Visa-commissioned study estimates electronic payments have helped create 34,500 UK jobs each year
A new study conducted by Moody’s Analytics has found that electronic payments are a major contributor to consumption, economic growth and employment creation. The report, titled “The Impact of Electronic Payments on Economic Growth,” was commissioned by Visa. It covers 70 markets globally during the 5 year period between 2011-2015.
The main findings are:
- In the UK, increased use of electronic payments contributed to a 0.18% increase in consumption each year
- This, in turn, leads to a 0.11% contribution to the UK GDP, and over 34,500 jobs being created each year
- Globally, the increased use of electronic payments added US$296B to GDP, while creating 2.6 million jobs on average per year
- Across the 70 countries included 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
- Countries with the largest increases in card usage such Hungary, the United Arab Emirates and Ireland experienced the biggest contributions in growth
According to the report, electronic payments give consumers access to funds whenever they need them and open the door to online shopping. For merchants, cards lower labour costs, particularly at self-service checkouts, and attract consumers who might not have sufficient cash to hand. For central banks, lower demand for physical cash improves the efficiency of commerce. This helps reduce friction in the economy and lead to increased consumption, which in turn, contributes to increased production, more jobs, higher income, and, ultimately, stronger economic growth.
The report also indicated that the electrification of payments benefited governments and contributed to a more stable and open business environment. Additionally electronic payments helped to minimise 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.
Commenting on the findings Kevin Jenkins, MD for Visa Europe in the UK and Ireland, said:
“We are witnessing tremendous change in the way consumers pay and now we can see the economic benefits of that shift. Non-cash payments overtook cash for the first time last year while contactless payments are the new normal, and mobile payments are gaining traction too.
“The UK has always been a global-pace setter for payments. The accelerated shift to electronic payments is shaping the future of commerce, bringing tangible benefits to retailers and enabling them to grow their businesses. Consumers meanwhile can increasingly pay where and when they choose, and on any device.”
In measuring the impact of electronic payments on the economy, the team at Moody’s modelled real private consumption as a function of real disposable income, real interest rates and card penetration. It then calculated various measures to isolate the impact of card use on consumption, labour and GDP.
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