Moving towards an economy dominated by cashless transactions can bring tangible benefits to both emerging and developed economies, according to a study commissioned by Visa Inc. and conducted by Moody's Analytics. The study entitled The Impact of Electronic Payments on Economic Growth has found that a rise in use of electronic payment methods such as credit, debit and prepaid cards in the UAE added US$3.7 billion to the GDP, and created an average of 14,170 jobs per year in the economy between 2011 and 2015. The UAE also reported a six percentage point increase in card usage with the country placed at sixth spot, in terms of impact on the GDP, among the 70 countries that formed part of the study. Globally, the research estimates that electronic payment transactions fueled an aggregate $296 billion to GDP, while raising household consumption of goods and services by an average 0.18% per year and creating an average of 2.6 million new jobs, annually, over the five-year study period.
Mark Zandi, Chief Economist, Moody’s Analytics says that the study clearly points to a scenario where countries with large increases in card usage also saw larger contributions to overall growth in their economies. The report highlights that going beyond the aspect of convenience, digital payment modes help activate economic growth globally by contributing to a more stable business world and enabling greater financial inclusion for the consumers. Explaining the benefits for countries in going cashless, the report notes that “electronic payments help reduce paper transactions, reducing the cost to central banks of providing notes and coins, and also increase tax revenues through the reduction of the gray economy, or transactions not accounted for in official statistics.”
A regional analysis of the findings reveals that the Middle East experienced a relatively lower impact of these instruments, with card usage adding around 0.09% to GDP in the region, while average jobs added per year stood at 9,000. In the larger MENA region, Saudi Arabia benefitted by an addition of $3.43 billion to the country’s GDP and 12,470 jobs and in Egypt, payment cards stimulated $0.1 billion to the GDP and created an average of 2,300 jobs. The report recommends that countries must simplify regulations around digital payments to improve the financial infrastructure behind such payment systems, which in turn would lead to greater consumption expenditure- the current need in most global economies.