Ethiopia’s financial sector is experiencing a quiet revolution as new digital payment methods and fintech innovations emerge, offering the potential to extend banking services to millions of unbanked citizens. The rise of mobile money, online payments, and neobanks in the country promises to drive financial inclusion and transform how Ethiopians manage their finances.
The State of the Banking Industry in Ethiopia
Ethiopia’s banking sector is still dominated by traditional banks, with the Commercial Bank of Ethiopia holding the largest market share. However, despite the presence of several established banks, only about 35% of the population has access to formal financial services. The situation is worse in rural areas, where banking infrastructure is limited and people rely heavily on cash transactions.
Mobile money is rapidly changing this scenario. The introduction of Telebirr by Ethio Telecom in 2021 marked a significant step towards financial inclusion. In its first year of operation, Telebirr registered over 20 million users and processed billions of birr in transactions. The platform allows users to transfer money, pay bills, and even save funds without needing a traditional bank account.
The Rise of New Payment Methods
Alongside mobile money, Ethiopia is also seeing a rise in digital payment platforms and fintech solutions. As internet penetration grows, more Ethiopians are accessing online financial services. According to data from the World Bank, Ethiopia’s internet penetration reached 25% in 2023, and this number is expected to grow steadily, making it easier for more people to access digital banking services.
Online payments are also on the rise, with e-commerce gaining traction among urban consumers. Platforms like Amole, launched by Dashen Bank, provide a range of digital services including bill payments, money transfers, and online shopping. These platforms are helping to modernise Ethiopia’s payment systems, offering faster and more convenient ways to conduct financial transactions.
Neobanks and Their Potential in Ethiopia
While neobanks—digital-only banks—have yet to establish a significant presence in Ethiopia, the country’s growing interest in fintech suggests that they could play a major role in the future. Neobanks like TymeBank in South Africa and Kuda in Nigeria have already disrupted traditional banking models across Africa, and Ethiopia may follow suit as more people gain access to smartphones and the internet.
Ethiopia’s unique banking challenges, such as the large unbanked population and the reliance on cash, make it an ideal candidate for neobanking solutions. By eliminating the need for physical branches, neobanks could provide low-cost, accessible banking services to millions of Ethiopians who currently lack access to formal financial institutions.
Payment Innovations Driving Financial Inclusion
The rise of new payment methods in Ethiopia is not just about convenience—it’s about financial inclusion. Mobile money and digital payment platforms offer a solution for the roughly 65% of Ethiopians who are unbanked, giving them access to essential financial services. In 2021 alone, Ethiopia’s mobile money market processed over $1 billion in transactions, with further growth expected as Telebirr and other platforms expand their services.
Digital payment methods are also reducing the country’s reliance on cash, making transactions safer and more efficient. For example, by allowing people to pay bills or transfer money digitally, these platforms help to cut down on the risks associated with cash handling and transport.