While mobile money is growing, it’s still far from being a ubiquitous payments platform available everywhere. There are many parties vying to control the space and many different technologies underlying those varied solutions. This series will look at some of the channels used for mobile money and assess their qualifications moving forward. The first installment looked at the ordinary SMS channel; this one focuses on USSD.
USSD is both powerful and deeply underappreciated. Unstructured Supplementary Service Data is exactly that in most countries – it’s very much unstructured and often a completely forgotten, supplementary channel. In countries where GPRS and 3G data reign supreme, that may make sense – but in developing countries, USSD is an incredibly practical way to exchange back-and-forth information between two parties.
One of the major differences between USSD and SMS is that USSD is session-based whereas SMS is transaction-based. When a USSD session is initiated, several exchanges of data can be sent and received in a “call and response” sequence. This opens up the possibility for conditional and dynamic exchanges of information. It’s easiest to describe an example of a common exchange that occurs on Equity’s USSD-based Eazzy 24/7:
Equity Example Steps
|End user initiates USSD session by typing in a 3 digit short-code trigger, generally in the format *XXX#||Equity customer initiates Eazzy 24/7 by typing in *247#|
|Based on the trigger entered, information is returned to the end user prompting additional data entry by the user||Equity sends back a prompt for the customer to enter in their Eazzy 24/7 PIN to authenticate the user|
|End user enters characters (numbers or text) based on the prompt and desired action||Equity customer types in their Eazzy 24/7 PIN|
|Based on the data entered, the order is executed and information is returned to the end user prompting additional data entry by the user||Equity sends back the Eazzy 24/7 menu to the customer with several available prompts – including balance inquiry, airtime top-up, etc.|
|End user enters characters (numbers or text) based on the prompt and desired action||Equity customer types in the number “2” in order to execute a “Balance Inquiry”|
|Based on the data entered, the order is executed and information is returned to the end user prompting additional data entry by the user||Equity checks the customers balance and returns to the user a message showing the customer their account balance. There is then the option to return to the main menu.|
Because of the speed with which data is exchanged, many such activities can be achieved in a single USSD session. This is a vast improvement over SMS which would require numerous messages while also being more difficult to follow in a coherent way.
Let’s take a look at how USSD fares in 3 important areas for mobile money:
- Security: Neutral to Poor (2/5). USSD data is not encrypted; it is sent in plaintext from the phone to the network meaning that it could be intercepted and read. However, I’ve given it a slightly better mark than SMS due to its temporary nature – once a USSD session is terminated, none of the data remains stored on the phone. SMS data, on the other hand, remains stored on the phone and could be vulnerable if the phone is stolen.
- User Experience: Neutral (3/5). The speed and responsiveness of USSD make it a better customer experience than SMS for complex or multi-exchange activities. However, on very low end phones the menu can appear messy and the navigation is unintuitive.
- Cost: Neutral to Poor (2/5). Unfortunately there is not the same kind of competition between carriers on USSD that there is on GPRS data so USSD sessions are fairly expensive, especially for the poor. In Kenya, USSD charges are around the equivalent of $0.06. This isn’t terrible when compared with multiple SMSes given the amount of information exchanged but it is much more expensive than it would cost to do a similar exchange of information over the GPRS data channel. Hopefully mobile network operators (MNOs) will realize that lowering the cost of USSD will encourage greater take-up and affinity; since the USSD has miniscule marginal cost, there is room for reduction. And when mobile money services delivered over USSD are compared to MNO-led services like M-Pesa where the communication costs are free – USSD is very expensive.
For financial institutions, USSD is probably the most viable channel for offering mobile financial services in developing countries due to its ubiquitous availability on low-end phones as well as its ability to facilitate multiple exchanges of information. However, it’s a sub-optimal customer experience especially compared to the STK channel on low end phones and downloaded apps on smartphones. And it’s expensive compared to GPRS data that can be achieved with internet-enabled phones. For users who want to go beyond MNO money transfer services (like M-Pesa) to more sophisticated financial services like loans and insurance, this is a case where the people who need those financial services the most (the under- and un-banked) suffer.