The impact of digital payment systems on business efficiency in urban markets. A case of Ugandan markets

Abstract

This study investigates the impact of digital payment systems (DPS) on business efficiency in Nakasero Market, a prominent urban commercial center in Kampala, Uganda. Guided by the overarching research objective to examine how digital payment adoption influences business performance in informal market settings the study focuses specifically on the role of mobile money platforms such as MTN MoMoPay and Airtel Money in enhancing the operational efficiency of small and medium-sized enterprises (SMEs) within the market. Employing a quantitative research design, the study collected data through structured questionnaires administered to 364 traders operating in Nakasero Market. The findings reveal that digital payment systems have substantially improved key business metrics, including transaction speed, customer convenience, financial record-keeping, and cash flow management. Mobile money, in particular, has become deeply embedded in daily operations, supporting the transition toward more organized and secure business practices. However, the study also identifies a set of persistent challenges that undermine the full potential of these systems. These include high transaction fees, frequent network disruptions, concerns about fraud and data security, low levels of digital literacy, and limited interoperability between platforms. These issues create barriers that prevent traders from maximizing the benefits of digital payments, often forcing partial or temporary reversion to cash-based methods. The study concludes that while digital payment systems are catalyzing improvements in business efficiency at Nakasero Market, their long-term impact will depend on addressing the structural, technical, and behavioral constraints identified. Policy recommendations include reducing transaction costs, expanding ICT infrastructure, implementing user training programs, and enforcing stronger digital security protocols. These interventions are essential for fostering a more inclusive, resilient, and efficient digital payment ecosystem that can support sustainable growth in Uganda’s informal urban trade sector. Keywords; Business efficiency, Digital payment systems, Urban markets, Ugandan markets