Unstructured Supplementary Service Data (USSD), Features, Components

USSD (Unstructured Supplementary Service Data) is a mobile communication technology that enables real-time, session-based communication between a user and an application on a network. It is widely used in banking services, especially for customers who do not have access to smartphones or internet connectivity. USSD allows users to perform banking functions like balance inquiry, fund transfer, and mini statements by dialing a code (e.g., *99#) on any GSM mobile phone. Unlike SMS, USSD provides instant feedback and does not require mobile data, making it ideal for rural and low-income users in India for financial inclusion.

Features of USSD:

• Real-Time Communication

USSD facilitates real-time, interactive communication between the user and the banking system. When a user dials a USSD code, such as *99#, the session remains open and allows a two-way exchange of information without delays. Unlike SMS, where a message is sent and then a reply is awaited, USSD enables a continuous session. This makes it ideal for banking applications like balance inquiry, fund transfers, and mini statements. Its instantaneous nature ensures faster responses and increased efficiency, making it especially useful for urgent banking transactions in areas with limited connectivity.

• No Internet Required

One of the most significant features of USSD banking is that it does not require an internet connection. It operates over GSM networks, allowing customers with basic mobile phones to access essential banking services. This feature is highly beneficial for people in rural areas or regions with poor internet penetration. By removing the barrier of internet dependency, USSD contributes to financial inclusion by providing banking access to a broader demographic. Users only need a registered mobile number linked to their bank account and the ability to dial the designated USSD code.

• Universally Accessible

USSD can be accessed by any GSM-enabled mobile phone, regardless of the brand, model, or operating system. It does not rely on smartphone features or mobile applications, making it highly inclusive. Even low-income users with feature phones can benefit from digital banking services through USSD. The platform is compatible with almost all telecom service providers and banks in India, ensuring nationwide accessibility. This universal reach allows banks and the government to serve unbanked and underbanked populations, further advancing the goals of digital India and financial inclusion.

• Menu-Driven Interface

USSD operates through a menu-driven interface where users are guided step-by-step to complete a transaction. After dialing the USSD code, a menu appears on the screen offering various options like checking balance, transferring money, or viewing recent transactions. The user simply selects the desired option by entering a number corresponding to that service. This system minimizes errors and makes the user experience intuitive, even for people who are not tech-savvy. It provides a guided process, reducing confusion and enabling easier adoption of digital financial services.

• Multilingual Support

To cater to India’s diverse population, USSD services often support multiple languages. This allows users to interact with the banking interface in their preferred regional language, making the service more user-friendly and accessible. Multilingual support is crucial in increasing usage among people who may not be fluent in English or Hindi. By presenting instructions and options in local languages, banks can ensure that a larger segment of the population can independently conduct banking transactions, boosting overall financial literacy and empowerment.

• Secure Transactions

USSD banking is designed with security measures to protect customer data and transactions. Each session is encrypted, and the service generally requires users to enter a Mobile Money Identifier (MMID) or MPIN to authorize transactions. Since no data is stored on the device and sessions expire quickly, the risk of fraud is minimized. Moreover, banks monitor USSD transactions for unusual patterns, adding another layer of protection. These security features make USSD a safe platform for conducting low-value banking transactions, especially for users unfamiliar with mobile apps or online banking.

• Low Transaction Cost

USSD banking incurs minimal transaction costs, making it an affordable option for users. Most telecom operators charge only a nominal fee per session, and in many cases, the service is free when accessed through government-backed platforms like the *99# initiative by NPCI. This low-cost model is especially beneficial for users with limited financial resources, as it provides access to essential banking services without incurring high fees. The affordability of USSD services promotes greater adoption among economically weaker sections, thereby supporting the broader goal of inclusive banking.

Components of USSD:

• Mobile Device (User Handset)

This is the user’s mobile phone, which initiates and receives USSD communication. The device doesn’t need internet access or to be a smartphone. Even basic feature phones can access USSD services by dialing a code (e.g., *99#). The phone acts as the interface for sending and receiving USSD requests and responses.

• USSD Gateway (Provided by Telecom Operator)

The USSD Gateway is a telecom infrastructure component that receives the USSD request from the mobile device and forwards it to the correct application server. It also sends the response back to the user. It acts as a bridge between the user’s mobile network and the service provider’s system (like a bank’s server).

• Telecom Network (GSM Network)

USSD communication operates over the GSM (Global System for Mobile) network. The telecom network ensures real-time session-based communication between the user’s phone and the USSD gateway. Unlike SMS, it provides a two-way communication channel in real time.

• Application Server (Bank/NPCI Server)

The application server belongs to the bank or NPCI (National Payments Corporation of India). It processes the user’s requests—such as checking balances, transferring funds, or generating mini-statements—and sends the relevant response. It handles authentication, account validation, and transaction execution.

• IMPS Platform (Immediate Payment Service)

When money is transferred via USSD, the backend process often uses the IMPS platform. This enables instant fund transfers between banks using mobile numbers and MMIDs (Mobile Money Identifier). IMPS ensures real-time credit to the beneficiary’s account.

• NPCI Switch

NPCI acts as the central switch that routes the USSD requests to the appropriate bank. When a user dials *99#, the NPCI switch identifies the bank linked to the mobile number and routes the request accordingly. It ensures secure and efficient inter-bank transactions.

• Authentication System (MPIN/MMID Validation)

Authentication is carried out using MPINs (Mobile Personal Identification Numbers) and MMIDs. These secure credentials help validate users and authorize banking transactions. This system ensures that only the rightful account holder can access and transact using the USSD service.