Ethiopia’s Digital Payments Surge Masks Weak Merchant Adoption

Ethiopia’s digital finance ecosystem is expanding rapidly in scale, but new nationally representative data suggests merchant-level adoption remains shallow, limiting its real economic impact.

Findings from the first wave of the Merchant Payments Observatory show that while total digital transactions reached 9.7 trillion birr in 2024 and digital accounts surpassed 198 million, merchant payments account for less than 0.2% of total transaction value. The data points to a widening gap between infrastructure growth and actual usage at the point of sale.

The study, conducted by DFS Lab in partnership with FSD Ethiopia and in collaboration with the Ethiopian Statistical Service, surveyed 2,724 micro, small, and medium enterprises across urban and rural Ethiopia, capturing both digital and cash-based businesses.

Despite 139.5 million mobile money accounts, only 15% were active in 2024, underscoring weak engagement. While 58.8% of merchants report accepting digital payments, usage remains uneven—69.2% in urban areas versus 26.4% in rural regions—reflecting structural gaps in connectivity and infrastructure.

A central constraint is how merchants are onboarded into the system. More than 99% of merchants receiving digital payments use personal accounts rather than business-designated accounts, limiting transaction visibility and restricting access to formal financial services such as credit.

The provider landscape is highly concentrated. Commercial Bank of Ethiopia accounts for 83.2% of digitally active micro-enterprises, while most merchants rely on a single channel. Meanwhile, mobile money—despite its scale in account numbers—plays a limited role at the merchant level.

Infrastructure and onboarding frictions persist. Although 93.2% of merchants own mobile phones, only 34.9% use internet services, with rural usage significantly lower. Network reliability is also a constraint, with over half of respondents reporting weak or unstable connectivity. Most users continue to register through physical branches or agents, while QR-based payments remain negligible.

Even where digital tools are used, their economic value appears limited. While 79.8% of merchants report satisfaction, few link digital payments to business outcomes: only 3.1% associate usage with access to credit, and less than 10% report benefits in record-keeping or supplier payments.

This is notable given the strong underlying demand. 44.5% of merchants report needing additional credit, yet only 10.8% accessed loans in the past six months, with most relying on informal sources. The data suggests a structural gap between digital transaction growth and financial intermediation.

The report also highlights constraints in formal inclusion. National ID coverage stands at 58.3%, but drops to 39% in rural areas, indicating that tighter digital onboarding requirements could further slow adoption without parallel infrastructure improvements.

The timing of the baseline is significant. It captures the market ahead of major reforms, including interoperable payment systems and digital ID expansion, which are expected to reshape access and usage. Future survey waves will assess whether these interventions translate into measurable changes at the merchant level.

Overall, the findings suggest that Ethiopia’s next phase of digital finance development will depend less on expanding infrastructure and more on driving active, business-relevant usage among merchants, where the bulk of economic transactions still take place.