In today’s hyper-connected world, it’s easy to assume that everyone manages their money through banking apps and online portals. But the truth is, for billions of people across the globe, that kind of digital access just isn’t a reality. There are no fancy smartphones or steady internet – just a basic mobile phone and a pressing need to move money, pay a bill, or check a balance. That’s where USSD in banking comes into play. It’s a simple yet powerful technology that’s been quietly transforming financial access in some of the most underserved parts of the world. In the blog below, we take a closer look at what USSD is, how Telcos enable it, and why it continues to be a vital tool for financial inclusion, especially in places where mobile phones are far more common than bank branches.
Understanding USSD: The Tech Behind the Simplicity
To understand the impact of USSD in banking, we first need to understand what USSD is. USSD stands for Unstructured Supplementary Service Data. It’s a telecom protocol that allows mobile devices to communicate directly with a service provider’s computers via short codes. Unlike SMS, which is store-and-forward, USSD sessions happen in real-time and are session-based. This means that users get an immediate response after each input. The process typically looks like this:
- 1) User Dials USSD String
- 2) Routed to MNO USSD
- 3) Routed to Bank’s USSD Menu Application Server
- 4) USSD Menu Application Servers routes the user request to the Banking System.
This real-time communication is facilitated by the MNOs, who provide the essential infrastructure and ensure network reliability. Without telecoms, USSD in banking simply wouldn’t exist.
This is what makes USSD so powerful. It’s not flashy or app-based, but it’s dependable, simple, and accessible. This is especially important in areas where smartphones and data are luxuries, not givens.
The ease of use is just one of the benefits of USSD as a tool for banking, specifically. But more importantly, it offers financial inclusion for the billions of unbanked people globally. Let’s explore this in more detail.
USSD and Financial Inclusion: A Game-Changer
If there’s one word to define the impact of USSD in banking, it’s inclusion.
Across Africa, Asia, and parts of Latin America, millions of people remain unbanked, not because they don’t want a bank account but because there are no branches nearby, smartphones are unaffordable, and internet connectivity is unreliable or prohibitively expensive.
That’s where telecom-driven USSD services step in. Through USSD, financial services can now reach:
- A street vendor in Nairobi who needs to send money to her family.
- A farmer in Limpopo checking his loan status.
- A migrant worker in Mumbai paying electricity bills from a basic phone.
By bypassing the need for internet or smartphones, Telcos and banks are bringing the bank to the people, one shortcode at a time. But why is this so important? Simply because the global gap in financial access is still immense.
According to the World Bank, there are still 1.4 billion unbanked people across the globe. These are individuals who lack access to even the most basic financial services. That’s nearly a fifth of the world’s population shut out of economic participation, credit, and savings mechanisms.
Similarly, GSMA estimates that 345 million of the 400 million micro-enterprises in emerging markets are informal, operating without access to structured banking tools. These micro-entrepreneurs represent not just economic actors but are the backbone of many developing economies.
According to the UN, micro, small and medium enterprises (MSMEs) account for 90% of businesses, over 70% of employment, and 50% of GDP worldwide.
Without access to secure, affordable financial services, they will struggle to grow, be unable to take on larger orders, or manage fluctuating demand. That’s why investing in telecom infrastructure, enabling affordable connectivity, and delivering innovative financial tools via USSD can directly fuel local economies.
From the above, it is clear that Fintech has a role to play in reducing poverty and stimulating economic growth, and telecom-led USSD banking is one of its most powerful enablers. This is because it provides accessible services like mobile money transfers, bill payments, savings accounts, and microloans in real-time, without the need for data or smart devices.
In many parts of the world, USSD isn’t just a convenience, it’s a lifeline. But how do Telcos enable USSD banking? We answer this pressing question below.
Behind the Scenes: How Telecom Operators Enable USSD Banking
So, how do telecom providers make USSD banking possible? It all starts with USSD Gateways. These are platforms that integrate banking systems with telecom networks. These gateways are responsible for:
- Routing requests securely between mobile phones and banking servers.
- Ensuring uptime and session reliability across the network.
- Managing the logic behind interactive menus and responses.
Telcos must also maintain strong service-level agreements (SLAs) to ensure that USSD banking is fast and always available. Even a few seconds of downtime could disrupt transactions or discourage users.
Beyond connectivity, USSD banking opens up revenue opportunities for MNOs. By partnering with banks, MNOs can monetise USSD sessions through transaction fees, API access, or bundled fintech services. It is a win-win for everyone involved in the process. But how safe is USSD for banking?
Keeping It Safe: Telecom-Grade USSD Security
Naturally, with money involved, security is non-negotiable. Telcos work closely with banks to secure USSD sessions in several ways:
- Encryption – While USSD itself is not inherently encrypted, secure communication between the USSD gateway and the bank’s system is vital.
- Session Timeouts – To prevent interception or unauthorised access, USSD sessions are time-bound and expire quickly.
- SIM Swap Detection – Telcos play a key role in preventing fraud by monitoring SIM swaps and flagging unusual activity.
- Network Firewalls – Block rogue USSD traffic and ensure only authorised systems can connect.
Best practice involves a combination of telecom-layer protections and bank-side controls. Together, they build a safety net that keeps users’ transactions secure, even on the most basic phones.
If you are still wondering if USSD is still relevant in today’s world of banking apps, our answer is absolutely.
Is USSD Still Relevant in a World of Banking Apps?
While smartphone apps dominate in urban centres, USSD remains irreplaceable in many emerging markets. But the technology is also evolving, not standing still.
New developments are making USSD faster, more responsive, and more secure. Telcos are exploring AI-powered chat flows over USSD to enhance the user experience, and blockchain is being tested to bring more transparency and trust to mobile money transactions.
At the forefront of these innovations is Adapt IT Telecoms, a leading provider of advanced USSD solutions that cater to both banks and MNOs. By offering smart gateway infrastructure, real-time transaction capabilities, and robust security features, Adapt IT Telecoms is helping clients future-proof their USSD platforms for the next generation of mobile banking.
Conclusion
From the above, it is clear that at its core, USSD in banking represents the perfect synergy between telecommunications and finance, bringing vital services to people who need them most. From the technology behind the scenes to the farmers, vendors, and everyday citizens it empowers, USSD is proof that simple tech can drive profound change. Telcos are not just passive enablers, they’re essential partners in expanding financial inclusion, ensuring transaction security, and fuelling economic growth. As companies like Adapt IT Telecoms continue to innovate, the future of USSD banking looks not only secure but incredibly promising. So, the next time you dial *120# on a feature phone, remember: you’re not just using a service, you’re part of a revolution.
Discover why 3.5 billion people around the world still use USSD
In this whitepaper we explore the current communication landscape, the significance of USSD and what the future holds for technology in Africa, Emerging and First World Markets.
Matthew Seabrook leads the NGVAS business unit at Adapt IT Telecoms, driving next-gen telecom solutions. With 30+ years in Telecoms, ICT, and IT, his expertise in sales, operations, and professional services enables him to strategize effectively, optimize networks, and unlock new revenue. A servant leader, he fosters growth, removes obstacles, and champions innovation, ensuring lasting partnerships and a thriving, people-centric team.
