Digitalization of payments and tracking cash flows are becoming increasingly popular strategies for governments around the world, and Ethiopia is no exception. The government of the second most populous state on the continent is actively promoting a mobile money platform called Telebirr. The platform is operated by state-owned telecommunications giant Ethio Telecom and is capable of processing up to 100 transactions per second (TPS). Further plans are to increase the bandwidth up to 1000 TPS.
In two years since the launch of Telebirr in Ethiopia, there has been significant growth in users and transaction volume. As of March 2023, Telebirr has over 31 million subscribers. The volume of transactions carried out is also impressive. Since the launch of Telebirr, more than 379 billion birrs (about $7 billion) have been transacted.
Naturally, the digitalization of online payments in Ethiopia brings both benefits and challenges. Especially when it comes to government money tracking and the fight for tax revenue.
Benefits of Digital Payments in Ethiopia
- Improved cash flow tracking: This can help prevent money laundering, terrorist financing and other illegal activities.
- Increasing tax revenues: Digital payment systems provide an opportunity to more accurately assess the income of the population and businesses. This allows the government to collect taxes more efficiently and increase tax revenue, which in turn can contribute to the development of the country and the provision of public services.
- Transparency and elimination of corruption: This can help reduce opportunities for corruption and unjust enrichment as all transactions are logged and can be viewed.
Challenges and Prospects of Fintech in Ethiopia
Such a development of fintech has a huge number of critics, both from the opposition and from ordinary people. In addition, there are many technical issues to be solved, as well as to overcome the cultural and educational barrier.
Indeed, at gas stations, in stores, and so on, you can often meet people who solve the problem of the lack of a stable Internet connection, someone forgot the password, and someone did not update the application. Raising awareness, education and training of the population are important success factors.
At the moment, about 60-70% of the population still do not have access to banking services. The liberalization of the banking sector, which the government only committed to in 2020, opens up huge prospects for the growth of the financial technology sector.
Plus, as we all know, healthy competition generally has a positive impact on quality and cost for consumers. Competition in this area is also gaining momentum. Kenyan broadcaster Safaricom is keen to take on the Ethiopian market with its popular M-Pesa mobile payment platform.
On the African continent, in many countries from Egypt to South Africa, there’s a growing demand for the concept of engaged banking. They want digital solutions to create a people-centric, personalized experience for digital finance customers.
Status of Cryptocurrencies in Ethiopia
Along with the rapid development of cashless payments and efforts to further develop fintech, the National Bank of Ethiopia (NBE) does not recognize cryptocurrencies as a means of payment.
Of course, like most states in Africa, the government has not completely banned cryptocurrencies, leaving them in a “gray” area. At the same time, the regulator reminds that cryptocurrencies are often used for money laundering. NBE urges reporting illegal operations to law enforcement agencies.
Thus, we see that significant changes are already underway in the banking sector in Ethiopia, as well as throughout the African continent. And if the elderly population is still without bank accounts and prefers cash, as it has always been before, then young people are already actively switching to digital transactions and this transition is at the very beginning of its journey.
We hear more and more that Africa is beginning to become the most dynamic market. It becomes the most promising in terms of its growth rate. Will online payment in Ethiopia become a symbol of their digital transformation?
