Igniting Tanzania’s economic engine: The power of digital payments

By Chad Pollock

The Tanzanian financial landscape is undergoing a fundamental shift as digital payment systems disrupt traditional transaction models. 

This evolution is driven by a confluence of factors, including regulatory reforms, technological advancements, and increasing demand for accessible and convenient financial services.

The resulting increase in financial inclusion is poised to unlock significant economic potential, particularly for Tanzania's growth engine: its small and medium-sized enterprises (SMEs).

With over half of the population now online, the future of payments is undeniably digital. 

Tanzania’s digital payments market is projected to grow by 11.28 percent annually between 2024 and 2028 to reach a market volume of $6.793 billion by 2028, according to Statista outlook.

This rapid expansion underscores the fertile ground for digital payments to flourish.

This isn't just a technological shift; it's a reshaping of our economic landscape. 

By bringing more individuals and businesses into the formal financial system, digital payments foster financial inclusion, enabling access to savings, credit, and insurance. 

This, in turn, can drive significant economic growth. Globally, research by Moody’s suggests that the transition to a digital economy can generate 1-2 percent annual GDP growth, with even a one percent rise in card usage potentially generating an average $67 billion annual increase in goods and services consumption.

A shift in preferences, a surge in growth

Tanzania's payment landscape is undergoing a profound transformation, driven by the rapid adoption of digital technologies. 

A recent Visa-commissioned study, reveals that a remarkable 84 percent of surveyed merchants have adopted digital payments within the last two years.

The driving force behind this change is the recognised potential of digital payments to fuel business growth. 

Indeed, 64 percent of surveyed SMEs view digital payments as a crucial investment, citing tangible benefits such as reduced fraud risk (41 percent), enhanced security (34 percent), and increased convenience for customers (32 percent). 

These advantages translate into real improvements in operational efficiency, cost savings, and customer satisfaction.

This proactive adoption is further amplified by the growth of e-commerce. 

With over half of SMEs having an online presence now accepting digital payments, the thriving digital ecosystem is emerging.

This interconnectedness between online and offline commerce creates a virtuous cycle, driving further digital adoption and expanding market opportunities for businesses of all sizes.

However, for cash-only SMEs, the risks are becoming increasingly apparent.

More than a third report lost sales due to customers' lack of cash, a clear competitive disadvantage in an increasingly digital market - underscoring the urgency for businesses to leverage digital payments to remain competitive and cater to evolving consumer preferences.

Seizing the opportunity

The positive momentum creates a significant opportunity for Tanzania to harness the transformative power of digital payments and accelerate its journey towards a more inclusive and dynamic economy. 

However, to fully unlock this potential, several key challenges must be addressed.

One persistent hurdle is consumer perception. While cash is often preferred for its perceived ease of refunds and wider acceptance, 76 percent of consumers cite specific concerns—such as the security of digital platforms and lack of access to smartphones or reliable internet—as their primary reasons for using cash. 

Addressing these concerns through targeted consumer education, improved digital literacy programmes, and increased access to affordable technology is vital to foster trust and accelerate adoption.

Beyond consumer perceptions, the challenges associated with cash transactions pose significant concerns for businesses. 

An alarming 93 percent of surveyed merchants report issues related to cash handling, with the most pressing being the risk of robbery (77 percent), employee theft (62 percent), and errors in giving change (62 percent).

This represents an opportunity to promote digital payments as a safer option.

At Visa, we are committed to fostering digital payment growth in Tanzania through strategic partnerships and targeted initiatives. 

We collaborate with financial institutions, businesses, and policymakers to develop solutions that enhance security, streamline onboarding, and demonstrate the value of digital acceptance.

This includes investments in innovative technologies like Tap to Phone, empowering businesses of all sizes to accept digital payments, as well as providing educational resources and best practices.

The future of Tanzania’s economy hinges on the success of its SMEs who are the engine of innovation and job creation. Empowering these businesses to thrive digitally is a necessity. 

This requires a collaborative ecosystem—payment providers, financial institutions, businesses, and government stakeholders working together—to foster growth and innovation.

By pooling resources and expertise, we can equip SMEs with the tools and support they need to navigate the complexities of digital transformation, empowering them to embrace digital payments, expand their reach, and fuel economic growth.

Ultimately, the digital transformation is about building a stronger, more resilient, and more inclusive Tanzanian economy.

Chad Pollock is vice president and general manager of Visa East Africa