Are ATMs Becoming Obsolete in Africa? A Close Look at Tanzania's Digital Shift
In recent years, the landscape of banking in Africa has undergone a significant transformation. One of the most notable changes is the decline in the use of Automated Teller Machines (ATMs), particularly in countries like Tanzania
This shift raises the question: are ATMs becoming obsolete in Africa? To answer this, we need to delve into the factors driving this change and explore the rise of digital payment systems like Tanzania's Instant Payment System (TIPS).
Tanzania has witnessed a noticeable decrease in the number of ATMs across the country. According to recent reports, regions such as Dar es Salaam and Mbeya have experienced a drop in bank branches over the past five years, with many banks consolidating and closing branches to invest more heavily in digital channels . This trend is not isolated; at least 15 banks have closed in the previous five years as part of a broader sector consolidation .IPP MediaBusiness Insider Africa
Several factors contribute to this decline:
- High Operational Costs: Maintaining ATMs involves significant expenses, including installation, security, cash replenishment, and maintenance.
- Low Usage: With the increasing adoption of mobile banking and digital payment platforms, the demand for physical cash withdrawals has decreased.
- Security Concerns: ATMs are often targets for theft and vandalism, leading to increased security costs.
In response to the declining use of ATMs, Tanzania has embraced digital payment systems to enhance financial inclusion and efficiency. A pivotal development in this regard is the launch of the Tanzania Instant Payment System (TIPS).afi-global.org+1
TIPS is a national real-time payment switch developed and operated by the Bank of Tanzania (BoT). It facilitates interoperable retail transactions between Digital Financial Services Providers (DFSPs), both banks and non-banks . The system aims to provide an inclusive, interconnected, and robust payment infrastructure that ensures seamless transactions across various platforms.Bank of Tanzania+3Bank of Tanzania+3afi-global.org+3cbpn.currencyresearch.com
The adoption of TIPS has been remarkable. In 2024, the system processed over 490 million interoperable retail transactions, a significant increase from previous years . This growth reflects the widespread acceptance and trust in digital payment methods among Tanzanians.Bank of Tanzania
The shift towards digital payments offers several advantages over traditional ATM usage:The Citizen
- Accessibility: Digital payments can be accessed via mobile phones, making financial services available to individuals in remote areas without the need for physical infrastructure.
- Cost-Effectiveness: Digital transactions often incur lower fees compared to ATM withdrawals, benefiting both consumers and financial institutions.
- Security: Digital platforms employ advanced security measures, reducing the risks associated with physical cash handling and ATM-related crimes.
- Convenience: Users can perform a wide range of financial transactions, such as payments, transfers, and bill settlements, anytime and anywhere.
Despite the advantages, the transition from ATMs to digital payments presents certain challenges:
- Digital Literacy: Not all individuals are familiar with digital platforms, necessitating training and awareness programs.
- Internet Connectivity: Reliable internet access is crucial for digital transactions, which may be limited in some regions.
- Regulatory Framework: Continuous development of policies and regulations is needed to ensure the security and integrity of digital payment systems.
The decline of ATMs in Tanzania is a reflection of the broader trend towards digitalization in Africa's banking sector. While ATMs are not entirely obsolete, their role is diminishing as digital payment systems like TIPS offer more efficient, secure, and inclusive alternatives. As Tanzania continues to embrace digital financial services, other African nations may look to its experience as a model for their own digital transformation journeys.
Have you experienced the shift from ATMs to digital payments in Tanzania? Share your thoughts and experiences in the comments below!
