The main argument for using electronic payments has always been about convenience and security for the user, because after all it’s no use launching a product and not explaining why it’s good or convincing people to use it. That’s why you have quirky TfL videos extolling the virtues of contactless cards, which have changed the game for morning commutes, why you have expensive adverts showing just how easy it is to use mobile payments to go shopping without having to get up off the sofa or how new startups are making Forex more transparent
A new research from Moody’s – commissioned by Visa – shows that there are also many other upsides – on a global scale – of using electronic payments.
The study found that increased use of electronic payment products, including credit, debit and prepaid cards, added $296B to GDP, while raising household consumption of goods and services by an average of 0.18 percent per year. In addition, Moody’s economists estimate that the equivalent to 2.6 million new jobs were created on average, annually, over the five-year period as a result of increased use of electronic payments. The 70 countries in the study make up almost 95 percent of global GDP.
“Electronic payments are a major contributor to consumption, increased production, economic growth and employment creation,” noted Mark Zandi, Chief Economist, Moody’s Analytics. “Those countries which saw large increases in card usage also saw larger contributions to overall growth in their economies.”
More transparent payment environment
A key finding of the report was that electronic payments are conducive to a “more stable and open business environment” particularly because of the way they reduce the strength of what is described as a “shadow economy” where cash transactions are unreported. Therefore, the report says e-payments provided a higher potential tax revenue base for governments and higher financial inclusion.
These findings reinforce the many positive benefits that electronic payments bring to local economies all over the world,” said Charlie W. Scharf, Chief Executive Officer, Visa Inc. “This research also suggests that the right public policies can create an open, competitive payment environment, and contribute to economic growth and job creation.”
More card usage is the key
The countries that experienced the largest contributions in growth were the ones that had the biggest increases in card usage. For example, Hungary’s GDP rose by a quarter of a per cent, with the likes of UAE and Chile not far behind. The report noted that card usage increased regardless of economic performance.
The increase of card usage has added the equivalent to almost 2.6 million jobs on average, per year, across the 70 countries sampled between 2011 and 2015. The two countries with the greatest average job increases were China (427,000 jobs added) and India (336,000 jobs added), which both had large gains in employment due to the combination of fast growing labor productivity and increased card usage.
Across the 70 countries in the study, Moody’s found that every 1% increase in usage of electronic payments could produce, on average, “an annual increase of approximately $104 billion in the consumption of goods and services. Assuming all future factors remain the same, this could result in an annual average increase of 0.04 percent to GDP attributable to card usage.”
Not the panacea by itself
The report was keen to stress that rise in electronic payments is not the secret key to turning a country into a financial superpower. There has to be a stable financial ecosystem already in place and the economy has to be healthy for the greatest impacts to be had.
The findings lead Moody’s to conclude that governments must do more on a macro-level such get rid of unneeded regulations and strengthen the financial infrastructures.
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