Radar |
Dec 20 , 2025.
The march towards a cash-light future was supposed to be swift. Banks, telecom firms and regulators trumpeted a payment revolution, powered by mobile phones and glossy apps, that would haul the economy into the 21st Century.
However, what has emerged is less a network than an archipelago of feudal estates. Each big bank guards its own domain, allowing merchants to accept payments only from customers of the “right” institution. Shopkeepers across the country routinely reject transfers from what they dismiss as “other banks,” a feature in a mobile payment app that allows transfers between banks. Most will accept only the state-owned Commercial Bank of Ethiopia (CBE) or Telebirr, a wallet run by the state-owned Ethio telecom.
Even when they do accept funds from rival outfits, they often wait hours, sometimes weeks, before the cash appears. So much for instant settlement.
Such balkanisation makes life irksome for consumers and business owners alike. A shopper may juggle three banking apps to pay for groceries, fuel and a cup of coffee. A trader on a market stall can lose sales because buyers belong to the wrong network. Everyone wastes time confirming receipts over patchy mobile signals. Behind the tills, then, sits a national system without a national clearing house, an arrangement as awkward as it sounds.
Ethiopia is trying to abandon notes and coins before making digital money cheap, predictable or trusted. The result is a network that looks modern on paper, vast in scale, and impressive in growth. Yet, it remains stubbornly marginal in everyday life.
Regulators tacitly acknowledge this failure. A newly released draft national digital-payments strategy from the National Bank of Ethiopia (NBE) reads like an apology wrapped in policy. After years of cheering exploding account numbers and rocketing transaction values, monetary policymakers concede a blunter truth. Consumers spurn digital options not because they lack access, but because they cost too much, feel unsafe and offer little advantage over cash.
Coverage, moreover, is patchy. Many rural areas still rely on spotty signals, while urban users complain of sluggish apps and frozen screens.
The document signals an about-turn. Expansion gives way to use; infrastructure to incentives; and volume to value. Its hardest punch lands on fees, the silent tax that has turned digital finance into a luxury for small merchants and low-income customers. Providers will be compelled to spell out every charge and to slash levies on tiny or peer-to-peer transfers. Basic banking via USSD, the only digital channel available to millions who have nothing more sophisticated than a feature phone, will become free of charge.
This will be no cosmetic tweak. It tries to rewrite the economics of cashlessness. For years, the narrative prized scale. Bank and mobile-money accounts multiplied at dizzying speed. Transaction values climbed into the trillions of Birr. Press releases crowed about percentage growth. Nonetheless, usage lagged far behind. Most accounts lie dormant. Merchant payments are negligible. Person-to-person transfers dominate, often serving as a proxy for retail transactions, chosen less for convenience than to avoid merchant fees.
In functioning digital economies, customers pay shops, and shops swallow the cost. In Ethiopia, shoppers pay to pay, while shopkeepers retreat to cash. Central Bank figures expose the distortion. More than three-quarters of digital traffic flows through personal channels, and formal payments to merchants barely register. Cash remains king not because citizens resist novelty, but because ditching it is dear.
Banks and payment providers say their tariffs reflect reality. Installing systems, striking deals with telecom operators, and complying with compliance rules gobble up capital. As credit growth slows and the margin between loan and deposit rates narrows, transfer fees supply increasingly vital income. The draft strategy threatens that model. Should charges fall, financial institutions should discover fresh ways to keep the lights on.
The Central Bank’s counter-proposal is “scale with discipline”. Low-cost Automated Clearing House (ACH) transfers are to move centre stage. Today, many users are compelled to hunt through obscure menus or recognise cryptic transaction codes to find this cheaper route. Tomorrow, an “ACH Pay” button will sit in plain sight, promising the same certainty at a fraction of the price. Providers must publish open APIs so firms can automate wage and supplier bill payments. The hope is that this will replace manual and high-friction routines with predictable, cheap rails that encourage volume.
The government wants to lead by example. Public transport, from city buses to national railways, will scrap cash fares. In Addis Abeba, tap-and-go cards and phone apps already settle rides on shiny new electric buses. Officials believe daily, unavoidable use will forge fresh habits faster than any marketing campaign.
Cost, however, is only half the trust gap. Fraud is the other. As digital volumes rise, so do losses. Social-engineering scams, patchy consumer awareness and uneven controls have pushed fraud into the billions of Birr. Cyber-attacks on public-sector agencies and private firms have surged. The draft strategy focuses on a centralised, AI-powered monitoring hub run by the NBE, which would pool data across providers and make reporting compulsory.
Shared intelligence can spot wrongdoing quickly, yet shining too bright a light on fraud may scare users, while burying the numbers encourages abuse. Private firms are not waiting. New entrants are rolling out their own defences and experimenting with near-zero-fee models that shove costs back onto banks and gateways. Their logic is understandable as fees cannot bankroll universality. Revenue would flow later, from data, add-on services and raw scale.
E-commerce exposes the same fault lines. Most online orders still end with cash on delivery, a symptom of distrust rather than habit. Escrow is weak or informal. Shoppers grumble about losing money after pre-payment; sellers lament non-payment after delivery. The strategy plans to license banks as neutral escrow agents, linking payouts to returns and baking fraud checks into the pipes. Without this, digital trade stays shallow no matter how many platforms bloom.
The Central Bank wants digital transactions to reach several times the GDP by the end of the decade and a clear majority of accounts to be active. The framework, built on infrastructure, inclusion, skills, use cases and innovation, looks tidy enough on the page. Execution will no doubt be messier. Lower fees will meet stiff resistance from incumbents. Opening telecom lines will upset the balance between banks, fintechs and Ethio telecom. Forcing a digital leap without fixing literacy, patchy connectivity, and security could deepen exclusion rather than cure it.
Ethiopia’s payments battle is no longer technical. It is political and economic.
Who foots the bill for transition? Who absorbs the risk? And who gains first?
Until these questions find answers, the country’s cashless promise will remain just that - a promise - while notes and coins continue to change hands with a rustle much louder than the quiet buzz of an incoming mobile alert. For now, every ring of a cash register is a reminder that technology alone cannot overthrow the old order. Incentives and trust must do the heavy lifting.
PUBLISHED ON
Dec 20,2025 [ VOL
26 , NO
1338]
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