The growing use of electronic payments contributed €1.8bn to the economy during the recession through increased consumption and larger tax revenues, according to new research.
Economists at Moody’s Analytics estimate that between 2011 and 2015, debit, credit and prepaid cards helped stimulate economic activity worth an additional $296bn (€265bn) to GDP globally.
The contribution of electronic payments to Irish GDP was double the European average over the same five year period as a result of increased card usage, the Moody’s report carried out on behalf of Visa found.
“Over the last 50 years, the rapid proliferation of electronic payments has enabled and improved how consumers pay for goods and services.
“The report findings reinforce the positive benefits that electronic payments have brought to Ireland, as increased consumption has contributed to growth in Irish GDP and also seen firms expand in order to meet increased demand for goods and services,” said Visa Ireland country manager, Philip Konopik.
According to Moody’s, their research shows that electronic payments aid economic growth by increasing consumption, reducing cash and cheque handling costs and expanding the pool of customers “guaranteed” to pay for goods.
They also argue electronic payments improve governments’ ability to collect additional tax revenue by reducing the number of unreported transactions in the “grey economy”.
“Ireland can realise more benefits from electronic payments by increasing the level of acceptance in industries beyond the retail sector and through greater financial inclusion by enabling those without access to the formal banking system a safe and efficient payment alternative to cash,” Mr Konopik added.
Countries, such as Ireland, in which card usage grew the most reaped the greatest benefit to GDP.
For example, the contribution of card payments to GDP in Ireland over the five year period of 0.2% was the fourth largest after Hungary (0.25%), United Arab Emirates (0.23%) and Chile (0.23%).
Across the 70 countries in the study, Moody’s found that each 1% increase in usage of electronic payments produces, on average, an annual increase of approximately $104bn in the consumption of goods and services, or a 0.04% increase in GDP, assuming all other factors remain the same.
The study compares increased card usage on consumption and consequently GDP in Ireland and Qatar — both of which saw penetration increase by close to 10%.
While both countries experienced an increase in consumption of between 0.4% and 0.5% due to higher card usage, a far greater relative impact was seen on Ireland’s GDP as consumption plays a larger role here than in the Qatari economy which is reliant on oil exports.
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