A profound yet ongoing digital evolution is currently unfolding across Tanzania, fundamentally reshaping the mechanisms by which its citizens engage in sending and receiving monetary value.

Spearheading this significant transformation is the Tanzania Instant Payments System (TIPS) — a cutting-edge, interoperable payments infrastructure meticulously designed to streamline the high volume of low-value, real-time retail transactions that occur daily throughout the nation.

Inaugurated in the year 2020 by the esteemed Bank of Tanzania (BOT), with crucial support and resources provided by the Financial Sector Deepening Trust Tanzania (FSDT) and the globally recognized Bill and Melinda Gates Foundation, TIPS has been widely recognized as a pivotal and groundbreaking project directly addressing long-entrenched obstacles that have historically hindered comprehensive financial inclusion within the country.

Reflecting on the significant impact and far-reaching consequences of TIPS, as detailed in the recently published and insightful case study titled “Building an Inclusive Payments Ecosystem in Tanzania,” the esteemed Governor of the Bank of Tanzania (BoT), Emmanuel Tutuba, emphatically stated that this sophisticated platform holds a central and indispensable role in the nation’s ambitious vision for a fully realized digital economy.

“TIPS transcends the mere definition of a payments system; it serves as the very national digital backbone upon which inclusive finance is being constructed and strengthened. By facilitating immediate, low-cost transactional capabilities between diverse financial entities, including traditional banks, burgeoning mobile money operators, and a variety of other payment service providers, TIPS actively empowers millions of Tanzanian individuals to meaningfully participate in the burgeoning digital economy, irrespective of their geographical location within the country or the extent of their financial resources,” Governor Tutuba eloquently explained.

He further underscored the unwavering commitment of the BOT to actively cultivate a cash-lite economy, emphasizing that this strategic objective extends far beyond the realm of conventional financial services, providing crucial support for broader national economic growth and the formalization of various economic activities.

“Through the strategic deployment and widespread adoption of TIPS, we are directly confronting and actively mitigating the historically high costs associated with digital payment processes and systematically dismantling the existing barriers that have traditionally segmented various financial institutions. This crucial step is absolutely essential for fostering healthy competition within the financial sector, stimulating innovation in financial product offerings, and ultimately contributing to the tangible improvement of the daily livelihoods of all Tanzanian citizens,” he further elaborated.

Despite Tanzania’s acknowledged leadership and significant penetration in the realm of mobile money — boasting an impressive figure of over 63 million active mobile wallets by the conclusion of 2024 — the overall financial ecosystem has historically exhibited fragmentation. 

Elevated transaction costs imposed on users, limitations in the seamless interoperability between different platforms, and a persistent cultural preference for conducting transactions using physical cash have collectively impeded deeper and more widespread financial inclusion, particularly affecting vulnerable segments of the population such as women, younger individuals, and small-scale business owners.

Recognizing these critical challenges, the BOT meticulously designed TIPS with the express purpose of directly addressing these limitations, establishing a shared and universally accessible utility that enables seamless, real-time payment processing across all duly licensed Payment Service Providers (PSPs) operating within the Tanzanian financial landscape.

In a strategic departure from the approach adopted by many other nations that often procure off-the-shelf foreign technological solutions, Tanzania made a deliberate and informed decision to develop the TIPS platform entirely in-house. 

This ambitious undertaking leveraged the extensive technical expertise and deep institutional knowledge accumulated by the BOT through its prior successful management of the Real Time Gross Settlement (RTGS) system.

A fundamental driver underpinning the remarkable success and rapid adoption of TIPS is its strategically implemented semi-mandatory participation model. This crucial framework mandates that all providers of digital transaction accounts operating within Tanzania must route all inter-PSP transactions through the unified TIPS infrastructure. 

This decisive measure effectively eliminated the cumbersome and often protracted need for numerous bilateral agreements between individual institutions, thereby fostering genuine and seamless interoperability and cultivating a truly level playing field for all participating entities.

By the close of the year 2024, the TIPS platform had achieved a remarkable milestone, processing an astounding volume of over 490 million individual transactions, representing a total value exceeding 15.7trn/- (equivalent to approximately US$6.3 billion).

These impressive statistical figures serve as a compelling testament to the growing levels of public trust and confidence in the security and efficiency of digital payment methods, the tangible reduction in transaction-related costs experienced by consumers across the nation, and the significant operational efficiencies realized by businesses of all sizes.

Furthermore, TIPS is actively enabling the emergence and proliferation of innovative new financial services, including accessible micro-lending facilities, convenient savings mechanisms, and streamlined government payment disbursements. 

These developments are closely aligned with the overarching objectives articulated within Tanzania’s National Financial Inclusion Framework (NFIF II) and the forward-looking Tanzania Digital Economy Strategic Framework (spanning the years 2024 to 2034).

“The demonstrable success of the TIPS initiative stands as a powerful testament to Tanzania’s visionary leadership and proactive approach in the realm of digital financial services. It unequivocally demonstrates the transformative potential that can be realized when essential public infrastructure is thoughtfully designed with the core principle of inclusivity firmly embedded at its foundation,” affirmed Mwanahiba Mzee, the esteemed Chief Executive Officer of FSDT.

Looking towards the future, the BOT has articulated its strategic aims, which include deepening the rate of merchant adoption of digital payment solutions, further strengthening the robustness of cybersecurity measures protecting the digital financial ecosystem, and proactively exploring opportunities for cross-border integrations with neighboring regional payment systems to facilitate seamless international transactions.

Despite the significant progress achieved, the Governor remains resolutely optimistic about the future trajectory:

“TIPS has unequivocally demonstrated that through the strategic implementation of the appropriate infrastructure, well-defined policy frameworks, and effective collaborative partnerships, we possess the capacity to construct a comprehensive financial ecosystem that genuinely serves the needs of all Tanzanian citizens. This remains our unwavering commitment, and we will continue to vigorously pursue innovation in the financial technology space to foster an inclusive and thriving digital economy for the entire nation,” Governor Tutuba emphatically affirmed.

Tanzania has recently been a witness to a truly remarkable and dynamic transformation within its financial sector, significantly propelled by the rapid and widespread adoption of innovative technologies in the crucial processes of developing and efficiently distributing a diverse range of financial services and products to its populace.

Notwithstanding these significant advancements and the increasing digitization of financial interactions, the level of access to and consistent usage of formal financial services among the adult population across Tanzania remains unevenly distributed, with certain geographical regions and demographic segments still facing considerable challenges.

According to the insightful findings of the Fin-Scope Survey conducted in 2023, the overall level of access to and utilization of formal financial services in Tanzania experienced a notable increase, rising to an impressive 89 percent for access and 76 percent for usage in 2023, compared to the corresponding figures of 86 percent for access and 65 percent for usage recorded in 2017.