NEW YORK (3/14/16)--Increased use of electronic payments, including credit, debit and prepaid cards, contributed $296 billion to economic growth across 70 countries between 2011 and 2015, according to a new study by Moody’s Analytics.
The study, commissioned by Visa, determined that electronic payments caused a rise in the overall household consumption of goods and services by an average of 0.18% per year in the affected countries.
Electronic payments provide access to financial resources, the report accompanying the study concluded. “Consumers using cash or checks may be limited in the amount of funds they have for particular transactions,” the report said. “With cash, consumers are limited to the funds they have on hand. Merchants may be reluctant to accept checks for bigger transactions because of the risk of nonpayment.”
Electronic payments address both of these issues, the study found. “They provide consumers with access to all available funds or lines of credit for a given transaction and they give merchants peace of mind about payment guarantees, provided they follow appropriate payment procedures,” the report said.
Cards also provide consumers the means to participate in the digital economy. In most cases, online shoppers are required to use cards to make purchases. “Cardholders thereby have a larger variety of goods and vendors to choose from and a broader international marketplace is made available to consumers,” the report said.
Trust in electronic transactions further drives consumption, the study found. “With electronic payments, consumers have recourse for fraudulent transactions,” the study said. “The peace of mind that merchants have with guaranteed payment also extends to consumers, who feel more comfortable making purchases when they can pay with a card. This trust in the payment system eases friction, bolstering consumption and thereby gross domestic product growth.”
It is estimated that the equivalent of 2.6 million new jobs were created on average, each year, over the course of the five-year period as a result of increased use of electronic payments.
Countries with the largest increases in card usage experienced the biggest contributions to 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%).