Tanzania's payment trends inspire cashless economy

Cashless (1)
Cashless (1)

What you need to know:

  • While the mobile payment channel remains the most used in terms of volume of transactions, there has been a growing trend towards other channels such as point-of-sale (POS) machines and mobile banking.

Dar es Salaam. Tanzania’s payment systems have shown a broader trend towards digitisation and a shift away from cash-based transactions, The Citizen has learned.

While the mobile payment channel remains the most used in terms of volume of transactions, there has been a growing trend towards other channels such as point-of-sale (POS) machines and mobile banking.

The POS machines are used for different purposes, including the facilitation of banking services at agent points, the facilitation of government bill payments, and private sector operations.

According to the data from the Bank of Tanzania’s (BoT) National Payment Systems Annual Report 2022, in the years from 2018 to 2022, customers made over 3.59 billion mobile payment transactions. That was the highest usage across all channels and a 34 percent increase from 2.94 billion transactions made through mobile during 2018.

Between 2018 and 2022, The Citizen analysed that the mobile money channel was also the highest in value, at Sh114.34 trillion from Sh81.37 trillion.

However, notably during 2022, according to the central bank, the role of merchant POS was emphasised as one of the strategies to digitise business and attain a cash-less economy, with 6.74 million transactions, a significant leap considering there were only 912,955 transactions in 2018.

“Several factors have contributed to the increased usage of merchant POS, but the most important one is its efficiency in payment collection. The increased merchant adoption has also increased the demand for and adoption of POS machines,” the central bank stated in part.

The value of POS payments had also surged significantly to Sh1.34 trillion in 2022 from Sh145.4 billion in 2018. During the reviewed period, it was shown that mobile banking transactions, which include fund transfers from bank to wallet and wallet to bank, had also doubled to 92.12 million from 45.68 million.

Other services provided by mobile banking were bill payment, account notification, and mini statements.

The value of all mobile banking transactions locally grew to Sh30.65 trillion from just Sh2.9 trillion five years ago. Internet banking transactions increased to 7.9 million in 2022 from 5.4 million in 2018, highlighting the growing acceptance of online banking solutions.

The Internet banking value of transactions was Sh66.47 trillion in 2022, up from Sh47.5 trillion. Moreover, both locally issued card transactions (82,900,000 transactions in 2022) and ATM transactions (57,770,101 transactions in 2022) witnessed steady growth over the five years at 11 percent and 27 percent, respectively.

The locally issued card value of transactions was Sh10.26 trillion in 2022, a slight decrease from Sh10.68 trillion in 2018. 

The Automated Tellers Machine (ATM) value of transactions increased by 41 percent to Sh9.8 trillion from Sh6.93 trillion in 2018, indicating this channel remains a convenient cash withdrawal option.

Speaking to The Citizen, seasonal banker and analyst Kelvin Mkwawa said, apart from improving awareness, there have been deliberate efforts from the government to create a conducive environment for service providers by reducing operational requirements and attracting new investors in digital financial solutions.”

Additionally, bank initiatives that align with the cashless campaign. 

The institutions have been innovative and competitive in creating convenient, easy, and fast payment systems, and they are even willing to partner with fintech,” he said.

Mr Mkwawa also noted an increase in entrepreneurs, leading to a rise in demand for seamless payments. He mentioned that the government’s move to reduce taxes and fees for online mobile and banking transactions has also complemented the growing trend.

Analyst Mr Christopher Makombe said alternative payment channels are effective for customers and businesses, as they enable businesses to have access to more data about customers’ spending behaviour and therefore respond to changing customer needs and preferences.

“It is more convenient to pay by hand than to carry large amounts of cash, which can be risky to customers,” he said.