Drivers of Digital Payments in Rwanda

Abstract

In its first National Strategy for Transformation (NST1), Rwanda set a target of increasing the value of electronic payment transactions as a percentage of GDP from 26.9% (2017) to 80% by 2024. This target was surpassed, with the ratio standing at 199.9% in 2023 (MPFSS, March 2024), thanks to a supportive regulatory environment, the Government’s active drive via the ‘cashless campaign’, and increased digitization of public services. Using the 2024 FINSCOPE data set, and to ensure robustness, this study uses fractional logit, fractional probit, Beta regression, and the Tobit model to empirically examine the drivers of the intensity of adopting digital payments in Rwanda. The choice of the models is premised on the fact that the dependent variable is measured as a fraction. Empirical findings from all estimated models consistently indicate that the intensity of adoption is positively affected by the increase in perceived convenience and security of using digital payments. In contrast, the high perceived cost of using digital payments and residing in rural areas has a negative effect. This study stresses the need to encourage the development and use of convenient, secure, less costly, and easy-to-use digital payment products. Also, digital payment products should be tailored to the specific needs of different segments of society to ensure inclusiveness. This requires investment in innovative products and infrastructures, including cybersecurity, and other relevant technologies, in both rural and urban areas.