Tanzania has taken a significant step towards promoting digital transactions by eliminating charges on card payments. The Bank of Tanzania announced that debit, credit, and prepaid card payments at point-of-sale (POS) machines will no longer attract any fees. Merchants who violate this order will face penalties.
This move is part of the central bank’s efforts to encourage a cash-lite economy, offering advantages such as improved security, transparency, and convenience. Governor Emmanuel Tutuba stated that the bank plans to promote the use of POS machines to facilitate and encourage digital payments. Tanzania’s digital payment journey aligns with its economic growth.
The World Bank projects a positive medium-term outlook for the country, with GDP growth around 6%. Key sectors driving this growth include manufacturing, electricity, construction, tourism, trade, and financial services. According to Statista, the total transaction value in Tanzania’s digital payment market is projected to reach $4.43 billion in 2024, with mobile POS payments being the largest segment.
Tanzania boosts digital payments adoption
Tanzania ranks eighth in Africa, with 48.4% of its population utilizing digital platforms for transactions. Financial inclusion in Tanzania has risen significantly, with 76% of the population now formally included, up from 65% in 2017.
This growth aligns with the increase in mobile phone ownership, which rose from 63% to 75% during the same period. Access to commercial banking services has also improved, increasing from 17% to 22% since 2017, largely due to the enhanced accessibility of these services through mobile phones. In contrast, Zimbabwe’s introduction of a 2% Integrated Money Transfer Tax (IMTT) in 2018 has discouraged the use of digital payments.
The country had made significant strides towards becoming a cashless society, with electronic transactions peaking at 70% in 2017. However, the IMTT has reversed these gains, making digital transactions more expensive and driving the country back to cash-based transactions. This contrasting scenario raises important questions about the impact of scrapping charges on digital payments in Zimbabwe and the potential consequences for banks that rely heavily on fee income.
Tanzania’s move could serve as a case study for Zimbabwe, highlighting the importance of reducing costs associated with digital payments to revive its digital economy.
