As Ethiopia embarks on the final phase of its 2020 digital transformation strategy aimed at digitizing the economy by 2025, the country has made giant strides in digital payments, significantly altering the way people buy, pay, and get paid. With internet users surging to over 41 million[1]—a significant increase from 17 million in 2018 – the future of payments is undeniably digital. This growth is further amplified by increasing digital adoption nationwide, creating fertile ground for digital payments to flourish.
This isn’t just a technological shift; it’s a reshaping of our economic landscape. By bringing more individuals and businesses into the formal financial system, digital payments foster financial inclusion, enabling access to savings, credit, and insurance. This, in turn, can drive significant economic growth. Globally, research[2] suggests that the transition to a digital economy can generate 1-2% annual GDP growth, with even a 1% rise in card usage potentially generating an average $67 billion annual increase in goods and services consumption.
A Shift in Preferences, a Surge in Growth
Ethiopia’s journey towards a digital economy is gaining significant momentum, with a clear shift in preferences towards digital payments. A recent Visa-commissioned study, “Value of Acceptance, Understanding the Digital Payment Landscape in Ethiopia,” underscores this trend, revealing that a remarkable 80% of surveyed merchants have embraced digital payments within the last two years. The growth of e-commerce is further contributing to this trend, with over half of SMEs with an online presence now accepting digital payments.
A driving force behind this transformation is the tangible benefits experienced by early adopters; an impressive 92% of SMEs utilizing financial technology reporting satisfaction, appreciating the institutional support and quicker payment processing that digital solutions provide. This positive feedback loop reinforces the value proposition of digital payments and encourages further investment. In particular, most merchants cite increased customer convenience, reduced fraud risk, and improved efficiency as key advantages – benefits that translate into real improvements in operational efficiency, cost savings, and enhanced customer satisfaction. In addition, 64% of digitally enabled SMEs plan to expand their digital payment capabilities, signaling a strong commitment to a digital future.
Overcoming Challenges, Unlocking Potential:
Despite the clear advantages of digital payments and their growing adoption, several challenges need to be addressed to fully unlock Ethiopia’s digital potential.
In particular, a significant 65% of cash-only SMEs cite the risk of robbery as a major concern, highlighting the vulnerability and insecurity inherent in cash-based operations. These risks not only represent financial vulnerabilities but also operational inefficiencies that can significantly hinder growth and profitability. The costs associated with managing cash, including security measures, and time spent on manual counting and reconciliation, can place a substantial burden on SMEs. Furthermore, the complexities of cash accounting processes can create additional administrative burdens and increase the risk of errors, limiting a business’s ability to adapt and thrive in an increasingly digital marketplace.
Visa: A Partner in the Digital Transformation
Visa is committed to fostering digital payment growth in Ethiopia through strategic partnerships and targeted initiatives. We collaborate with financial institutions, businesses, and policymakers to develop solutions that enhance security, streamline onboarding, and demonstrate the value of digital acceptance. This includes investments in innovative technologies like Tap to Phone, empowering businesses of all sizes to accept digital payments, as well as providing educational resources and best practices.
Furthermore, Visa offers data-driven insights into payment trends and market analysis, enabling stakeholders to make informed decisions and develop tailored strategies. Our expertise includes ecosystem maturity assessments, identifying areas for optimization and facilitating broader digital payment acceptance. Through tailored programs and innovations like the Visa Acceptance Platform, alongside other forms of targeted support tailored for local needs, we are expanding digital payment access for all merchants.
A Collaborative Future
The future of Ethiopia’s economy hinges on the success of its SMEs, the engines of innovation and job creation. Empowering these businesses to thrive digitally is a necessity. This requires a collaborative ecosystem—payment providers, financial institutions, businesses, and government stakeholders working together—to foster growth and innovation.
By pooling resources and expertise, we can equip SMEs with the tools and support they need to navigate the complexities of digital transformation, empowering them to embrace digital payments, expand their reach, and fuel economic growth. Ultimately, the digital transformation is about building a stronger, more resilient, and more inclusive Ethiopia’s economy. By working together, we can ensure our SMEs lead the charge toward a brighter future.
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[1] https://english.news.cn/20240328/36c392b8d9744838b85c68358a4272bf/c.html
[2] Moody’s, 2021.
