The attention on the African continent has recently been drawn to the potential of its tech platforms that are driving innovation, entrepreneurship, and job creation. Startups such as Jumia, Andela, VConnect, MeQasa, and LifeQ are becoming familiar to technophiles around the world and achieving forefront exposition in the most renown conferences (e.g. VivaTech). However, among this “tech craze” and its increasingly complex answers to the continent’s problems, simple solutions remind us that impact does not necessarily need to be associated with technological sophistication.
That is the case of Unstructured Supplementary Service Data (USSD), sometimes referred to as “Quick Codes” or “Feature codes”, an African-specific technology that remains largely unknown in OECD countries.
*606#: a familiar format for feature phone users
USSD is a real-time connection between a mobile network operator’s computer and a user’s mobile phone, allowing a two-way emission and reception of data on a mobile phone. Thus, internet connection is not necessary and USSD can be used on either a smart or a feature phone. This technology differs from text messages in that data is not stocked on the mobile phone – it is only accessible while the USSD session is open. Concretely, users usually type a short number such as *606# and menu through which they can navigate by using their phone’s keys appears.
USSD has numerous, diverse usages, from WAP internet browsing, prepaid callback services and menu-based information to mobile money. A simple, yet popular form of USSD services in developed countries is when customers type the mobile network’s number to query the available balance of their prepaid phone.
More innovatively, mobile network operators across Africa and beyond quickly realized the potential of this technology with the advent of mobile money in 2007. As a result, USSD is the most popular available communications technology to deliver mobile financial services to the Bottom of the Pyramid (BoP). It is used by large scale companies such as Tigo, M-Pesa in Kenya, EcoCash in Zimbabwe, but also bKash in Bangladesh, Wing in Cambodia, and EasyPaisa in Pakistan. The Kenyan startup LittleCab now also allows to order a taxi through USSD and Orange has developed a personalized store in Egypt, RDC, Mali, Cameroon and Senegal.
USSD services are operated by mobile network operators, but these can partner with businesses to offer their technology and provide access for their service in exchange for a transaction fee.
A key lever for economic development
Despite the rapid spread of smartphones among low-income populations – 40% of mobile sales in Africa, the price of devices and data remain high compared to that of feature phones. USSD is compatible with 99% of telephones. It is a cost-effective, and low data-consuming way to access similar services to those offered by the internet on a smartphone.
As a result, it is the privileged communication channel for the development of services in the continent, which are indispensable for its economic growth. The impact of mobile money has long been identified, as more mobile money bank accounts have been opened in a few years than bank accounts in decades. This has allowed for the financial inclusion of populations that were left aside by credit, transactions, and loans, restricting their capacity to create businesses, increase their productivity, and meet better standards of living. USSD, therefore, appears as a crucial driver for the development of several services, dynamizing the economy and fostering innovation.
Significant obstacles to unleash the potential of USSD remain
Several challenges remain for USSD to reach the potential it can have on African economies.
- Low confidence: USSD is not as secure as other communications channels, and USSD connections tend to be interrupted when the service is used for too long. Confidence in the service could be boosted by developing more secure and quality connections.
- Barriers to entry: Access to this technology remains restricted to a few enterprises, due to concentrated power in operators, which charge expensive fees
- Laborious negotiations: Businesses need to negotiate with every operator the price for the usage of its USSD technology. To deal with this issue, USSD operators gather into gateways such as BLickatell and txtNation to negotiate the price with network companies and offer USSD access to other businesses. This eases firms’ entrance on the market and increases the revenue of the whole value chain.
- Limited expansion in francophone Africa: If the Anglo-Saxon countries have seen gateways and USSD usage expanding, francophone Africa remains by-sided by these innovations, notably due to the lack of regulatory modifications of telecommunications by national authorities.
USSD demonstrates that a simple technology, adapted to the reality of the BoP’s digital usage, has the undeniable advantage to be able to be used by anyone. It provides fundamental services and new communication channels for businesses, which are the basis for unleashing the continent’s entrepreneurial and economic potential. Nevertheless, regulatory authorities and operators still have a long way to go to scale the success of this communications technology across Africa and other emerging markets.