Card Payments in Tanzania: A Missed Opportunity or a Sign of a Deeper Trend?

In Tanzania, There's 12 million cards but 96% of all card transactions happen at ATMs, not at point-of-sale (POS) terminals or for online purchases.

Introduction.

After this heated discussion on Linkedin, I decided to write an article about why cards have such a low usage when it comes to payments in Tanzania.

In Tanzania, a country of over 60 million people, the adoption of payment cards paints an intriguing picture. On the surface, the numbers look promising: more than 12 million cards have been issued. But a closer look reveals a startling fact—only 2 million of these cards are actively in use. To add to the mystery, 96% of all card transactions happen at ATMs, not at point-of-sale (POS) terminals or for online purchases. The source of data used is primarily the central bank annual payments report for full year 2023.

Beyond supermarkets, hotels, and select restaurants or shops in shopping malls, cash remains king. Most other sectors have yet to adopt card payments, with one notable absence: transport. While ongoing efforts to digitize transport payments with platforms like Safiriapp and Otapp are advancing, cards like Mastercard and Visa remain absent, with mobile money taking the lead.

However, one card stands out in this space: the N-Card. Unlike typical scheme cards, the N-Card is locally issued and has made significant strides in sectors like sports, ferries, and rapid bus services. The N-Card has integrated well with mobile money and continues to expand its use cases across Tanzania. Its success suggests that locally issued, non-scheme cards might actually have a chance to thrive in specific segments like transport, fuel, schools, and sports.

This article will explore this phenomenon in three parts: The Challenge, The Reason, and The Potential Solutions for increasing card usage in Tanzania.

Part 1: The Challenge

The numbers paint a picture that can’t be ignored. Out of the 12 million cards issued, the majority remain unused, and cash still dominates most retail, transport, and fuel transactions. Even in sectors where card payments are expected to thrive, like retail, hospitality, and transport, card payments struggle to gain significant traction.

1. Limited Use of Cards at Point of Sale
   While supermarkets, hotels, and a few restaurants accept cards, the vast majority of merchants do not. For everyday transactions like buying groceries at a corner store, dining in a local restaurant, or paying for public transport, cash is king.

   Card transactions are overwhelmingly limited to ATM withdrawals, with only a small portion being used for POS payments. This limits the impact that cards can have in digitizing Tanzania’s economy and providing convenient, secure payment methods for everyday use.

2. Card Payments in Transport: Missing in Action
   In a country where intercity and commuter transport is a lifeline for millions of people, card payments have barely made an impact. Digital ticketing platforms like Safiriapp and Otapp are digitizing public transport, but they rely on mobile money rather than cards. Even in this modern push for digitization, Mastercard and Visa have been absent from the conversation. Mobile money, with its stronghold in the country, continues to lead the charge.

3. Fuel Stations Prefer Fuel Cards or Cash
   Despite being key points for large-volume payments, petrol stations haven’t widely adopted card payments either. Some, like Oryx and Puma, do accept Visa cards, but others—Lake Oil, TOTAL, and Oilcom, among the largest in terms of footprint—do not. Interestingly, petrol stations often push their own fuel cards as the primary alternative to cash. In fact, ATMs are common at petrol stations, but POS terminals for card transactions are rare, contributing to the stagnant growth of card payments.

4. Few Incentives for Merchants
   Merchants across the country cite two major reasons for not accepting card payments:

   • High costs associated with card transactions, including POS terminal fees and processing charges.

   • Lack of incentives to accept cards when cash and mobile money work just fine. For smaller businesses, which operate with tight margins, the high cost of setting up card infrastructure simply isn’t worth it.

Part 2: The Reasons Behind the Low Card Adoption

There are several underlying reasons for the slow adoption of card payments in Tanzania, and they are interwoven with infrastructure, cost, and consumer behavior.

1. Cost to Merchants
   One of the key barriers to card adoption is the perceived high cost of accepting cards for merchants. Setting up a POS system requires upfront investment, and transaction fees are seen as a burden. For merchants operating in the informal economy—which comprises a significant portion of Tanzania’s businesses—mobile money provides a cheaper and more familiar alternative. Without a compelling financial incentive to switch, many businesses stick to cash or mobile money.

2. Lack of Infrastructure and Awareness
   The infrastructure needed to support card payments is either lacking or is concentrated in urban areas like Dar es Salaam and Arusha. Even in these cities, smaller retailers, fuel stations, and transportation providers don’t have POS systems available. Many merchants also lack the awareness or education needed to see the benefits of accepting card payments. Moreover, the dominance of mobile money further decreases the perceived need for card infrastructure.

3. Consumer Behavior
   Tanzanians are comfortable with mobile money—it’s fast, easy, and accepted everywhere from retail stores to transportation hubs. Services like M-Pesa, Tigo Pesa, and Airtel Money dominate the payment landscape, especially for lower-value transactions. As a result, there’s little motivation for consumers to switch to using cards for everyday purchases. Cards are primarily used for cash withdrawals at ATMs, rather than being seen as a convenient tool for transactions.

Part 3: The Potential Solutions and Way Forward

There is a clear opportunity for card payments to grow in Tanzania, but the strategy for increasing adoption must be localized and focused on solving real problems for both consumers and merchants. Here are a few ways forward:

1. Developing Local Card Solutions
   The success of the N-Card shows that locally issued, non-scheme cards have the potential to thrive. By working closely with mobile money platforms and targeting specific sectors like transport, fuel, schools, and sports, locally issued cards could capture market segments where global schemes have struggled. N-Card’s integration with mobile money has proven to be a smart move, allowing consumers to top up and use the card with ease. Expanding this model to other sectors could accelerate the growth of card payments across Tanzania.

2. Reducing Merchant Costs
   Lowering the cost of card transactions is critical for encouraging merchants to adopt card payments. This can be done through:

   • Subsidizing POS terminal costs or providing terminals for free.

   • Reducing transaction fees for merchants, especially in the informal economy.

   • Offering incentives such as cash-back programs or reduced fees for merchants who handle high transaction volumes via cards.

   Card issuers and banks need to create clear value propositions for merchants, highlighting the benefits of card acceptance beyond just providing an alternative to cash.

3. Targeting Specific Use Cases
   Rather than trying to replace mobile money, card issuers should target specific niche markets where cards can offer unique advantages.
   For example, transport systems, including buses and ferries, could benefit from adopting card payments, especially as Tanzania continues to urbanize.
   Similarly, the fuel sector, where petrol stations are already established as high-traffic points, presents a significant opportunity for card growth—especially if card payments are integrated with loyalty or reward programs to drive consumer usage.

4. Educating Consumers and Merchants
   Consumer and merchant education is key to increasing card usage. Card issuers need to invest in campaigns that educate both merchants and consumers about the benefits of using cards over cash or mobile money. By demonstrating the security, convenience, and potential rewards of card payments, they can shift consumer behavior and encourage more merchants to adopt POS systems.

Conclusion:

The card payment ecosystem in Tanzania has a long way to go, but with the right strategies in place, there’s a clear path forward. By focusing on reducing costs, developing local solutions, and targeting specific niche markets, card payments can gain more traction in the country.

The rise of local solutions like the N-Card shows that Tanzania is ready for tailored card products that work within the existing mobile money ecosystem and offer real value to consumers. Whether Mastercard and Visa will follow suit or continue to focus on larger urban markets remains to be seen. In the meantime, local innovation and smart partnerships will likely drive the next wave of card adoption in Tanzania.

So What do you think? Is Tanzania on the verge of a card payment revolution, or will mobile money continue to reign supreme? Let’s keep the conversation going.