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TO BE PUBLISHED IN THE GAZETTE OF INDIA
EXTRAORDINARY PART III SECTION 4
TELECOM REGULATORY AUTHORITY OF INDIA
THE TELECOMMUNICATION TARIFF (FIFTY SIXTH AMENDMENT) ORDER, 2013
No. 5 of 2013
NOTIFICATION
New Delhi, the 26th November, 2013
No. 301-26/2012-ER — In exercise of the powers conferred upon it under subsection
(2) of section 11, read with sub-clause (i) of clause (b) of sub-section (1) of
the said section, of the Telecom Regulatory Authority of India Act, 1997 (24 of
1997), the Telecom Regulatory Authority of India hereby makes the following Order
further to amend the Telecommunication Tariff Order, 1999, namely:
1. (1) This Order may be called the Telecommunication Tariff (Fifty Sixth
Amendment) Order, 2013.
(2) This Order shall come into force on the 1st day of January, 2014.
2. In clause 2 of the Telecommunication Tariff Order, 1999 (hereinafter referred to
as the principal tariff order), after sub-clause (r), the following sub-clauses shall be
inserted, namely: ---
“ra. “USSD” or “Unstructured Supplementary Service Data” means a
real-time or instant session-based messaging service;
rb. “USSD-based mobile banking services” means delivery of
banking services through mobile phones over USSD;
rc. “USSD session for USSD-based mobile banking services” means
a session over USSD between the mobile subscriber and the bank or its
agent;”
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3. In the Schedule II to the principal tariff order, the item (8) shall be numbered
as item (9);
4. In the Schedule II to the principal tariff order, after item (7A), the following
items and entries relating thereto shall be inserted, namely:
ITEM TARIFF
“(8) Use of USSD for USSD-based mobile banking
services
(8.a) Charge for outgoing USSD session for USSDbased
mobile banking services
Ceiling of Rs. 1.50 per
USSD Session
(8.b) Other matters related to USSD-based mobile
banking services
Forbearance.”
(Manish Sinha)
Advisor (F&EA)
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Explanatory Memorandum
A- Introduction and Background
1. The purpose of the present amendment to the TTO is to design a mechanism
and determine the terms and conditions under which mobile banking for
financial inclusion can be facilitated. The amendment prescribes a ceiling tariff
for conducting a banking transaction through a mobile phone over USSD. This
explanatory memorandum aims to provide the rationale for this regulatory
action.
2. Availability of banking services to the entire population of the country without
any discrimination is a major objective of public policy. Banking services are in
the nature of a public good. Financial inclusion based on the principle of
equity and inclusive growth has been engaging the attention of policy makers
around the world. The United Na tions broadly describes the main goals of
financial inclusion as access to services such as savings, credit, insurance,
remittance and other banking/ payment services to all ‘bankable’ persons at a
reasonable cost.
3. However, a large section of the population in India has no access to banking
services today. The barriers to financial inclusion in India include (a) the poor
accessibility of banking services, mainly due to the reluctance on the part of
the banks to invest in infrastructure and human resources in remote areas;
and, (b) when accessible, the high costs incurred by households to access
such services. There is an increasing realization that a sustainable solution to
the problem could lie in technology-driven service delivery models. The
mobile phone is evolving into another transaction mode for customers with
bank accounts. The ease of use of a mobile phone could potentially draw the
unbanked into opening bank accounts and undertaking banking transactions.
On 30.09.2013, there were about 87 crore mobile subscribers in the country
of which about 35 crore were in the rural areas. The fact that a large number
of mobile subscribers in rural areas do not have access to banking facilities
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presents an opportunity for leveraging the mobile telephone to achieve the
goal of financial inclusion.
4. Technology adoption in India is proceeding apace. A large scale digitization of
India is becoming visible. While there are about 87 crore mobile subscribers in
the country, the number of subscribers who access Internet by wireless
phones has grown to about 14.3 crore. With crores of people transacting
faster, quicker and better, there is likely to be productivity improvement and
GDP growth. With growth in household incomes, the demand for monetary
and banking transactions is also likely to rise. The Government-to-citizen cash
payments such as direct benefits transfers are also bringing in the unbanked
population into the banking system. With bank accounts becoming universal
and planned 80 crore Aadhar cards easing the Know Your Customer (KYC)
norms, there is going to be an increase in the demand for banking services in
the next few years. Even if the banks were prepared to invest heavily into
building physical branches, it may be difficult to serve the requirements of the
large and widely dispersed rural population. With a significant penetration of
mobile telephony in rural India, the mobile phone has the potential to help
provide basic banking and payment services to citizens on a model that
supplements the conventional banking system.
5. With a view to leverage the strengths of mobile telephony for financial
inclusion, the Government of India constituted an Inter-Ministerial Group
(IMG) to submit a report on the framework for delivery of basic financial
services using mobile phones. The framework proposed in the IMG report has
been accepted as the basis for delivery of basic financial services using mobile
technology by a Committee of Secretaries under the chairmanship of Cabinet
Secretary in April 2010. The IMG framework envisages the opening of mobile
linked ‘no-frills’ accounts, which would be operated using mobile phones. The
customer would be able to perform five basic transactions - cash deposit,
cash withdrawal, balance enquiry, transfer of money from one mobile-linked
account to another, and transfer of money to a mobile-linked account from a
regular bank account.
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6. The IMG framework also proposes compensation to the key players after
taking into account the actual costs incurred by them. One of the
recommendations of the IMG is that the telecom service providers (TSPs)
should provide prioritized secure communication for mobile banking and they
should charge not more than Re. 1 per transaction from their subscribers viz.
mobile linked ‘no-frills’ account holders/ Business Correspondents. TRAI has,
however, been requested to devise a mechanism to support the operation of
market forces for ensuring that telecom services of adequate quality are
provided for mobile banking services at reasonable charges.
7. In countries where the financial services infrastructure is not sufficient to
provide access to a large population, the mobile system can be an effective
replacement mechanism to access the bank. The ecosystem in mobile banking
thus comprises two distinct sectors i.e. the financial services sector and the
telecom sector. The two sectors are governed by two separate sets of
regulations.
8. To make financial services available for the unbanked population, USSD-based
mobile channels can be effectively deployed. USSD based mobile banking
services have already been launched by some banks in the country viz. State
Bank of India, Canara Bank and ICICI Bank in partnership with some TSPs.
However, the extent and scope of the USSD-based mobile banking services
offered by these banks are limited on the following counts:
(i) These services are, at present, not available to the subscribers of all
TSPs.
(ii) These services are limited to the provision of value added banking
services to the banks’ existing customers and are not designed to meet
the objective of providing banking services to the unbanked/ underbanked
population i.e. financial inclusion.
9. On the other hand, the IMG framework envisages mobile banking services to
cater to the banking needs of the masses in general and the unbanked/
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under-banked population, in particular. This would require creation of an
enabling environment where subscribers of all TSPs and customers of all
banks would be able to avail of mobile banking services as per their
requirement and at affordable prices. The business framework required for
this purpose would have to transcend the simple model of one-on-one
partnerships between banks and TSPs in areas of mutually perceived
pecuniary advantage.
10. As a follow-up to the IMG report, the Department of Telecom (DOT) , through
their letter no. 20-1/2011-AS-III/43/7/6 dated 09.12.2011, allocated the
USSD code *99# to the Department of Financial Services for mobile banking
services through the gateway of the National Payments Corporation of India
(NPCI). TSPs were directed to connect to the gateway of the NPCI as per
requirement of service and in consultation with NPCI. A copy of the letter is
placed as Annexure. Perceiving that a certain extent of hand-holding would
be required for the project to take-off, TRAI made concerted efforts to bring
the banks and TSPs into a technical and commercial partnership model by
evolving a mutually acceptable consensus regarding the terms and conditions
of such a partnership. TRAI’s efforts in this direction stretched over a period
of 10 months. However, this attempt did not lead to the desired result, for
two reasons. Firstly, the banks were not able to clearly articulate the business
case embodied in the proposed venture. Secondly, it is also true that the TSPs
view the IMG model as being in competition with their own efforts to diversify
into the mobile money space. The lack of cash-out facility in the mobile
money solutions has remained a sore point with the TSPs. Since the
collaborative effort, focused as it was on business-to-business relationships,
did not take off, the Authority decided to go in for a fresh round of
consultations for enabling mobile subscribers to have an option to access
financial services through the technology of their choice at an affordable
price.
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11. With a view to devising a framework for use of USSD for delivery of basic
financial services through the mobile phone, a Consultation Paper (CP) on
‘USSD-based Mobile Banking for Financial Inclusion’ was issued on
20.09.2013. Stakeholders were invited to submit written comments by
04.10.2013 and counter-comments by 11.10.2013. The comments and the
counter-comments received from the stakeholders were placed on TRAI’s
website– www.trai.gov.in. The issues raised in the CP and the views of the
stakeholders thereupon are being examined in the succeeding paragraphs.
B- Analysis of the Key Issues Raised in the Consultation Paper
12. A summary description for each issue together with the comments of
stakeholders and further analysis thereon is presented below:
(1) Suitability of USSD for mobile banking for financial inclusion
13. A majority of TSPs and their industry associations have not favoured USSD as
the most appropriate mode for mobile banking service for financial inclusion.
The primary concerns of these stakeholders are based on the following
premises:
(i) USSD is not a main-stream commercial service.
(ii) USSD menus are currently available only in English.
(iii) USSD is not supported by CDMA.
14. These stakeholders have argued that USSD has primarily been deployed in a
limited way in telecom networks for delivering various value added services
(VAS) which do not need to follow the stringent and rigorous specifications for
a financial transaction such as audit trail of transaction, storage of transaction
data, interface with multiple third-party applications, and stringent quality-ofservice
(QoS) parameters; in order to make USSD as a main-stream
technology for mobile banking services, significant investment in billing
systems, transaction data storage, retrieval systems, dedicated USSD platform
and the radio access network (RAN) would be required. Further, they have
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contended that the fact that USSD menus are currently available only in the
English language would act as an adoption barrier for financially excluded
customers. They have also pointed out that a significant portion of mobile
users would not be able to use USSD-based mobile banking services since
CDMA does not currently support USSD. Owing to these issues, such
stakeholders have favoured Interactive Voice Response (IVR) and SMS in
place of USSD for mobile banking services for financial inclusion.
15. On the other hand, some TSPs and a majority of consumer advocacy groups,
organizations and individual stakeholders have favored USSD as the most
appropriate mode for mobile banking service for financial inclusion. These
stakeholders have cited the following features of USSD in support of their
view:
(i) Ubiquitous (Available across mobile handsets): A significant proportion
of mobile phone users are still using ultra-low-cost-handsets (ULCH).
USSD is available on nearly all GSM mobile handsets.
(ii) Inexpensive: USSD uses an inexpensive resource (signaling channel) of
the TSPs.
(iii) Secure: USSD is the most reliable channel for making financial
transactions because there is no potential risk of misuse of mPIN.
(iv) Convenient: USSD offers better user experience as it is menu-based
and provides a continuous session for the transaction(s).
(v) It also supports vernacular/ regional languages.
16. In view of the fact that USSD has all the essential features required in a
communication channel for mobile banking services for financial inclusion viz.
it is ubiquitous, inexpensive, secure and convenient, the Authority is of the
view that USSD is an appropriate channel for mobile banking service for
financial inclusion.
17. The successful use of USSD for mobile banking transactions is likely to open a
significant revenue stream for TSPs. They are already deploying USSD-based
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services in their networks. Some of them are also using it to provide mobile
banking services in partnership with banks. In existing USSD-based mobile
banking models, one or more entities interface between the banks and the
TSPs in channeling and processing transactions. On the TSPs’ side, the
requirement is for compiling the USSD messages and interfacing with the
banks. On the banks’ side, the requirement is for compiling transactions and
interfacing with the TSPs. The entities which perform these functions for the
TSPs and banks are generally referred to as aggregators. The TSPs and banks
can have a common, single aggregator, or separate aggregators. For the sake
of clarity, in this explanatory memorandum, the TSPs’ aggregator is referred
to as the gateway operator. The gateway provider provides equipment and
services to TSPs who do not own the necessary infrastructure i.e. the USSD
gateway and the capability to generate Call Data Records (CDRs) for USSD
transactions. (The banks’ aggregator has already been termed as the USSD
aggregation platform provider in the CP dated 20.09.2013).
18. Some TSPs have contended that the use of USSD for mobile banking
transactions would necessitate huge investments. However, the Authority
observes that a large amount of capital expenditure can be avoided by
employing the services of gateway operators who, inter-alia, can provide
capability for billing USSD messages to the TSPs. The records that are created
for billing will also help to satisfy the information needs of the customers.
Besides, some TSPs are already making use of SMS-MT (Short Message
service-Mobile Terminating) upon completion of USSD session for billing their
subscribers.
19. To sum up, no excessively large capital expenditure is involved in extending
the use of USSD-based channels for mobile banking services. It can be done
economically, as has been demonstrated. Further, in most models where
gateway operators are working for TSPs, the same gateway operator provides
the required CAPEX for enhancing capabilities.
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20. As regards the contention that a significant proportion of mobile users would
not be able to use USSD based mobile banking service because USSD is not
supported by CDMA systems, it is pertinent to point out that of the total
wireless subscriber base of about 87 crore as on 30.09.2013, about 80.7 crore
(92.77%) of the subscribers are GSM subscribers, and only about 6.3 crore
(7.23%) are CDMA subscribers. The objective of financial inclusion is to cover
a wide base of telephone users with mobile banking services. The Authority is
of the view that this objective will be largely achieved if such a large
percentage of wireless subscribers are enabled to use the USSD-based mobile
banking service. Additionally, the possibility of work-around methods to cover
CDMA subscribers can also be explored by banks and TSPs.
21. It is clarified that while considering USSD as an appropriate channel for
mobile banking service for financial inclusion, the Authority, by no means,
intends to exclude IVR and SMS-based mobile banking services. The use of
USSD is only to supplement the already present IVR, SMS and mobile Appsbased
offerings with a specific focus to cater to the needs of financially
excluded citizens of the country.
(2) Should the access service providers collect charges from their
subscribers for the use of USSD for mobile banking services?
22. A core issue is whether the customers should pay for the use of USSD for
mobile banking services - the business-to-customer (B2C) pricing model orshould
banks/ banks’ agents pay for the use of USSD for mobile banking
services- the business-to-business (B2B) pricing model.
23. A majority of TSPs, their industry associations, a few organizations, and a
consumer advocacy group have not favored the B2C pricing model for the use
of the USSD channel for mobile banking services. The primary concerns of
these stakeholders are based on the following premises:
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(i) Implementation of B2C pricing model for USSD-based mobile banking
service would require a new billing system for which a huge investment
would be needed. Without an assured USSD transaction volume, there
can be no business case for investing in additional capacity.
(ii) In case charges are recovered by TSPs from their customers (B2C
pricing model), they would be more inclined to contact the call centers
of the TSPs instead of calling to banks. This would put an unnecessary
burden on the call centre infrastructure of the TSPs.
(iii) Since the users are customers of the banks, the banks should recover
charges from them directly or absorb the cost. However, the banks
must compensate the TSPs for their cost in both the scenarios.
24. On the other hand, a few TSPs and a majority of consumer advocacy groups,
organizations and individuals have favoured the B2C pricing model for the use
of the USSD channel for mobile banking services. These stakeholders have
cited the following reasons in support of their view:
(i) It is natural to expect the user of a service to pay to the providers of
the service. In the present case, the TSPs are providing the service of
‘air-time’ through the USSD channel to their customers.
(ii) The USSD channel is just like any other channel of communication viz.
voice, SMS and data. For USSD transactions, the TSPs should collect
charges from subscribers as they do in the case of SMS-based, Mobile
App-based and Internet banking.
(iii) As the customer is benefited both in terms of cost and convenience by
using the USSD-based mobile banking service, he would be willing to
pay a reasonable amount for the use of USSD. The customer reduces
the risk of carrying cash and the service is available everywhere
irrespective of the location of the Bank/ATM. A charge on the customer
would encourage proper use and avoid misuse of the service.
25. From the stakeholders’ comments, it is evident that a majority of the TSPs
prefer a B2B pricing model. One of their apprehensions about the B2C pricing
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model is that it may require a significant investment on a new billing system
to support USSD transactions, which will not yield sufficient returns on
investment (ROI). However, the present ecosystem provides a ready
alternative solution. Many TSPs have already outsourced the USSD gateway
service to gateway operators. The gateway operators can, in addition, help to
build a billing and audit trail system to satisfy the customers and fulfill the
regulatory requirement. The model of business that is currently in use
incorporates a revenue share to the gateway operator that replaces the
requirement of making fresh investments. The payment in exchange for the
services provided by the gateway operator for the USSD channel ranges
between 5-15% of the charges levied by the TSPs on their subscribers. The
spread of the cost per transaction is very small and can easily be built into the
end-user tariff.
26. In addition, the mobile banking service would add value to existing services
and providing a new revenue stream, thereby increasing the average revenue
per user.
27. The concern of TSPs that, in the event of adopting the B2C pricing model,
they would be unnecessarily inundated with customer complaints of failed
banking transactions at their call centers appears to be a misapprehension.
The TSP is providing a communication channel to the mobile customer, not
the banking service per se, which is provided by the bank. This situation
applies equally to mobile banking through SMS, IVR or the Internet, which are
also used as modes for mobile banking. As such, customers are fully aware
that they are making transactions out of their own accounts in the bank, for
which the TSP cannot be held responsible.
28. The argument of TSPs that the banks should recover charges from citizens for
the use of USSD because the citizens are customers of banks, does not
appear to be reasonable. The mobile banking sector involves players from the
financial services sector on the one hand and the telecom sector on the other.
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Their respective roles in the process of delivering USSD-based mobile banking
services are as follows:
(i) Banks facilitate their customers with banking over mobile. Thus mobile
banking acts as another outlet of the banks.
(ii) TSPs provide their subscribers with a delivery channel (USSD) to
execute banking transactions. Thus the USSD channel acts as a vehicle
to help the customer reach the mobile banking outlet of the banks.
29. The Authority is of the view that the B2C model is logical. It is only
appropriate that the TSPs receive adequate recompense from the customer
for the facility of the USSD communication channel that they provide to help
the customer (subscriber) access mobile banking services.
30. It is further observed that the B2C model has been successfully implemented
in some of the existing mobile banking projects such as the partnerships
between ICICI Bank and six TSPs, and that between SBI and five TSPs. A
significantly strong argument in support of this model is that it is already
working in the functioning systems.
31. Although the TSPs have argued strongly for a B2B model, it is a fact that the
banks and TSPs have failed to reach agreement on terms and conditions of
partnership, in spite of intensive parleys over the past year. In the
meanwhile, the project of mobile banking for financial inclusion has been the
casualty. The Authority is of the view that this situation cannot be allowed to
continue indefinitely. As stated earlier, the present TTO is meant to fix the
terms and conditions under which mobile banking for financial inclusion can
be facilitated.
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(3) Appropriateness of Rs. 1.50 per USSD session for mobile
banking as a ceiling tariff
32. On the subject of the appropriate ceiling tariff for mobile banking service,
significantly divergent views have been expressed by the stakeholders viz.
(i) Tariff per USSD session for mobile banking should remain under
forbearance.
(ii) A ceiling tariff of Rs. 1.50 per USSD session for mobile banking would
be appropriate.
(iii) A tariff significantly higher than Rs. 1.50 per USSD session for mobile
banking should be allowed.
(iv) The ceiling tariff should be much lower than Rs. 1.50 per USSD
session.
(v) Subscription based pricing model instead of pay-per-use pricing model
should be adopted.
33. Some TSPs and the industry associations have favoured the policy of
forbearance in the tariff for the USSD session for mobile banking services.
They have stated that mobile banking is at a very nascent stage of growth as
the eco-system is still developing and, therefore, it would be premature to fix
a ceiling tariff per USSD session at this stage.
34. On the other hand, many stakeholders have supported prescription of a
ceiling tariff for the use of USSD for mobile banking services in view of the
following:
(i) A ceiling tariff is necessary for customer protection and to encourage
innovation to enable scale and volume of transactions on the USSD
channel.
(ii) From the experience of usage of short codes in SMS-based banking, it
seems necessary to prescribe a ceiling tariff for USSD-based mobile
banking service. Since the TSPs charge Rs. 3 per SMS, the usage has
not picked up in the lower end of the customer segment.
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35. A few stakeholders have considered Rs. 1.50 per USSD session for mobile
banking as an appropriate ceiling tariff in order to ensure that the TSPs do
not charge an exorbitant or unreasonably high tariff per USSD session. They
have also stated that voice and SMS services also operate near this price
point.
36. A few access service providers have argued that they should be allowed to
charge higher than Rs. 1.50 per USSD session (e.g. Rs. 3 or Rs. 5.50) in view
of the following:
(i) Huge investment in the billing system and to meet the strict guidelines
for quality of service for mobile banking;
(ii) USSD session for mobile banking service involves multiple hits which
would engage the signaling channel and core network for a long time.
37. On the other hand, a majority of consumer advocacy groups, organizations
and individuals have contended that the TSP should charge much lower tariff
per USSD session. Some of the comments offered by these stakeholders are
as below:
(i) The price per USSD session should be at par with GPRS service i.e. Re.
0.20 to Re. 0.30 per USSD session.
(ii) The customers should be able to pay as low as Re. 0.50 per USSD
session with no additional charges.
(iii) The ceiling should begin with Re. 1 per USSD session.
These stakeholders have opined that the real growth of the service will come
out of ‘large volume of transactions and small value charges’ rather than from
‘high value charges and small volumes of transactions’.
38. One TSP has stated that a subscription-based pricing model instead of payper-
use pricing model should be adopted for pricing the use of USSD for
mobile banking services so that the TSPs do not require any investment in
their network.
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39. Though there are divergent views on the issue, most of the stakeholders
consider tariff of USSD session for mobile banking service an important
determinant of the success of USSD-based mobile banking service. Besides, it
is clear, from the comments of the stakeholders, that the principle that the
person seeking the service must pay for the service, is widely acceptable.
40. As the use of USSD for mobile banking service is not a main offering of the
TSPs, the pricing of these services is not likely to be subjected to the same
competitive pressure which the main offerings of the TSPs (viz. voice call and
SMS) have to face in the marketplace. Besides, the use of USSD for mobile
banking for financial inclusion carries definite socio-economic benefits to the
target group i.e. unbanked/ under-banked population and, therefore, the
price for the use of USSD for mobile banking needs to be reasonable and
affordable. In the USSD-based mobile banking solutions already deployed in
the country, subscribers are charged a pay-per-use charge in the range of Rs.
1 to 1.50 per USSD session regardless of the duration of the session.
41. It is noteworthy that while voice calls travel over traffic channels, USSD
messages and SMS messages travels over inexpensive signaling channels.
The prevalent tariff of outgoing SMS in the tariff plans offered by the TSPs is
generally Re. 1 per local SMS and Rs. 1.50 per national SMS.
42. In the light of the above, the Authority is of the view that a ceiling tariff of Rs.
1.50 per USSD session would be reasonable to compensate the TSPs to meet
the expenses incurred in the use of USSD for mobile banking service and also
it would be affordable to the subscribers. Ordinarily, a USSD session shall
comprise one banking transaction e.g. balance enquiry, transfer of money
(Fund transfer) etc. However, the TSPs and banks/ banks’ agents may agree
to accommodate more transactions in a USSD session. A pay-per-use charge
within the ceiling tariff of Rs. 1.50 per USSD session would be payable by the
subscriber upon establishment of an outgoing USSD session, regardless of
whether the session results in a successful or a failed banking transaction.
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Annexure
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List of Acronyms
Sl. No. Acronym Expansion
1 ATM Automated Teller Machine
2 B2B Business-to-Business
3 B2C Business-to-Customer
7 CAPEX Capital Expenditure
4 CDMA Code Division Multiple Access
5 CDR Call Data Record
6 CP Consultation Paper
8 DoT Department of Telecommunications
9 GDP Gross Domestic Product
10 GPRS General Packet Radio Service
11 IMG Inter Ministerial Group
12 IVR Interactive Voice Response
13 KYC Know Your Customers
14 m-PIN Mobile Personal Identification Number
15 NPCI National Payment Corporation of India
16 QoS Quality of Service
17 RAN Radio Access Network
18 ROI Return on Investment
19 SMS Short Message Service
20 SMS-MT Short Message Service - Mobile Terminating
22 TRAI Telecom Regulatory Authority of India
23 TSP Telecom Service Provider
21 TTO Telecommunications Tariff Order
24 ULCH Ultra-Low-Cost-Handsets
25 USSD Unstructured Supplementary Service Data
26 VAS Value Added Services
