TRAI suggests USSD the preferred mode, as financial inclusion is paramount

To seek feedback on the usage of Unstructured Supplementary Service Data (USSD), The Telecom Regulatory Authority of India (TRAI) have released a consultation paper.

To give you more context, telecom players make use of USSD technology to send alerts to their users. USSD can be utilized for location based content services, prepaid callback service and menu based services.

'USSD appears to be one of the most promising modes for mobile banking for financial inclusion. In order to identify and address the various issues related to USSD-based mobile banking for financial inclusion, the authority has issued the consultation paper,' says TRAI.

The consultation paper also states that transactions via USSD are in real time. The accessibility cost of information through the technology is low since all low end phones can also use the technology.

USSD messages create a real time connection during a session unlike SMS (Short Service Message). A 2-way exchange of a sequence of data is allowed while the connection remains open. The USSD is more responsive in comparison to an SMS due to such feature.

Only 54.4% of rural households had access to banking services as per 2011 census. Even today in India, a huge population of mobile subscribers in rural areas do not have access to banking facilities. USSD provides an opportunity for leveraging the mobile telephone to achieve the goal of financial inclusion, according to TRAI.

TRAI has sought comments if USSD is one of the most appropriate modes for mobile banking. Also if it is appropriate to fix a ceiling of Rs.1.50 per USSD session.

The stakeholders – bank, RBI, TSPs, aggregators – are required to send in their comments by October 4, and counter comments by October 11, 2013. Banks like ICICI bank and State Bank of India (SBI) have already launched USSD based mobile banking services.

TRAI suggests creation of a common platform to connect mobile operators and banks. Through this platform all interested banks can provide USSD based services to their customers. One of the problems associated with USSD based transactions is that TSP’s have to send an SMS to the customer after the transaction is complete. TRAI asks whether TSP’s should generate records for USSD transactions to audit them. Also, USSD codes do not work with CDMA telcos. They work only with GSM telecom operators (although its majority of the connections). An advantage is users do not have to send an SMS or require a GPRS enabled device. A basic mobile handset is capable to access the system. It does mean that a user has to respond and provide inputs several times to transact. The USSD method takes one criteria inputs at a time.

LTP View: In 2011, the USSD based Interbank Mobile Payment Service (IMPS) which was launched by National Payment Corporation of India (NPCI) hit a roadblock with telecom operators over the revenue sharing model. VISA also claimed that telcos were blocking its USSD based payment service. To make USSD based mobile banking service inclusive for the unbanked and underbanked, TRAI might have to work closely with telecom operators. It will be interesting to see what response or changes TRAI will come up with post receiving feedback turned in by the stakeholders. We are just worried about the fragmentation of efforts at a national level in the country with respect to payments. There is NPCI's IMPS system plus mobile banking apps plus online option plus third party payment apps and USSD based systems. It will be great if stakeholders can come together to chalk out a common roadmap for this country w.r.t. payments.