Ethiopia’s Financial Technology (fintech) sector is on a promising upward trajectory, driven by innovative products and a growing appetite for digital solutions. Mobile wallets, online banking, and digital payment platforms are transforming the way people transact, making financial services more accessible than ever before. From peer-to-peer transfers to bill payments, fintech is reshaping how individuals and businesses interact with money, signaling a shift toward a more connected and inclusive financial ecosystem. Yet, amidst this remarkable progress, person-to-merchant transactions remain a weak link, which undermines financial transparency and limits the effectiveness of these fintech products, highlighting both the strides made and the opportunities yet to be seized in Ethiopia’s digital finance revolution.
Ethiopia’s fintech sector has progressed significantly since the modernization of payment systems in 2011 with the launch of the Ethiopian Automated Transfer System (EATS) by the National Bank of Ethiopia (NBE). The sector gained momentum in 2016 with the introduction of EthSwitch and surged further with Telebirr, a mobile money platform that attracted over 21 million users in its first year. Supported by the Digital Ethiopia 2025 strategy, these developments have reshaped financial services access, driving financial inclusion and laying the foundation for a connected digital economy. The transformation has reshaped how Ethiopians access and use financial services, laying the foundation for a more connected digital economy. According to the National Bank of Ethiopia (NBE), the country now averages over 7.5 million digital transactions daily, with a total transaction value exceeding 26.5 billion birr.
Today, platforms like Telebirr, Ebirr, Kacha, Mobile Bankings and HelloCash lead the way in mobile money and online payments, while M-Pesa’s 2023 entry brought Safaricom’s expertise to the country. Chapa and ArifPay are revolutionizing e-commerce and point-of-sale transactions, and tools like CashGo and MamaPays are making remittances more accessible. Meanwhile, emerging digital lending and microinsurance solutions are supporting underserved communities, especially women and youth.
Despite these advancements, the NBE’s recent financial stability report highlights challenges, such as the limited use of Point-of-Sale (PoS) machines compared to ATMs. Many businesses still prefer person-to-person transactions, according to industry experts. The report notes that the number of ATMs nationwide grew by 34.2% to 10,551 by June 2024, while PoS terminals increased by only 16.7%, reaching 14,030 during the same period. Additionally, most fintech tools, except Telebirr and M-Pesa, are predominantly used in Addis Ababa rather than other parts of the country.
Solomon Tadesse, a cafe owner in the Kazanchis area, shared that despite displaying his Telebirr QR code on each table, many customers still prefer cash or mobile banking transfers. He attributed this hesitation to the lack of interoperability among systems prior to the NBE’s introduction of a QR code standard.
Mohammed Assefa, Division IFB Product Manager at Bank of Abyssinia, pointed out that most transactions in Ethiopia are limited to P2P transfers and airtime purchases, with limited adoption of P2M and Business-to-Business (B2B) services. He noted that many businesses, especially SMEs, are hesitant to adopt digital platforms due to setup costs, lack of trust in technology, and limited technical knowledge. Additionally, Ethiopian consumers remain reluctant to move away from cash, unlike in Kenya, where M-Pesa has popularized cashless transactions. He also highlighted regulatory and infrastructure gaps, such as insufficient POS terminals, internet coverage, and clear interoperability guidelines, which hinder broader adoption.
Mohammed further highlighted that while P2P transactions dominate in Ethiopia, P2M transactions account for less than 10% of total digital payments. He noted that mobile wallets are mostly used for bill payments and airtime top-ups, with minimal adoption for everyday retail purchases. Despite this, mobile money transaction volumes have grown exponentially, surpassing billions of Birr annually. However, significant potential remains untapped in sectors such as retail, hospitality, and transportation.
“The adoption of P2M transactions in Ethiopia faces several challenges,” said Dawit Alemayehu, BNPL Product Manager at EagleLion System Technology. He highlighted issues such as low digital literacy, limited access to electricity and internet, and infrastructure problems like power outages. He also pointed to concerns around digital identification, cybersecurity, and customer protection. Dawit noted that a lack of trust, limited competition, and weak legal and regulatory frameworks hinder the growth of e-banking. Additionally, security risks and merchants’ skepticism about digital payments further slow adoption.
P2M transaction tools are not being widely adopted in Ethiopia, with usage largely limited to specific sectors. E-commerce platforms, digital-based businesses, and event ticketing services have been the primary adopters, but broader integration remains scarce. While Telebirr is increasingly used for fuel purchases and is mandated for certain government services, its use in everyday commercial transactions is still minimal. The adoption of P2M tools can streamline payments, reduce cash handling risks, and increase financial inclusion by providing a secure, efficient way to conduct transactions, benefiting both businesses and consumers. These tools can also foster a more transparent economy, helping businesses track payments and customers make quicker, more convenient purchases.
“P2M transactions offer numerous advantages,” said Dawit. These include improved financial management, simplify tax compliance, and attract customers who prefer cashless transactions. By enabling credit card acceptance and online payments, businesses can streamline transactions, manage cash flow better, avoid bad checks, and provide greater convenience and flexibility to customers.
The minimal adoption of P2M transactions in Ethiopia has raised concerns among industry experts, who emphasize the need for further efforts in promoting innovative products and creating awareness, given the benefits for all stakeholders. Neighboring Kenya serves as a benchmark, with Safaricom’s collaboration with banks and a strong focus on merchant onboarding enabling mobile money to flourish. “Incentives such as reduced transaction fees and robust agent networks were key,” said Mohammed.
He added that in Nigeria, fintech companies like Flutterwave and Paystack have leveraged APIs to support merchant payments and e-commerce, fostering a vibrant B2B and P2M ecosystem. Globally, India’s Unified Payments Interface (UPI) stands out as a model, enabling seamless transactions between merchants and consumers across platforms. Its success is attributed to government-led awareness campaigns, merchant incentives, and reduced fees for small transactions.
“Investing in digital infrastructure, such as high-speed internet and mobile networks; promoting interoperability among digital payment systems; reducing regulatory burdens for new entrants; and encouraging mergers, acquisitions, and foreign bank participation are crucial steps,” said Dawit. He also emphasized the need for subsidizing or providing tax incentives for merchants to acquire and use POS terminals, streamlining the regulatory framework to enable more fintech companies to offer innovative solutions, improving digital and financial literacy through targeted campaigns, and investing in reliable internet connectivity and electricity to support POS system deployment.
Dawit further explained that emerging technologies like AI, augmented reality (AR), virtual reality (VR), and advanced analytics are reshaping traditional teaching methods and broadening access to education in Ethiopia. He noted that these technologies could similarly revolutionize P2M transactions by unifying the payment ecosystem through interoperable QR code systems, increasing digital payment adoption, and reducing transaction costs. Additionally, they promote financial independence for merchants, expand market reach, lower operational costs, and enhance efficiency.
“To advance the fintech landscape and increase P2M transactions, Ethiopia could incentivize merchants to adopt digital payments by reducing onboarding costs and transaction fees, invest in digital infrastructure such as POS terminals and internet connectivity, especially in underserved areas, create public-private partnerships to replicate successful models from neighboring countries, and enhance consumer awareness and trust through financial literacy programs and campaigns,” said Mohammed.
The Ethiopian fintech landscape has achieved remarkable milestones, with numerous money transfer operators introducing innovative products tailored to the needs and cultural preferences of the society. These advancements are a testament to the country’s growing digital financial ecosystem, which has made financial services more accessible than ever before. However, despite these promising developments, the adoption and use of these products during transactions remain relatively minimal. This can be attributed to a range of challenges on both the user and merchant sides. To fully harness the potential of Ethiopia’s fintech sector, it is crucial to focus on addressing digital literacy gaps, building trust, and improving infrastructure to encourage wider adoption among both users and merchants.
