Tanzania: Africa’s Other Mobile Money Juggernaut
With the rapid spread of digital financial services, many in the wider public are now familiar with mobile money and have some idea of what it is. A quick Google News search will tell you that “mobile money” has become essentially a household term. For the most part, however, mainstream press coverage has focused on Kenya as the global hotbed for innovation and leading success story in the space, as demonstrated by the 1.08 million results for a news search of the term “mobile money Kenya.”
However, a growing number of other countries are now catching up with Kenya, featuring their own innovations and paths to success that deserve broader attention. Perhaps foremost among them is Tanzania, which is hot on the heels of its northern neighbor in terms of uptake and use of digital financial services. The total number of mobile money transactions made in Tanzania (95 million per month) now outnumbers that of Kenya and the gap on total value transacted is steadily closing. Yet a similar Google News search kicks back just 185,000 results for “mobile money Tanzania,” It’s time to correct this imbalance. The Tanzanian market features a number of significant differences that makes it an important alternative model for regulators and practitioners to study and worthy of greater attention by the general public.
Although Kenya and Tanzania are both mobile money success stories, they have followed very different paths to get to this level. A key source of difference can be found in the structure of the telecoms market. Whereas Safaricom sports two thirds of voice users and around 96% of mobile money users in Kenya, the three large Tanzanian MNOs have very even market shares on voice. Vodacom, while the clear leader in Tanzania, has only just over half of mobile money users. While Safaricom’s dominance served Kenyan mobile money customers well in the early days by quickly generating the network effects that help drive the value proposition, after a few years complaints started to crop up and several of its competitors have accused it of anti-competitive behavior by monopolizing agents, rigging pricing and obstructing access to customers as well as of holding sway over the regulators.
The more competitive Tanzanian market seems to have few such controversies but delivers good value for customers and a steady stream of new innovation. For instance, over half of agents in Tanzania work with multiple providers and therefore serve a broad range of customers. The providers even work with aggregators whose very role is to facilitate cash transactions across all of them. This brings greater convenience to customers and makes it easier for them to switch providers if a competitor started offering a better value proposition. The providers don't seem to fear this, however, but rather see it as the spur that drives them to constantly improve their offerings.
It is arguably no coincidence that Tanzania is also the first advanced digital financial services market in the world where providers have voluntarily agreed to interoperate, letting customers with different wallets and on different networks send money to each other. Talks are now under way to do the same for agents and retail merchants. Tanzania also recently became the first country in the world where mobile money providers pay interest on mobile wallets when Tigo Wekeza started passing on the interest earned on the e-money float to its customers, paying out over $10 million in the first two of its quarterly payments; other providers are reportedly following suit. With its CBA-backed M-Pawa savings and credit product, Vodacom Tanzania was the first deployment worldwide to follow on Safaricom’s success with M-Shwari, but in a matter of months Airtel launched its own credit product Timiza. Additionally, Tigo Tanzania won another global first when it launched cross-border remittances to and from Rwanda.
Collectively, these examples are testament to a very dynamic market for digital financial services in Tanzania, with an increasingly interconnected ecosystem of providers competing to offer a range of financial services to a previously almost entirely unbanked population. Though it is early days yet, it is clear that something potentially truly transformative is taking place. So while Kenya is rightly lauded and studied as the global pioneer of mobile money, Tanzania has not only been quietly catching up with its neighbor - with innovation starting to really set the market apart from its peers, Tanzania is blazing its own trail to success.