Ethiopia’s digital payment sector, still in its nascent stage, has reached a critical juncture where key industry stakeholders are calling for fundamental policy reforms to foster wider adoption and reduce costs for consumers.
In a recent high-level discussion involving banks, fintech firms, and payment networks, experts underscored that the current payment fee structure poses the biggest barrier to mass merchant acceptance of digital payments. They unanimously urged policymakers to adopt the international standard Merchant Discount Rate (MDR) model, which charges merchants a small fee while removing transaction costs from consumers. This approach is widely recognized globally for encouraging digital payment uptake.
Abay Sime, Director of Digital Customer Admissions at Bank of Abyssinia, emphasized that charging the consumer acts as a disincentive, driving customers away from digital solutions and undermining efforts to increase digital transactions. The existing ecosystem suffers from legacy issues where expensive technology rolled out primarily benefits banks, leading to a drive for high-revenue clients at the expense of broader merchant coverage.
This narrow focus leaves many small and medium-sized enterprises (SMEs) underserved, limiting their access to digital payments. Early infrastructure challenges, delayed transaction settlements, and operational inefficiencies have further impeded successful deployment at scale.
The rise of mobile person-to-person (P2P) money transfers, accelerated by COVID-19 cash withdrawal restrictions, has driven consumers and merchants toward fee-free alternatives, entrenching this informal habit. Tensaye Desalegn, CEO of Santim Pay, described Ethiopia’s mobile payment market as unique, driven largely by remittance flows rather than traditional merchant transactions—making transformation especially complex.
Experts agree that overcoming entrenched P2P usage requires a multidisciplinary approach, involving collaboration across fintech, banking, telecommunications, and regulators, alongside merchant education and introduction of value-added services. The aim is to build a robust, customer-friendly digital payment ecosystem.
The National Bank of Ethiopia (NBE) has been instrumental in laying foundational reforms, including the introduction of Payment System Operator and Payment Instrument Issuer licenses in 2020. However, industry voices call for greater collaboration and ongoing merchant training to address high employee turnover and facilitate platform adoption.
Rediet Tsigeberhan, CEO of ARIFPAY, suggested the next frontier in digital payments should extend beyond basic transactions, integrating ancillary services such as stock management, enterprise resource planning, microcredit, and insurance—elevating merchant value propositions.
Currently, Ethiopia has between 40,000 and 50,000 active point-of-sale (POS) terminals, starkly fewer than Nigeria’s 6 million or Kenya’s substantial banking sector deployment. The high cost of POS devices remains a barrier for SMEs.
In this context, Visa’s partnership with Santim Pay, announced at Visa Connect Ethiopia 2025, aims to address Ethiopia’s structural challenges by deploying over 20,000 new POS terminals within a year. This expansion is seen as a vital step to increase payment acceptance points and enable more inclusive digital economic growth. Market projections expect a fivefold growth in digital payments within the next two to three years fueled by regulatory support and enhanced competition.
