Cash, Cards, or Clicks? Navigating Tanzania's Payment Maze in 2025

Tanzania's way of paying for things is buzzing with change! While the familiar feel of cash is still very much present, digital payments, especially through mobile phones, are rapidly transforming how people send, spend, and save money. It's a fascinating mix: cutting-edge mobile technology thriving alongside the age-old tradition of using cash.  

Imagine this: over three-quarters of Tanzanian adults now have access to formal financial services, a huge leap mainly thanks to mobile money reaching 72% of the population! Yet, walk into many shops, and cash is still the preferred way to pay for most people. Bank accounts? Only about 22% of adults have one. And those plastic cards? While millions exist, they're mostly used to pull cash out of ATMs, not swipe at the till. 

So, what gives? Why the digital surge alongside stubborn cash habits? Let's break down the main ways people pay in Tanzania – Cash, Point of Sale (POS) systems (think cards and agent banking), and Mobile options (like USSD codes and smartphone apps) – to understand their pros, cons, and where things might be heading.

1. The Enduring King: Cash (Tanzanian Shilling - TZS)

Cash is simple. It's the physical banknotes and coins issued solely by the Bank of Tanzania (BoT). You hand it over, you get something back – transaction complete.

• The Upside:
  • Universally Accepted: Everyone takes cash, everywhere. No special device or account needed. 
  • Instant: The exchange is immediate. 
  • Tangible: You can see and feel your money, giving a sense of control.
  • No Tech Required: Works even when the power's out or there's no network signal.
• The Downside:
  • Security Risks: Carrying cash can make you a target for theft. Counterfeiting is also a concern, though the BoT works hard to prevent it. 
  • Handling Hassles (Especially for Businesses): Storing, transporting, insuring, and counting cash takes time and money. These hidden costs can eat up a surprising chunk of a business's turnover – potentially 7-20% according to one study.
  • No Digital Trail: Cash transactions are hard to track, which can be an issue for budgeting or business record-keeping and makes them more susceptible to fraud or leakage.
• The Reality: Despite the digital boom, cash isn't going away soon. It's essential for daily life, especially in the informal sector and rural areas where digital infrastructure might be weaker. In fact, the amount of cash circulating has actually been increasing. For many, its simplicity and reliability are hard to beat. 

2. At the Counter: Point of Sale (POS) Payments

POS refers to payments made right there at the merchant's location, usually involving a specific device.

• A) Card Payments (Debit, Credit, Prepaid) Think swiping, dipping (the chip), or tapping your bank card (like Visa, Mastercard, or the local N-Card) at a terminal.  
  • How it Works: You present your card, maybe enter a PIN. The terminal talks to the merchant's bank, which talks to your bank via the card network (like VisaNet) to get approval. Funds are settled between banks later. Virtual cards linked to mobile wallets are also emerging. 
  • The Upside: Convenient for cardholders (no need for exact change), provides a transaction record, can be very quick (especially tap-to-pay).
  • The Downside:
    • Limited Acceptance: Finding places that accept cards can be tough outside major cities, hotels, and large supermarkets. Only 84% of SMEs report accepting digital payments, and many still lack infrastructure.  
    • Needs Infrastructure: You need a bank account and card; the merchant needs a POS terminal (which costs money to buy – anywhere from ~$400 to over $1300, though rental or bank-provided options might exist), power, and network connectivity. 
    • Merchant Costs (MDR): Merchants pay a fee for every card transaction, called the Merchant Discount Rate (MDR). This percentage fee covers costs for the banks and card networks. This cost is a major reason why many smaller businesses don't accept cards. 
    • Surcharges Banned: The BoT says merchants cannot charge customers extra for using a card, but you might still encounter it sometimes.  
  • The Reality: Card use for payments is growing but remains low. Most card activity is still just withdrawing cash from ATMs. Innovations like QR codes linked to cards (QR Pay-by-Link) aim to make acceptance easier for merchants without needing a physical terminal.  
• B) Agent Banking (Wakala) These are the local shops or kiosks acting as mini-bank branches, approved by the BoT. 
  • How it Works: You visit a Wakala agent to deposit cash into your bank account, withdraw cash (using your card or phone), pay bills, or check your balance. The agent uses a special POS device or phone app linked to the bank. You'll likely need ID and maybe your PIN. 
  • The Upside:
    • Massive Reach: Agents dramatically extend banking services, especially into rural areas where branches are scarce. Tanzania has over 1.47 million mobile money agents alone, many doubling as bank agents. 
    • Convenience: Provides easy access points for basic banking needs and acts as a crucial bridge between cash and digital accounts. 
  • The Downside:
    • Liquidity Issues: The biggest headache! Agents need enough physical cash for withdrawals and enough electronic 'float' in their account for deposits. If they run out of either, your transaction fails. This can be frustratingly common.  
    • Limited Services: Agents mainly handle basic transactions, not complex banking needs. 
    • Requires Connectivity: The agent's device needs a reliable network connection. 
  • The Reality: Wakala networks are the backbone of financial access for many Tanzanians. They are vital for turning digital money into cash and vice-versa. Improving agent liquidity management is key to making this channel more reliable. 

3. The Mobile Revolution: Payments on Your Phone

This is where Tanzania has seen explosive growth, driven by Mobile Network Operators (MNOs) like Vodacom (M-Pesa), Tigo (Tigo Pesa/Mixx by Yas), Airtel (Airtel Money), and Halotel. 

• A) USSD (The 150 Method) This is the classic way to use mobile money, involving dialing shortcodes like *150*00# [47-62].
  • How it Works: You dial the code, navigate text-based menus by entering numbers, input the recipient's number or bill details, amount, and your PIN to confirm [47, 48, 54, 61-66].
  • The Upside:
    • Works on Any Phone: Doesn't matter if you have a basic 'kabambe' or the latest smartphone. 
    • No Internet Needed: Uses the basic mobile network (GSM), not mobile data. 
    • Reliable: Works even where data signals are weak or non-existent. 
    • Familiar: Many users are very comfortable with this method. 
  • The Downside:
    • Clunky Interface: Navigating text menus can be slow and tedious.
    • Error-Prone: Easy to mistype numbers.
    • Basic: Limited functionality compared to apps.
  • The Reality: USSD was the launchpad for mobile money's success and remains incredibly important, especially in rural areas. Even many smartphone users stick with it for simple transactions, possibly due to habit, avoiding data costs, or finding it simpler for basic tasks. 
• B) App-Based Payments (Standard & QR Code) Using dedicated apps from MNOs or banks on smartphones. 
  • How it Works (Standard): Download the app, log in (PIN or fingerprint/face ID), use the graphical interface to send money, pay bills (like LUKU electricity, DAWASCO water, or government payments [60, 68, 70-77]), top up airtime, transfer to banks, view history, etc.. 
  • How it Works (QR Code): Designed for paying merchants ('Lipa Kwa Simu'). The merchant shows a QR code (printed or on a screen). You scan it using your mobile money or banking app, enter the amount, and confirm with your PIN/biometric. Tanzania has a national standard, TANQR, so any compliant app should be able to pay any TANQR code. 
  • The Upside:
    • User-Friendly: Apps generally offer a smoother, visual experience. 
    • More Features: Access transaction history, statements, linked savings/loans easily. 
    • QR Convenience: Scanning a code can be faster and less error-prone than typing numbers for merchant payments. 
  • The Downside:
    • Requires a Smartphone: Limits reach, as feature phones are still more common. 
    • Needs Internet: Relies on mobile data or Wi-Fi, which costs money and isn't always available or reliable, especially outside cities. 
    • Low Adoption (So Far): Despite potential, usage of apps and especially QR codes for payments remains relatively low. People are still used to USSD and cash. 
    • Complexity: Downloading, logging in, navigating menus, or scanning might feel like more steps than USSD for some users. 
  • The Reality: Apps and QR codes hold promise for a better digital payment experience. The government's push for the national TANQR standard is a big step towards making QR payments seamless and interoperable.But overcoming user habits and the infrastructure challenges (smartphone access, data cost/reliability) is key. 

4. Putting It All Together: How the Channels Stack Up

5. The Big Picture: Where Tanzania Stands and Where It's Going

Tanzania's payment scene is a story of rapid digital adoption, led by mobile money, significantly boosting financial inclusion [3-7, 15, 83, 45, 95-97]. However, cash remains the go-to for everyday spending, and card payments haven't really taken off for purchases. 

The Bank of Tanzania is actively shaping this landscape. They're pushing for systems where different banks and mobile money providers can easily talk to each other (like TIPS), promoting the national TANQR standard for easy QR payments, and regulating costs by capping some bank transfer fees and banning extra charges on card payments. Protecting consumers is also a major focus.  

Key challenges remain:

• Closing the gap in digital access and usage between urban and rural areas. 
• Convincing people and businesses to choose digital over cash more often. 
• Making digital transactions, especially via mobile money, more affordable by managing fees and levies.
• Improving the reliability of agent banking by tackling liquidity issues. 
• Encouraging more people to use smartphone apps and QR codes. 

Looking Ahead:

The trend towards digital payments will undoubtedly continue. Expect to see more efforts focused on making different systems work together smoothly (interoperability), bringing down costs, and making digital options even more convenient and secure. The goal isn't just about getting people access to digital finance but encouraging them to use a wider range of services that can truly improve their financial lives. 

From the bustling markets of Dar es Salaam to the rural villages, the way Tanzanians handle money is evolving. While cash holds its ground, the convenience and reach of mobile money, coupled with supportive government initiatives, are paving the way for an increasingly digital financial future. It's a journey worth watching!