BANK of Tanzania (BoT) has established a new payment system-Tanzania Instant Payment System (TIPS)-to facilitate processing of real time payment transactions across networks.
The arrangement that is expected to become fully operational in June next year will also provide interoperability without depending on the bilateral agreements between payment providers.
Launching the construction project yesterday, BoT Deputy Governor for Financial Stability and Deepening Dr Bernard Kibese said TIPS will also place Tanzania as the leading country in pursuit of solutions to costeffective payment systems.
According to Dr Kibese, all this will be possible because the system will have a shared platform for payments that originate from and through different channels like banks and other institutions that offer financial services.
"TIPS is designed to transform the country from cash payment to cashless or less cash economy provided that it will be done electronically," he noted.
Under the system operation, once the payer initiates payment, all parties are informed within less than 10 seconds on the status of the transaction whether or not the payment has successfully reached the payee's account.
"Additionally, the system is expected to address market demands for interoperability which in turn contribute towards reduction of transaction costs for the public and ultimately help acceleration of financial inclusion in the country," explained Dr Kibese.
He noted that the central bank foresees that the outcomes of having an instant payment system will go miles in proliferating financial inclusion in the country, increasing uptake of electronic payments and money circulation.
Dr Kibese was of a view that, being interoperability enabler, TIPS is also expected to make payments affordable and faster by increasing speed of settlement, integrating innovative inter-operable payment methods and systems supported by world-class technologies.
"It will further encourage usage of electronic payments rather than cash in the economy and reduce cost of distribution of cash to the bank and transaction costs to the public," he noted.
According to BoT Monetary Policy Statement of June 2018, during the July 2017 to April 2018 period, utilisation of mobile money services grew to 80.7 million transactions involving 3.3tri/-, representing a 104.7 per cent volume growth compared to the corresponding period of 2016/17.
He added; "On account of this usage trend, it is envisioned that Tanzania will be a cash-lite economy with majority of payments transacted electronically in the near future."
Earlier, BoT Director of National Payment System Bernard Dadi said the system will also enhance regulatory capabilities by providing transparency and enabling the bank to better perform its oversight responsibilities while ensuring the system safety.
"Transaction visibility will provide accuracy of data in relation to revenue streams and improve efficiency in tax collection... the system shall offer low-cost platform, with liquidity efficient settlement services to benefit both service providers and consumers," he explained.
Chairman of Tanzania Bankers Association (TBA) Abdulmajid Nsekela said the cost effective TIPS will enable banks to expand their wings to remote areas of the country.
"This is a great opportunity that bankers were waiting for so long, we are happy for the initiative, for us service providers, it is a single-point of integration which greatly reduces operational costs," he said.
Upon completion, TIPS will replace the current payment systems like Tanzania Interbank Settlement System (TISS) and East Africa Cross-Border Payment System (EAPS).