On Monday, April 24, 2023, all 153 gas stations in Addis Ababa started implementing Digital Fuel Transaction, meaning that all payments now need to be made using digital payment platforms, fully replacing cash. This caused chaotic lines across the city’s main fuel stations because vehicles queued for hours to access the service and pump fuel. Many on social and traditional media and in public are heard expressing frustration with how the decision and the service have been rolled out.
The concerns raised partly have to do with the limits of the apps used for payment.
Initially, the service was launched using the recently launched EthioTelecom’s Superapp Telebirr, despite the state-owned Commercial Bank of Ethiopia having launched its CBE-Nedaj (translated as CBE-Fuel) app in August 2022. A few days later, in response to the mounting pressure and lengthy queues of frustrated drivers, other financial service providers rushed to provide the service and fill the gap.
This new initiative is a unique opportunity for Telebirr and the Commercial Bank of Ethiopia (CBE) to get higher adoption of payment services at gas stations. To facilitate this, however, Telebirr’s team was tasked with enabling transactions and registering alongside gas station pump attendants while customers fueled up their cars. The situation has also seen a rise in hawkers providing short-term relief. They take cash from drivers in the queue who do not have payment apps and, in turn, make the digital payment to the fuel attendants. They also assist them in registering for the available services, all for a small fee.
All of this happened because many drivers don’t have the Telebirr app, have never used it for making payments, and were caught off-guard when arriving to get fuel. Interestingly, a good number of drivers also did not have smartphones that allowed for downloading the Super app or any other payment app required to fuel up. Even if the service was available on their phone, the registration and depositing took too long for some clients. Others arrived at the station without any information that the payment had migrated digitally. It is evident that a combination of these factors caused delays in pumping gas and making payments, leading to long and chaotic queues.
Analyzing the good, the bad, and the ugly of the current situation brings up a multitude of lessons for addressing the current challenges in fuel access. It also, predictably, gives insights into what is to come in the country’s journey towards digitalization—the additional services, migration, and payment service providers to come.
Insights to consider on Ethiopia’s digitalization journey
Timing: Although many argue that the introduction of the service and, most importantly, the banning of cash were sudden, there are enough indications that the government provided a reasonable lead time in the build-up to the complete migration. Most importantly, following the periodic increase in fuel prices, the government introduced fuel subsidies for public transport vehicles, such as taxis and minibuses, that had been utilizing the Telebirr system to access their subsidized fuel. This way, the government could control the distribution of the subsidies. Nevertheless, this still makes the issue of timing in introducing digital payment services an essential factor to consider going forward.
Awareness/Sensitization: Directly related to the timing of introducing new services, creating enough awareness and sensitizing the public about the services is also an essential element. While awareness among customers is crucial, service providers missed a big opportunity to educate and increase adoption of the payment services at the gas stations ahead of the complete move to digital payment. Most importantly, as selected service providers, CBE and Telebirr could have used the grace period provided by the government to educate, register, and make clients at the gas station aware of the digital payments and the launch of the complete digital service ahead of the specified date.
A driver at least visits the gas station once every two or three weeks, if not more, which was also the notice period initially provided by the government. The service providers could have, jointly with the 153 gas stations in the city, planned ways to make the service efficient, the processes smooth, and the waiting time shorter.
It seems the gas stations were caught by surprise the same way customers were, hoping the law might not be enacted even though some preparations were being made. However, with the time lead and preparation, service providers needed to be adequately prepared or heavily promote the new service’s implementation. The time could also have been used to prepare sufficient support services and invest in process improvement and instruments such as smartphones, QR codes, payment terminals, etc. This is essential for payment service providers such as Telebirr.
In what appears to be an afterthought, it can be seen now that after a couple of days, ethio tele has mounted tents and has agents at every gas station to support customers; likewise, the Commercial Bank of Ethiopia (CBE). Other banks are also introducing the service, like the Cooperative Bank of Oromia, while others are in the pipeline. If the same rush for service was applied to educating customers and gas stations, these lengthy queues and waiting times could have been effectively avoided.
Testing the service: This definitely screams ACCESS. What are service providers doing to make access easy? What if this service had not been mandatory? What if customers could opt in and out of using the digital payment system for pumping fuel? What kind of opportunities does such mandatory government action present to merchant payment aggregators, as it will be overwhelming for gas station owners to select an FSP to use while rejecting others? How can the real-time inter-bank settlement product of Eth-switch complement this product? The payment service providers would have lost a lot for a lack of preparedness to make usage easy and convenient.
On a technological basis, the preparation from the payment service providers should also be from the perspective of handling such a massive surge of users to avoid crashing the system.
The Addis Ababa City Administration has discussed with other financial institutions exploring opportunities to bring them on board as solution providers, servicing clients’ gas stations, with the idea of expanding the same concept across the country.
While such actions have a positive impact on the immediate adoption of new initiatives, they also provide further opportunities to consider: how can we leverage such actions by the government to boost competitiveness among industry players and allow customers to choose the one service provider that resonates with them? How can customers’ best bear the cost of transactions, and how can they choose between service providers to avoid a similar rushed onboarding process with its attendant long queues in the future? Because the current scenario has pushed many consumers to make rushed decisions when selecting a product without having complete knowledge.
Service providers impose different fees, and the conditions vary accordingly. For fuel payments, it is not clear what transaction fees are, or whether additional service charges are charged.
How aware are the customers? What are the costs or benefits for the gas stations to move from cash to digital? How does the regulator protect consumers from any potential malpractices in the rollout of the system as well as provide guidelines? Where is the pricing of the services declared?
These questions should be answered before services are launched as part of the product design to create a market-based service that fosters competition. Collaboration between governments and service providers can bring seamless services from which most stakeholders can benefit and build value.
Appetite for more digitalization
The service is one of the many public services in the country that are migrating to digital payment services. In July 2021, the government of Ethiopia launched the first-ever digital payment strategy to accelerate inclusive growth. This has paved the way for digital payment platforms to proliferate and for services to jump on the opportunity to process payments digitally.
Earlier in April 2022, the Ministry of Innovation and Technology, in partnership with MasterCard and the CBE, launched the migration of payments through the government e-services portal, allowing Ethiopians to access and pay for government services digitally for the first time. The current situation of digitizing fuel payments at the pump is a perfect learning curve for policymakers, digital financial service providers, and customers.
UNCDF, with its role as a convener in the digital space, has supported multiple payment services to pilot and scale, prioritizing knowledge around these services while at the same time ensuring that government departments can monitor usage through data platforms.
With the anticipated and rapid migration to digital, it is essential to keep all walks of customers in perspective, including ways to protect customers. Further, from a business ecosystem perspective, these are opportunities for new types of businesses and job creation while developing new payment schemes in the country. This can be taken case by case through the government’s mandate to push digital payment adoption across different sectors.
In the end, digital is not a silver bullet. It is an enabler. Hence, hybrid systems should always be an option to ensure no one is left out of the system or unintentionally excluded.
Customer awareness and service providers’ preparedness should be addressed to beat the current chaotic but inevitable rollout. Service providers should anticipate customer needs and capabilities. Policymakers and decision-makers need to partner and engage with the private sector and the public in testing, customizing, and eventually co-creating the digitally enabled future we all aspire to see for our communities.
Ibrahim Mamma is the country coordinator for the United Nations Capital Development Fund (UNCDF) in Ethiopia. Endashaw Tesfaye is the digital finance country lead for the United Nations Capital Development Fund (UNCDF) in Ethiopia and leads the Digital Financial Services for Resilience (DFS4Res) program funded by the EU and the Organization of African, Caribbean, and Pacific States (OACPS).
Contributed by Ibrahim Mamma and Endashaw Tesfaye