The Commission’s intervention is critical because the current system was introduced partly to resolve longstanding disputes between banks and telcos. For years, banks collected USSD fees from customers but often failed to remit the agreed portion to telecom operators, leading to billions of naira in debt. The switch to direct airtime billing was meant to solve this problem, but it has now created new headaches for consumers.

The USSD issue highlights a broader problem in Nigeria’s financial and telecom systems. While both sectors have achieved significant progress in expanding access, there is still a lack of synergy in ensuring that consumers get fair value. For financial inclusion to succeed, services must not only be available but also affordable, reliable, and transparent.

For now, millions of Nigerians like Chinyere continue to pay the hidden costs of failed transactions. Unless stakeholders move quickly to close the gaps in the system, trust in USSD banking will continue to decline, and the promise of financial inclusion may slip further out of reach.