What are the advantages and disadvantages of using SMS and USSD as channels for mobile banking and payments?

1 How SMS and USSD work

SMS stands for Short Message Service, and it allows users to send and receive text messages up to 160 characters long. SMS messages are stored and forwarded by the network, and they can be sent to any phone number. USSD stands for Unstructured Supplementary Service Data, and it allows users to communicate with a service provider through a menu-based system. USSD messages are not stored by the network, and they are sent to a specific code that starts with an asterisk and ends with a hash sign. For example, *123#.

2 Benefits of SMS and USSD

One of the main benefits of SMS and USSD is that they are simple and accessible. They do not require a smartphone, an app, or an internet connection. They can work on any mobile phone, and they are supported by almost all network operators. They are also fast and reliable, as they use the core network infrastructure that is designed for voice calls. They can reach millions of customers, especially in rural and remote areas where other channels are not available or affordable. They can also provide convenience and security, as users can perform transactions anytime and anywhere, without sharing their personal or financial details.

4 Best practices for SMS and USSD

To overcome these challenges and maximize the potential of SMS and USSD, some best practices can be followed. For example, designing clear and user-friendly interfaces, using encryption and authentication methods, providing feedback and confirmation messages, offering customer support and education, and monitoring and evaluating the performance and impact of the services. Additionally, fostering collaboration and coordination among the different actors involved, and ensuring compliance and alignment with the relevant policies and frameworks.

5 Future trends for SMS and USSD

SMS and USSD are not likely to disappear anytime soon, as they still have a large and loyal user base, especially in emerging markets. However, they may face increasing competition from other channels, such as mobile apps, web browsers, or chatbots, that offer more features and functionalities. Therefore, SMS and USSD may have to adapt and innovate, by integrating with other platforms, leveraging new technologies, or creating new use cases. For example, SMS and USSD could be used for identity verification, digital receipts, loyalty programs, or social impact initiatives.