Digital payments in the economy make better, more resources allocation

27Sep 2016
Daniel Semberya
The Guardian
Digital payments in the economy make better, more resources allocation

policymakers and businesses in other countries can learn as they go about digitising Person-to-Government (P2G) and Business-to-Government (B2G) payments in Tanzania, focusing on the period from 2012 to 2016.

Head of Research and development for the Better Than Cash Alliance, Camilo Tellez.

Speaking to The Guardian in an exclusive interview in Dar es Salaam over the weekend, Head of Research and development for the Better Than Cash Alliance, Camilo Tellez said that the diversity of channels, products and providers was good for the economy and for better competition.

He said although Tanzania was globally leading in digital financial services; however, there are still things that should be done, especially beyond person to government business segment, on the business to business segment and on the government to person business segment.

Tellez further revealed that lack of formalisation was costing the Tanzanian government around USD180m a year. Again, he said the inefficiencies in the economy were also costing the government a tune of USD300m annually.

However, he said compared to other East African countries, Tanzania is a much more interesting market because it has more competitive environment.
It has more minerals, public services competing; which makes ecosystem much richer. It has more competition and more products.

“There is much close that need to be digitalised. We expect digitalisation to have revenue potential of the USD500 million per year. So, we think that there is a massive opportunity for Tanzania to continue to grow by extending the digital payments among the other segments.”
According to Tellez digital payments include mobile payments, cards or any other payment that is basically electronic.

Commenting on The Better Than Cash Alliance, he says it is a global partnership of governments, companies, and international organisations that accelerate the transition from cash to digital payments in order to reduce poverty and drive inclusive growth. The United Nations Capital Development Fund serves as the secretariat.

Why the Alliance?
He says the Alliance was set up by different organisations including the Bill & Melinda Gates Foundation, City Bank among others. By now it have over 50 members over 22 countries that can be found in East Asia, America and Africa.

He said their main advocacy is on promoting the transition from cash to digital payments in a way that improves lives and expands responsible digital financial services.

The Alliance also conducts research, share the experiences of their members and develop tools to help the transition to digital payments.

“We help our members as they work towards the goal of building economies where people, governments, and businesses can make and receive digital payments.”

For the Alliance, cash is expensive both for security problems for the government, its users and businesses.

In addition to that he said cash allows for no transparency in operations digital. When you have digital transactions in businesses and at the government level it opens for black transparency and corruption in the operation system.

It is easy for people to pack up money when there is no accountability. In addition to that Tellez says there the angle of financial inclusion when people use cash and managing cash for people who are at lower level it is expensive because they have to pay more to keep up their money.

Even if they put under their mattresses it cannot be safe; does not give interest and can be stolen; thus managing that finances can be more complicated.

There is a large amount of evidence supporting the benefits of transitioning from cash to digital payments, but implementation is often difficult for governments to do on their own.

This is in part because successfully creating an economy where digital payments are widely available requires a collaborative approach between many players in the public and private sectors.

He says having digital payments in the economy makes better and more resources allocation, and pointing them out as being one of the factors that have made Tanzania to become a global leader in digital transaction services.

However, he said that if you look globally women were a group that was missing in the economic participation.

He says although women make 50 per cent of the global force, yet they are still financially excluded in many countries. “We see digital payments as avenue to allow basically for women to enter the workforce and be able to act in the financial services.

He further reveals that the Alliance through its members have a serious work stream that focus on, but specifically they look at an equal system approach…it is really a combination of players.

“Tanzania is a global leader in digital payment-we admire all the works that have been dome here in Tanzania. It is the first country where mobile money has been achieved. From the international perspective we look Tanzania as an example to learn,” he explained.

He further noted that when you look at the number, Tanzania has the highest rate of adoption of mobile money in the world. And because of that, access to digital payments helps the country achieve its target for financial inclusion come 2018.

In Tanzania, the digitisation of port business-to-government payments trimmed US $175 million in annual revenue leakages and has the potential to boost GDP by up to US $1.8 billion.

The Better Than Cash Alliance research studied 25 countries, including India, Nigeria, Tanzania, Ghana, Brazil, and Mexico, among others.

Other findings show that digital payments and financial services are part of the vital infrastructure of a modern economy, enabling individuals, businesses, and governments to transact cheaply and efficiently.

For a range of companies, including banks, telecommunications companies, payments providers, financial-technology start-ups, retailers, and others, the potential business opportunity is large.

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