Frequently asked questions on USSD channel for loans

USSD (Unstructured Supplementary Service Data)  may look like a basic technology, but it remains one of the most dependable ways for people to access financial services. In many communities, it is the first point of contact for digital lending because it works on every device and removes the barriers of apps or internet access.

For lenders, USSD provides a direct and reliable channel that integrates with the Lendsqr infrastructure. It allows them to onboard customers, authenticate users, run credit checks, and disburse loans using the same decisioning systems that power other channels. This FAQ explains how the USSD loan channel works, what users can do on it, and what to know when troubleshooting or setting it up.

Also read: What is Lendsqr, and how does it work?

What is the primary purpose of Lendsqr in implementing the USSD channel?

USSD can help more people access loans, especially those who earn less or struggle with internet access. This means that lenders can reach people who are usually excluded from fully digital channels. Adding USSD also opens more touchpoints for customers who prefer simple, familiar tools on their phones. With more channels available, lenders can serve a wider group of borrowers and strengthen their reach. 

What services does the USSD channel offer to borrowers?

Through USSD, borrowers can:

• Sign up and undergo KYC verification using phone number, NIN, and BVN validation.
• Browse and apply for nano loans offered via USSD by selecting loan amounts between N1,000 and N10,000.
• View loan details and initiate early repayments.
• Set up direct debit mandates for convenient repayment without requiring debit card inputs.​

How does USSD onboarding work on Lendsqr?

When a new user dials your USSD code, the system begins onboarding by retrieving their phone number and using it to pull their NIN, which is then validated against their BVN. This verification flow serves as an identity check, ensuring the person dialing the code matches the BVN owner. Despite USSD’s limited KYC capabilities, this NIN–BVN matching strengthens fraud prevention and helps establish a trusted user profile.

What domains and partners are associated with USSD?

Artis and Pecunia are the core systems that support this channel. They handle the processes that enable USSD sessions. HollaTags and CGate serve as external partners that will allow the USSD connection. They provide the infrastructure that connects mobile networks to Lendsqr, allowing users to dial a code and complete tasks without an internet connection.

What is the customer journey when applying for a loan via USSD?

The loan application journey on USSD involves:

1. Dialing the USSD code.
2. Selecting the loan application option.
3. Choosing a loan amount within the allowable range.
4. Viewing up to three loan offers based on lender eligibility checks, like credit bureau and Karma scores.
5. Select an offer and provide a bank account, bank name, and BVN.
6. Receiving an SMS with a link for card addition, which, if verified successfully, leads to loan disbursement.
7. Loan repayment is managed via card and SMS prompts when due.​

Also read: The true cost of in-house lending platforms

How does loan repayment work on the USSD channel?

Loan repayments on USSD can happen through two mechanisms:

• Manual repayment transfers initiated by the user via USSD that credit the borrower’s wallet.
• Payment via a repayment link sent by SMS, where CGate processes the transaction over USSD, confirms payment, and credits the wallet accordingly.

What are the costs and revenue aspects of the USSD channel?

USSD services are charged per session (20 seconds each), and a loan transaction spans about a minute. The lender pays for these sessions but can choose to pass these costs to borrowers within the loan interest. Lendsqr generates revenue from transaction fees on USSD activities and upfront implementation fees.

What security concerns are associated with USSD, and how does Lendsqr address them?

USSD communications are unencrypted, posing risks of eavesdropping and data interception. Additionally, risks such as unauthorized SIM swaps can result in fraudulent loan requests. Lendsqr mitigates these by integrating strict identity verification, combining BVN and NIN checks, and complying with regulatory guidelines to enhance security during onboarding and transactions.

Can users apply for loans directly through USSD?

Yes. Once verified, the borrower sees the list of loan products that the lender has made available for USSD. By following the on-screen prompts, the borrower can complete the application journey and receive an offer. Their request still goes through all standard eligibility checks configured on the lender’s back office: Karma, Credit Bureau, Loci, and advanced scoring models, to protect the borrower from unnecessary risk.

Can borrowers who signed up via USSD access other channels later?

Yes. Borrowers onboarded via USSD can log into mobile apps or the web using the same identity. Likewise, those who originally signed up on web/mobile can use USSD as long as the lender has enabled it.

Also read: The hidden costs of cheap lending software

How can lenders enable USSD as a channel on Lendsqr?

Lenders can activate USSD for any loan product inside the dashboard:

1. Go to Product Management → Loan Products.
2. Create or open an existing product.
3. Navigate to Product Attributes / Settings.
4. Select Channel availability.
5. Choose USSD from the dropdown and save.

How can lenders get their own USSD code in Nigeria?

There are two main routes.

• The first is the DIY route, where you apply directly to the Nigerian Communications Commission (NCC) for a dedicated short code, typically four digits, since the three-digit codes are exhausted. This process requires filling out the NCC short code form, submitting proof of payment, attaching your operating license and network architecture, and working with a VAS provider to integrate with mobile networks. It is costlier but gives you full ownership of your code.
• The second route is to use a Value Added Services Provider (VASP) such as VAS2Nets, HollaTags, Infobip, Africa’s Talking, or Interswitch. These providers give you a sub-code under their existing short code, which is faster and more affordable to activate. Lendsqr handles the custom integration when you choose a VASP route.

What should lenders keep in mind before adopting USSD?

USSD is powerful at scale, but it has constraints. Short response windows and character limits limit interaction, so you cannot ask users too many questions or rely on long data-entry flows. USSD sessions are also priced per interaction, which can become expensive for lenders with high traffic. Another challenge is that USSD doesn’t support real-time input validation, meaning your engineering team must handle errors on the backend. 

What are the risks associated with USSD lending?

The biggest risk is the potential for higher non-performing loans (NPLs). Because the loans offered on USSD are small, many borrowers may treat them casually, especially if it is their first experience with formal credit. There is also the challenge of limited financial literacy, which can affect repayment discipline. Lenders need strong eligibility rules and responsible loan amounts.

Can I talk to Lendsqr for support with USSD?

Absolutely. Lenders evaluating USSD or needing guidance with applying for a code, choosing a VASP, or setting up integration can reach out to us at [email protected]. The Lendsqr team helps lenders understand costs, risks, deployment timelines, and how to scale effectively using the channel.

Also read: What to do after your first digital lending demo?

Keeping lending accessible for everyone

USSD continues to play an important role in digital lending, especially for borrowers who rely on simple channels. With Lendsqr’s USSD infrastructure, lenders can reach borrowers wherever they are, online or offline. As digital ecosystems evolve, USSD remains a stable foundation that ensures no customer is left behind, and every lender can deliver an excellent loan experience across all device types.