Tanzania has eliminated fees on card payments to boost digital transactions, contrasting sharply with Zimbabwe, where a 2% tax on electronic payments hinders adoption. While Tanzania’s digital payment usage is soaring, Zimbabwe is regressing towards cash due to excessive costs associated with electronic transactions. The situation highlights the critical impact of governmental policies on the financial landscape of both nations.
Tanzania has recently taken significant steps to promote digital payments by eliminating fees associated with card transactions, aiming to foster a cash-lite economy. This initiative, spearheaded by the Bank of Tanzania, applies to debit, credit, and prepaid cards at point-of-sale machines, with strict penalties in place for merchant violations. Conversely, Zimbabwe has witnessed a decline in digital transactions since the government instituted a 2% Integrated Money Transfer Tax in 2018 due to its growing appetite for revenue, which has hindered the adoption of electronic payments and led to a return to cash transactions.
The rise in digital payments in Tanzania has been remarkable, with nearly half the population engaging in such platforms, a stark contrast to Zimbabwe’s situation, where the government’s tax policies have reestablished a reliance on cash. Despite the clear advantages of a cash-lite economy, Zimbabweans remain wary of electronic transactions due to the cumulative costs imposed by the government and banks. Should Zimbabwe consider adopting Tanzania’s approach by removing transaction fees, it might prompt a revival in digital adoption; however, the current economic structure and reliance on fee income suggest that substantive changes are unlikely to occur in the near future.
In 2017, Zimbabwe achieved a remarkable milestone where electronic payments constituted 70% of all transactions. However, this momentum declined substantially following the introduction of the 2% Integrated Money Transfer Tax in 2018, which discouraged the use of electronic payments due to increased costs. In contrast, Tanzania has embarked on a journey to enhance its digital payment landscape, abolishing transaction fees to stimulate growth in this sector, which has already seen significant advancements with nearly half the population utilizing digital platforms. This comparison highlights the divergent paths of the two nations regarding digital transaction policies.
The comparison between Tanzania’s recent initiatives to encourage digital payments by removing charges and Zimbabwe’s adverse tax policies illustrates the significant impact government decisions can have on the adoption of electronic transactions. While Tanzania pursues a path towards a cash-lite economy, Zimbabwe’s current reliance on cash transactions indicates a setback in its digital payment progress. Future assessments regarding Zimbabwe’s financial policies will be crucial in determining whether a transition back to electronic payments is feasible.
Original Source: www.techzim.co.zw
