Exploring Tanzania’s Digital Payments Landscape: Opportunities and Considerations

Venture for Africa

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Venture for Africa

6 min readSep 4, 2023

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In the fast-paced world of African digital payments, Tanzania is a compelling case study due to its potential for innovation and expansion. Aly Slater, an alumnus of the VFA Fintech Product Management Bootcamp, together with Schon Bediako, both examine Tanzania’s digital payments landscape, shedding light on mobile money’s evolution compared to its East African neighbour, Kenya.

They provide a comparative analysis of M-PESA’s trajectories in both countries, emphasizing the importance of contextualization in shaping the success of mobile money services.

Finally, the potential growth prospects for Tanzania’s fintech sector are discussed, including opportunities for rural financial inclusion and government support.

Understanding Tanzania’s Digital Payments Landscape

In today’s digital age, the world of finance is undergoing a transformative shift, and at the forefront of this evolution are digital payments.

From the convenience of online shopping and mobile wallets to the borderless nature of cryptocurrencies, the landscape of digital payments encompasses a multitude of categories that are changing the way we exchange value. Whether it’s sending money to a friend through a mobile app, making contactless payments at your favourite local cafe, or investing in the future with cryptocurrencies, the world of digital payments offers a diverse range of options to suit various needs and preferences.

Nowhere is this digital payments revolution more evident than in Tanzania, where mobile money services have surged to prominence. Major players like M-Pesa (Vodacom), Tigo Pesa (Tigo), Airtel Money (Airtel), and Halopesa (Halotel) have taken centre stage, revolutionizing the way financial transactions unfold in this East African nation.

Mobile Money’s Success Story in Tanzania

As of 2021, there were over 33.15 million registered mobile money accounts, and on average, individuals and organizations transacted the equivalent of over 50% of Tanzania’s GDP each month.

Tanzania’s experience in the mobile money sector reflects its early adoption following Kenya’s initiation in 2007/8. Collaborative efforts between private and public stakeholders, along with market-led innovation, a supportive regulatory environment, robust market data, high demand for branchless banking, and potent service provision through agent networks, have fostered its success so far.

Notably, Tanzania has experienced significant growth in digital financial services since 2008, contributing a remarkable one-third of East Africa’s mobile money accounts in 2015. As of 2021, there were over 33.15 million registered mobile money accounts, and on average, individuals and organizations transacted the equivalent of over 50% of Tanzania’s GDP each month.

The Tanzanian government played a pivotal role by adopting a “test and learn” approach after M-Pesa’s launch in 2007. Regulatory innovations by the Bank of Tanzania, such as tiered Know-Your-Customer (KYC) frameworks and prioritizing interoperability, bolstered the sector. Consequently, mobile money is propelling financial access.

Evolution of M-PESA in Kenya and Tanzania: A Comparative Analysis

Next up, we take a closer look at the success of M-PESA in Tanzania, examining key factors such as pricing evolution, leveraging SIM registration, expanding the product portfolio, marketing shift, and agent network evolution.

Pricing Evolution:

When M-PESA launched in Kenya and Tanzania, it implemented variable fees for money transfers. However, in Tanzania, Vodacom introduced a fixed fee of 200 Tanzanian Shillings in August 2009. The primary objective of this change was twofold: to incentivize transfers within the M-PESA user community and to counteract revenue losses from direct deposits. This adjustment streamlined the fee structure while encouraging greater use of the service in the region.

Leveraging SIM Registration:

In Tanzania, a crucial opportunity arose for M-PESA when SIM card registration became mandatory. Vodacom seized this opportunity by aligning Know Your Customer (KYC) information with M-PESA registration data during SIM card activation. This strategic alignment significantly streamlined the registration process, effectively positioning M-PESA as the central repository for user data. Consequently, onboarding new users became more seamless and efficient.

Expanding Product Portfolio:

M-PESA expanded its services in both Kenya and Tanzania beyond just money transfers, to include bill payments for essential services like electricity, water, and television. This transformation positioned M-PESA as a comprehensive financial solution. By diversifying its offerings, M-PESA enhanced its value proposition and utility, appealing to a wider spectrum of users.

Marketing Shift:

In Kenya, Safaricom changed its marketing approach from brand-centric campaigns to educational initiatives that focused on specific use cases. Meanwhile, Vodacom in Tanzania adopted an educational strategy from the beginning, emphasizing practical applications. Both approaches aimed to make M-PESA’s value proposition more accessible to potential users, but they differed in their timing and focus.

Agent Network Evolution:

Vodacom has introduced an innovative “aggregator model” for its agent network in Tanzania, which effectively addresses distribution challenges. This model involves leveraging aggregators to facilitate rapid scaling and enhance the business proposition for agents. In contrast, Safaricom in Kenya has established an extensive agent network by enlisting existing airtime retailers, resulting in swift adoption and wide accessibility.

Diving Deeper: The Underlying Differences

Before the introduction of M-Pesa, Tanzania faced significantly higher levels of financial services exclusion compared to Kenya. This challenge, combined with lower financial literacy rates, presented unique obstacles to mobile money adoption in Tanzania.

Three key areas of distinction emerged:

Financial Literacy and Service Utilization: Kenya’s stronger financial literacy and greater utilization of formal and semi-formal financial services created a more conducive environment for mobile money adoption.
Remittance Corridor: Kenya’s well-established “urban-rural” remittance corridor provided a natural use case for M-PESA, enhancing its adoption intuitiveness.
Banking System and Infrastructure: Kenya’s advanced banking system and robust infrastructure facilitated smoother operations for M-PESA.

Despite these disparities, Tanzania’s fintech growth prospects remain promising, with potential opportunities in key areas:

Education for Adoption: Raising awareness about financial services and the benefits of mobile money could drive higher adoption rates, gradually reducing barriers stemming from financial exclusion and literacy gaps.
Embracing Remittance Streams: Strengthening ties with existing remittance channels offers growth potential. Integrating mobile money services seamlessly into remittance flows allows providers to tap into established financial streams.
Rural Financial Inclusion: Given Tanzania’s significant rural population, expanding financial access in these areas can fuel growth. Mobile money’s role in bridging urban-rural financial disparities could lead to more comprehensive inclusion.
Government Support and Innovation: The Tanzanian government’s endorsement of fintech and mobile money could foster collaboration and innovation, creating an environment conducive to fintech growth.

Closing Thoughts:

Comparing M-PESA’s trajectories in Kenya and Tanzania highlights the importance of tailoring strategies to local contexts and unique market nuances.

Although both countries have benefited from this transformative financial tool, adoption-driving strategies were carefully adapted to address specific challenges and opportunities. This underscores the critical role of contextualization in shaping the success of mobile money services.

The hurdles faced by mobile money in Tanzania’s earlier landscape paved the way for learning and adaptation. Rather than impeding growth, these challenges established a framework for a comprehensive and strategic approach to expanding financial services while embracing the fintech trend.

As Tanzania progresses along this transformative trajectory, the fusion of education, partnerships, and innovation holds promise for the future of mobile money and digital financial services.

About the Authors

Aly Slater serves as the Chief of Staff at FutureFit AI and is an alumnus of the second cohort of the VFA Fintech PM Bootcamp. Schon Bediako works as a Marketing Associate at Venture for Africa.

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