Telecom operators have decided to drop a fee levied on mobile banking transactions, supporting the government’s demonetization of high-value currency notes and the consequent spike in cashless transactions.
Mobile banking will be spared the so-called unstructured supplementary service data (USSD) charges until the end of December, when the window for exchanging old currency notes closes.
“At present, a charge is being levied by telecom operators for mobile banking, which is commonly known as USSD charge. To facilitate use of electronic banking facility and reduce difficulty to the common man, telecom operators have decided to waive off charges for mobile banking services till 31 December 2016. This move will help people with feature phones to access electronic banking facility without incurring any additional cost till 31 December 2016,” telecom minister Manoj Sinha tweeted.
Further, to promote digital financial inclusion and cashless payments, the Telecom Regulatory Authority of India (Trai) has reduced the effective USSD rate from Rs1.50 per session to Rs0.50 per session.
“In India, 65% of the population still uses feature phones, this step is to promote digital financial transactions through USSD channel. We had earlier floated a consultation paper in August to review USSD charges and now we have re-fixed the cap to Rs0.50 per session,” Trai chairman R.S. Sharma said.
Bharti Airtel Ltd said in a statement, “To support customers during the ongoing demonetization exercise, Bharti Airtel has waived off transaction charges for all USSD based mobile banking transactions over its network till 31 December 2016. We would encourage customers to leverage this benefit for their convenience.”
Vodafone India also issued a statement: “To ease the burden of masses, we are waiving off all USSD charges presently levied for mobile banking till 31 December 2016. As several million customers use feature phones, we are hopeful that this free access to mobile banking will encourage them to adopt it as their preferred and convenient mode for banking.”
Each session for a customer includes five transactions, and the limit has been increased to eight transactions per session by Trai. The authority also said the decision was taken after recommendations from the Reserve Bank of India and banks.
Since the number of transactions is very low, 840,000 in October 2016, the authorities aim to scale it up by optimizing mobile banking. The National Payments Corporation of India has been asked to create a task force to look into the matter. As many as 54% of transactions remain unsuccessful and customers are charged for these failed transactions too, Trai said.
Mahesh Uppal, telecom consultant and director at ComFirst India, said the steps have been taken to soften the blow of demonetization. “By making it cheaper, the idea is to create incentives for electronic banking. Trai is facilitating mobile banking,” he said.
The authority noted that a committee in the finance ministry has also been making recommendations on USSD charges to enable mobile banking and payment services for people.
The move is expected to affect customers with feature phones more than smartphone users as the latter have access to applications using the Unified Payments Interface (UPI) to help them with banking online. UPI is a service that facilitates several banking features for customers.
Using the USSD channel, mobile banking customers can check their mobile balance, make peer-to-peer money transfers and deposit and withdraw money.