One of the first things you learn when getting a phone in an African country, is how to use USSD. To recharge your phone, to buy data, or subscribe to a new call tariff plan. Today, USSD has become so popular, that it’s safe to say so many people would not know what banking is, if not for USSD.   

However, if you ask anyone what Unstructured Supplementary Service Data is, chances are they’re going to stay back at you with a blank face. So it got us asking, where did USSD come from? How does it work? And, most importantly,  why is USSD technology still relevant today? 

We went a little bit down history lane, and we invited Mohammed, one of our Technical Product Managers, along for the ride as we try to answer our favourite question - What’s the point of USSD? 

First, where did USSD come from?

To understand USSD, we first need to go back to the creation of the Global System for Mobile Communications (GSM) in 1987 Europe. Now stay with me. Mobile phones work with radio waves; you can think of them as highways but for voice and data, instead of vehicles.

For it to work well, you need to develop standards (traffic rules) so everyone stays in the right lane, so it won’t look like Lagos traffic. While the US and Russia went with CDMA, Europe went with GSM, and so did Africa. 

In March 1997, the European Telecommunications Standards Institute (ETSI) published a document recommending a protocol that allows subscribers to communicate with their service providers. Few years later, the USSD protocol was created. 

Turns out, early adopters of mobile phones used post-paid plans and didn’t need to query their service providers often.  Now, it was a different story in Africa. Telcos introduced prepaid plans, and users had to dial USSD codes more often. 

By 2007, Safaricom leveraged USSD and SIM took kit to launch Mpesa, a mobile money service that became a massive hit in East Africa. In Nigeria, GT Bank launched the *737# service in 2012, and other banks promptly followed. 

How does USSD work in banking? 

So we know the USSD is a protocol that lets you the user communicate directly with your service provider, that’s why, before code harmonisation, *556# worked on an MTN line but wouldn’t work on Airtel. When you access banking services, your network provider acts as the traffic controller between you and your bank. 

When you hit *5573#, for example, the provider knows this is a Moniepoint code, and redirects your query to Moniepoint. But hitting that code is just the beginning of the flow due to the restricted nature of USSD. 

“Dialing the code tells us the customer wants to do something with us, but we now need to know what they want to do. So we now show them, say, five things they can do. 1. Transfer, 2. Buy airtime. If the user selects 1, it will ask to input account number,” says Mohammed. 

These days, banking apps and PoS devices let you do so much more, but the USSD platform is still gaining traction. The value of USSD transactions move from N2.9 trillion in 2020 to over N5 trillion in 2021? We got even more curious when the Moniepoint product team came up with the plan to launch a *5573# USSD service for customers. 

Why is USSD still relevant? 

In 2022, Nigerians processed 515 million USSD transactions and its growing popularity is for good reason. It serves both the financially underserved and served. 

Serving the underserved means more people can enter the financial system if they own a mobile phone. The number of smartphones in Nigeria is estimated to be around 25 - 40 million. The number of BVNs that exist alone leaves at least 20 million people in the banking sector who don’t have a smartphone. 

Even those with smartphones find USSD an easy way to quickly access banking transactions. Mohammed holds that simplicity is key to the success of USSD technology in banking. 

“It’s an easy way to get things done. It can be done on any phone as long as you have a valid sim, it doesn’t require an internet connection, and most importantly, it’s very simple, and you can’t build complicated flows or features even if you tried.”

How Moniepoint thinks about USSD

At its core, we see the creation of USSD as key to achieving true financial inclusion for millions of Nigerians. Until now, you needed a smartphone and a bit of tech savvyness to use the Moniepoint App (Personal or Business). Sometimes, some of our BRMs help to explain how the app works to some non-tech-savvy people, but that’s not scalable.

“Most people are already familiar with it because they use it for many more things (buying airtime, activating a data plan with your telecom providers…etc.”

We also created features to help users block/unlock their accounts or those of friends and family. We did this while placing reasonable security measures in case of theft.

We keep trying to keep things simple and effective for millions of Nigerians, so reach out if you’d like to partner with us or work with Mohammed or any of our product teams, kindly check out our career page.