INCREASED use of electronic payment products, including credit, debit and prepaid cards, added a record $296 billion to the GDP of 70 countries, according to a recent study.
The results of the new 2016 study conducted by Moody Analytics and released in March by Visa Inc., which commissioned it, analysed the impact of electronic payments on economic growth across the 70 countries between 2011 and 2015.
Moody’s economists estimated that the equivalent to 2.6 million new jobs were created on average per year over the five-year period as a result of increased use of electronic payments.
“The Impact of Electronic Payments on Economic Growth” report also found that the electronification of payments benefited governments and contributed to a more stable and open business environment. Additionally electronic payments helped to minimize what is commonly referred to as the grey economy - - economic activity that is often cash-based and goes unreported.
As a result, electronic payments provided a higher potential tax revenue base for governments, while also bringing the added benefits of lower cash handling costs, guaranteed payment to merchants and greater financial inclusion for consumers.
The study, however, makes the point that expanding electronic p1ayments alone will not necessarily increase a country’s prosperity—it requires the support of a well-developed financial system and healthy economy to have the greatest impact.
The report recommends at a macro-level, to encourage the further electronification of payments, countries must promote policies that minimize unneeded regulation, create a robust financial infrastructure, and lead to greater consumption.
Selected highlights from the study:
• Countries with the largest increases in card usage experienced the biggest contributions in growth. For example, big increases in GDP were recorded in Hungary (0.25%), the United Arab Emirates (0.23%), Chile (0.23%), Ireland (0.2%), Poland (0.19%) and Australia (0.19%). In most countries, card usage increased regardless of economic performance. ?
•INCREASED card usage added the equivalent to almost 2.6 million jobs on average per year across the 70 countries sampled between 2011 and 2015. Notably, 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 because of the combination of fast growing labor productivity and increased card usage. ?
•BOTH emerging markets and developed countries experienced gains in consumption due to higher card usage. Increased card usage added 0.2 percent to consumption in emerging markets, compared with 0.14 percent in developed countries between 2011 and 2015.
The corresponding figures for GDP were 0.11 percent for emerging economies and 0.08 percent for developed countries, and suggests that all markets, regardless of current card penetration rates, can benefit from increases in consumption due to increases in card usage. ?
•ACROSS the 70 countries in the study, Moody’s found that each 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% to a countries GDP attributable to card usage. ?
•?AFRICAN countries experienced, on average a 0.05% increase in GDP due to increased card penetration. Many African countries are in the early stages of developing their financial systems with appropriate infrastructure to support electronic payments. In the coming years, the increase in the use of mobile phone technologies to make payments is expected to increase electronic payments penetration. ?
South Africa, the most developed economy in Africa, recorded an average 0.18% increase in GDP from additional card usage, three times the regional average. This illustrates the strong benefits of electronic payments that accompany a developed financial services system
•INCREASED electronic payment usage added $3.1 billion to South Africa’s GDP from 2011 to 2015. ?
•AFRICAN countries had the fewest average number of jobs added per year from increased card usage (8,000), which is not surprising given the region’s low usage rates and developing financial infrastructure to allow for electronic payments to be more widely accepted. Increased electronic payment usage created the equivalent to an average of 26,550 jobs in South Africa per year between 2011 and 2015.