Tanzania’s economy shifts rapidly towards cashless transactions

Mobile money remains the backbone of Tanzania’s digital economy. Active subscriptions rose 17.46 per cent to 63.21 million in 2024, up from 51.72 million the previous year.

Transaction volumes reached 6.41 billion, compared with 5.06 billion in 2023, while transaction value surged 28.54 per cent to Sh198.85 trillion, up from Sh154.7 trillion.

The BoT attributed the growth to an expanded agent network, which reached 1.48 million nationwide, up nearly 19 per cent from 2023.

According to the central bank, the increase in mobile money activity was fuelled by economic growth, widespread agent expansion, service diversification, and a supportive regulatory environment.

An extensive agent network has made transactions seamless, even in remote areas.

“The mobile money sector has evolved beyond simple transfers, integrating international remittances and merchant payments, attracting millions of users. Supportive regulatory policies have enhanced trust, further driving adoption,” the report stated.

The boom in mobile payments is closely linked to rising smartphone ownership.

The Tanzania Communications Regulatory Authority reported 23.42 million smartphone users in 2024, an 18 per cent increase from 19.84 million in 2023.

AzamPay’s Chief Commercial Officer, Mr Ibrahim Malando, underlined this shift.

“The demand for digital payment solutions is very high across the country. The biggest challenge has been the high cost of transactions,” he said.

Mr Malando added: “That is why we, at Azam, introduced AzamPay. Through our AzamPesa service, we offer free transactions for sending money between accounts. Customers can also pay for electricity tokens or government services at no extra charge, and transactions between mobile phones and bank accounts are completely free.”

He said reducing transaction costs provides a strong incentive for citizens to move from cash to digital payments.

Digital payments are not only powered by mobile phones. Traditional POS machines also recorded significant growth. In 2024, Tanzania had 9,655 POS terminals, up from 8,652 in 2023.

The number of transactions processed through POS machines rose by 26.42 per cent for local payments and 46.13 per cent for foreign transactions.

In value terms, local POS payments surged 38.53 per cent to Sh3.29 trillion, while foreign transactions soared 54.89 per cent to $1.48 trillion.

POS machines remain essential for businesses, enabling acceptance of debit and credit cards, mobile wallets, and contactless payments, while reducing risks associated with handling large sums of cash.

While mobile money dominates in scale, internet banking is carving a niche among corporate clients, salaried workers, and urban professionals.

Registered internet banking users rose to 332,537 in 2024, up 20.42 per cent from 276,145 in 2023.

Transaction volumes increased to 21.5 million worth Sh213.96 billion, compared with 17.7 million worth Sh157.81 billion the previous year.

Merchant digital payments are perhaps the most striking trend.

In 2024, the number of merchants accepting digital payments doubled to 1.32 million, from 657,346 in 2023.

Electronic Money Issuers (EMIs), primarily mobile network operators, accounted for nearly 90 per cent of these merchants, while banks facilitated just 0.8 per cent.

The value of merchant transactions rose 50.24 per cent to Sh26.91 trillion.

Growth has been supported by interoperability platforms such as the Tanzania Instant Payment System (TIPS), mobile payment codes like Lipa Namba, and government waivers of certain levies, making digital payments more affordable.

Decline of cash and checques

The shift to digital is also reflected in declining use of traditional instruments.

Although the number of ATMs rose slightly to 2,174 in 2024, transaction volumes fell by 5.63 per cent to 70.8 million, while the value dipped 0.77 per cent to Sh13.78 trillion.

Cheque usage also declined sharply. Only 418,388 cheques were processed in 2024, down nearly 14 per cent from the previous year, with a total value of Sh1.75 trillion, down 7.15 per cent.

The BoT said this decline largely results from the adoption of alternative digital payment methods.

Opportunities and Risks

The shift to digital payments carries significant economic implications. Reducing reliance on cash lowers transaction costs, improves tax compliance, enhances financial inclusion, and supports the growth of e-commerce and digital entrepreneurship.

Financial analyst Christopher Makombe said: “Increased use of digital payment systems has many advantages for the economy. It boosts growth by encouraging e-commerce and digital business.”

However, experts caution that the rapid digital transformation carries risks. Greater reliance on digital platforms increases vulnerability to cybersecurity threats and fraud.

iTrust Finance Limited chief executive, Mr Faiz Arab, highlighted security concerns as a key barrier to adoption.

“Many users remain concerned about the safety of their funds and personal data. To address this, major industry players, including ourselves, focus on stringent security measures, customer education, and transparent communication to build trust and confidence,” he said.

He added that digital literacy, accessibility, and cultural reliance on cash also slow adoption.

“Changing such ingrained habits takes time. Demonstrating the benefits of digital payments, such as convenience and speed, through targeted campaigns and incentives can encourage a shift in behaviour,” Mr Arab said.

On the regulatory front, he noted that Tanzania has made commendable progress in fostering a digital payments ecosystem through policies and frameworks, including integration of systems such as TIPS, which enable interoperability and instant transactions.