In the heart of East Africa, Tanzania stands on the brink of a financial revolution. Despite the widespread adoption of mobile money services for personal transfers, a staggering 97% of point-of-sale (POS) transactions in Tanzania still rely on cash.
This article dives deep into the pressing challenges hindering the adoption of digital payments and presents a practical, clear roadmap to transform Tanzania’s payment landscape using mobile money, fintech apps, and banks.
Tanzania, with its widespread adoption of mobile phones, mobile money and mobile money agents, presents a unique footprint to propel digital payments forward. While digital infrastructure and interoperability challenges exist, I would argue that the primary hurdle remains with merchants and consumers willingness to participate in digital payments.
This article explores challenges and proposes a holistic but practical way to digitise Tanzania’s everyday payments between consumers and merchants.
Below are the Challenges and Barriers to digitising everyday payments, Insights from Customers on Mobile Money, Banks, and Fintechs.
- Fees & Charges
In Tanzania, digital transaction fees create a substantial barrier to adoption. Unlike developed markets where businesses absorb these fees to attract customers and increase sales, in Tanzania, both merchants and consumers share the burden. This dual fee structure discourages the use of digital payments, making cash transactions more appealing. - There’s No Benefit to Pay Digitally
Both Merchants and consumers often perceive little value in switching from cash to digital payments. Merchants see increased costs and delayed settlement without sufficient benefits to account for, while consumers find cash straightforward, transparent, and free from fees. This perception (very close to reality) creates a significant obstacle to digital adoption. - Issues With Speed of Settlements
You know for merchants, Money today is better than money tomorrow, Speed is a critical factor in payment systems. In Tanzania, digital transactions often suffer from delayed settlements, causing cash flow issues for businesses. Merchants prefer the immediate availability of cash, which supports their daily operational needs, further dissuading them from embracing digital payments.
Three Step Process to Digitise Everyday Payments Between Merchants and Customers in Tanzania
Tanzania is on the cusp of a financial transformation. However, despite the proliferation of mobile money, most transactions are still done in cash. Here’s a simple, three-step guide to effectively digitize everyday payments using mobile money, fintech apps, and banks.
- Start by digitising suppliers:
Partner with suppliers who sell to merchants, with the immediate benefit of helping them grow their sales numbers and volumes through digital payments from merchants in the platform. Incentives: Offer discounts or rewards for using digital payments. Other Products: Offer quick digital financing to increase sales.Example: Ramani partners with Cocacola to digitise payments from buyers and distributors using their proprietary technology and offer alternative financing to boost sales for everyone. - Then digitise the retail sellers (merchants):
Now these guys are already paying their suppliers with digital payments, it is time to encourage and incentivise them to receive payments digitally. For insistence A small retailer uses your app to receive payments will secure a financing limit for inventory and operations, showing immediate business growth and improved cash flow.Example: A B2B e-commerce platform, Sarafu partners with KCB bank to offer financing to the merchants using their platform to buy stock and they also encourage (kinda like force) them to pay suppliers using Sarafu. - Now go for consumers, encourage them to pay digitally.
Make digital payments reliable, cheaper, faster, attractive and convenient for consumers, also add some offers and discounts across the board for consumers.Example: A supermarket offers a 10% discount on purchases made with mobile money, encouraging more consumers to switch from cash to digital payments.Example: GePG by the government of Tanzania has been very successfully in making sure all utility bills like Luku and Water are paid digitally. The point with this example is the central government (supplier) has been able to incentive the merchants (local authorities) to accept and encourage digital payments from the consumers. (the public), and their payments are very reliable.
Conclusion.
In conclusion, Tanzania stands poised for a significant shift towards a cashless economy, leveraging its robust mobile and telecom infrastructure. Despite the challenges posed by transaction fees, perceived lack of benefits, and issues with settlement speeds, the path to widespread digital payment adoption is clear.
The three-step approach outlined—starting with digitising suppliers to boost their sales through digital payments, empowering retail sellers to accept digital transactions with incentives and financial support, and finally, encouraging consumers with attractive offers and reliability—provides a practical roadmap.
Although this seems like a three step process some innovators in some sectors will have to build a few more things in every step to accomplish the job, Example of SaaS in Transport and logistics, take SafiriApp and Otapp as examples, they digitise ticketing agents and bus operators at the same time to move faster to digital financial services.
By harnessing the existing mobile money ecosystem, fintech innovations, and strategic partnerships with banks, Tanzania can overcome adoption barriers and foster a thriving digital payment landscape. As we look ahead, collaborative efforts between stakeholders will be pivotal in driving this transformation, ensuring economic growth, financial inclusion, and convenience for all Tanzanians.
Through these concerted efforts, Tanzania can lead the way in embracing the future of digital payments across East Africa and beyond.
This article first appeared on https://reubenmars.substack.com/
Featured image credit: edited from freepik
