From Cash to Digital Payments: Evidence from a Two-Sided Market Intervention in Tanzania

Note that all interventions are implemented at the market level.

In each selected market, we target existing Lipa kwa Simu (LKS) merchants and consumers to incentivize more frequent use, increase the visibility of digital payments, and shift beliefs about their prevalence and acceptability, helping to address the coordination problem that sustains cash reliance in retail markets.

C (Control): no activation program during the study period.
T1 (two-sided Incentives): recruit and incentivize 4 LKS merchants and 6 LKS consumers per market to increase usage of digital payments.
T2 (two-sided Incentives + Cross-Sided Information / Ambassadors): same as T1 (recruited merchants and consumers receive incentives), but participants are also onboarded as Ambassadors to share relevant information and materials about LKS with other merchants and consumers in the market, aiming to encourage broader adoption and use of digital payments through increased awareness, public signaling, and correcting of misperceptions about the prevalence and acceptability of LKS use.

2025-11-10

2026-02-07

Digital payments use (extensive margin): Whether respondents (merchants and consumers) have recently used LKS.
Digital payments use (intensive margin): Number of LKS payments recently made.
Coordination beliefs (perceived adoption): Respondents’ beliefs about the prevalence of LKS acceptance and use among market participants (same-side and cross-side).

We measure outcomes using harmonized merchant and consumer survey modules:
Digital payments use (extensive margin): binary indicator equal to 1 if the respondent reports having accepted or made at least 1 LKS transaction in past 7 days
Digital payments use (intensive margin): count variable based on the number of LKS transactions accepted or made in past 7 days
Measured using respondents’ reported beliefs about the prevalence of LKS acceptance and use among other merchants and consumers in their market. Belief measures capture perceived same-side and cross-side adoption at the time of the endline survey.

(A.) Digital payments use during the program period
(A1.) Extensive margin: whether respondents used LKS in the past two months
(A2.) Intensive margin: number of LKS transactions in the past two months

(B.) Beliefs and expectations about future use
(B1.) Forward-looking expectations about market-wide LKS acceptance and use over the next year

(C.) Program exposure and diffusion indicators
(C1.) Exposure to Ambassadors or Rewards participants
(C2.) Receipt of LKS-related information or materials
(C3.) Peer influence from other merchants on LKS use

(D.) Awareness- and proximity-based exposure measures
(D1.) Ability to name LKS-accepting merchants
(D2.) Geographic proximity to Ambassadors or adopters
(D3.) Local density of LKS adoption

(A.) LKS use at intensive and extensive margin during the program period (past two months) to complement the seven-day measures. This allows us to measure early or episodic use that occurred while the program was active, but may not yet translate into sustained use observed in the seven-day recall window during the endline survey.

(B.) We measure forward-looking expectations about market-wide LKS acceptance and use over the next year as an intermediate belief outcome that may precede or accompany the realization of sustained usage.

(C.) We measure exposure to the program and social diffusion pathways, including contact with Ambassadors or Rewards participants, receipt of informational materials, and peer influence on LKS use. These measures allow us to assess whether adoption spreads through observation, encouragement, explanation, or assistance with onboarding.

(D.) Finally, we construct awareness-based and geographic exposure measures using roster-based nominations and GPS data to capture variation in visibility and proximity to LKS adopters and Ambassadors within markets.

The study is a market-level randomized controlled trial conducted across 79 retail markets in Tanzania. Markets were randomly assigned to one of three arms:
(i) Control;
(ii) Two-Sided Incentives (T1); and
(iii) Two-Sided Incentives plus Cross-Sided Information (T2).

In treatment markets, the intervention targeted existing users of Lipa kwa Simu (LKS) among both merchants and consumers. The interventions were designed to increase the frequency and visibility of digital payment use within markets.

In T1 markets, selected merchants and consumers received small monetary incentives tied to their actual use of LKS. In T2 markets, the same incentive structure was implemented, and selected participants additionally served as Ambassadors who promoted LKS use through informational materials and peer outreach.

The primary analysis compares markets assigned to either treatment arm (T1 or T2) to Control. We also compare T1 and T2 separately to Control assess the incremental effect of the Ambassador activities.

Randomization occurred at the market level with markets blocked by baseline market size and baseline LKS adoption. Interventions were implemented over approximately eight weeks per market, with staggered start dates. Primary outcomes measure digital payment use at the extensive and intensive margins and beliefs about market-wide adoption.

Not available

Randomization was conducted in office using a computer-generated random assignment in Stata.

The primary unit of randomization is the market. Each market represents a geographically defined trading area (approximately 100-meter radius) in which merchants and consumers interact regularly. Treatment assignment was conducted at the market level to capture coordination and spillover effects across merchants and consumers within the same retail environment.

Within treated markets, subsets of merchants and consumers were randomly selected for participation in incentives and Ambassador activities for implementation and exposure variation.

Yes

79 markets

790 merchants and consumers (5 merchants and 5 consumers surveyed per market at endline)

35 markets in Control; 22 markets in T1; and 22 markets in T2