What are the benefits of digital payments for SMEs in Tanzania

Why should SMEs digitize payments within their organization?

While the costs, challenges, and risks of cash transactions may not have an explicit direct line item on the profit & loss statement, they are significant. A study by the World Bank, for example, estimates that the cost of cash handling in Uganda and Tanzania can be 7–20 percent of annual company turnover. Using cash for transactions is:

• Expensive – Companies face high costs to insure, store, and transport cash to pay suppliers and distributors directly or at cash distribution points.
• Unsecured – Cash poses problems of theft and personal safety.
• Untraceable – Cash payments are more subject to fraud and leakages.
• Inefficient – Managing cash is clearly inefficient for companies.

Four benefits of digital payments for SMEs

SMEs that digitize payments dramatically reduces most costs and risks associated with cash, while introducing other benefits to the company, its partners, workers, and those in the community and country. While some benefits of digital payments for SMEs accrue quickly and others can take longer to emerge, there are long-lasting, positive impacts for companies. Find below the full benefits of digital payments for companies, most of which are multiplied through generating and accessing valuable data hidden in previously untraceable transactions. 

1. Improved Efficiency

• Reduced transaction costs
• Higher productivity
• Better cash and business management

Digitizing payments reduces the costs associated with managing and distributing cash — e.g., staff time, transportation, security, and insurance — and leads to higher productivity.

 

2. Increased Revenue

• Growth of suppliers / distributors through access to capital
• Data analytics for business development
• New business opportunities

Revenues can be increased by pursuing new business opportunities that leverage digitization, including the ability to facilitate financing for suppliers and distributors.

 

3. Greater transparency and security

• Transparent and traceable transactions
• Better fraud detection
• Higher personal security

Companies gain visibility into their operations by digitizing payments, making their supply chains more transparent. However, some companies cite concerns around increased transparency expressed by supply chain partners: for example, the fear of taxation or the prospect of uncovering gaps in their operations.

Shifting away from handling physical cash improves security. Companies across industries and geographies report concerns such as theft, attacks, and fraud — women, small retailers, and smallholder farmers in remote areas are particularly vulnerable to such risks. 

 

4. Strong business relationships

• Suppliers / Distributors: increased loyalty
• Employees / Workers: reduced turnover
• Consumers: better products
• Government: strategic partnership

By building stronger relationships with core supply chain partners and other stakeholders, companies can increase their visibility and brand value while developing more resilient networks.

 

The data and text of this article comes from Better Than Cash Alliance’s report: the Future of Supply Chains: Why Companies Are Digitizing Payments