Digital economy gets new boost

  • Central bank cuts interbank charges
  • New arrangement starts next year

TANZANIA: THE Bank of Tanzania (BoT) has revised down fees and charges for the Tanzania Interbank Settlement System (TISS) in order to reduce the costs of electronic payments and promote digital payment in the country.

According to BoT statement seeking stakeholders’ consultation, the move is part of their ongoing efforts to reduce the costs of electronic payments, encourage the adoption of electronic payment methods and decrease the use of cash. The new TISS fees and charges are expected to take effect in January next year.

The system facilitates settlement of interbank fund transfers, cheques and electronic funds transfer clearing obligations, payment card switch balances and money market transactions.

Alpha Capital Head of Research and Analytics Imani Muhingo told ‘Daily News’ that the revision of TISS fees and charges is a welcomed development, it builds on the government’s efforts to improve the business environment and formalise informal economic activities.

“The government had already relaxed mobile money transaction levies back in July, now this development adds on to the efforts of digitising the economy and carrying the associated benefits,” Mr Muhingo said.

TISS, which is owned and operated by the BoT, is the country’s payment settlement system that processes high-value and timesensitive payments in real time. The system facilitates the settlement of interbank fund transfers, cheques, electronic funds transfer clearing obligations, payment card switch balances and money market transactions.

The Vertex International Securities Chief Executive Officer, Mr Mateja Mgeta, believes that the BoT’s decision to reduce TISS fees and charges will have an impact on the liquidity of banks and the general public.

“We think this is a very positive and practical move by the Bank of Tanzania as it aims to ease liquidity for banks and the general public alike,” Mr Mgeta said.

Mr Mgeta told this paper that he expects the measures to boost the volume of interbank transactions and encourage the public to prefer bank transfers over other methods, thereby bringing more money into the banking system. Vertex head sees this move as positive and practical, as it aims to increase liquidity for both banks and the public.

The participants of TISS include commercial banks and some financial institutions, with the Tanzania Revenue Authority (TRA) indirectly participating when using the system to collect government revenue. Commercial banks are deposit money banks that have liabilities in the form of deposits payable on demand and transferable by cheque or other methods for making payments.

These TISS members use the system to send and receive payment messages on behalf of themselves or their customers. The Managing Director of DCB Commercial Bank, Sabasaba Moshingi, commended the BoT’s initiative to reduce electronic payment costs, as it will play a significant role in promoting a cashless economy.

He noted that for banks, the reduction in charges and fees means a reduction in income and advised banks to find ways to cut costs and continue to grow their businesses in order to adapt to the changing environment. Cashless payment systems can stimulate economic growth by making payments easier and more convenient, thereby promoting consumption.

These systems also provide time and cost savings opportunities for businesses by reducing manual reconciliation, counting and cash handling as well as reducing the government’s cost of issuing physical cash.

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