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Report Estimates Migration To Electronic Payments Added €1.8 Billion To Irish GDP Between 2011 - 2015

28/03/2016

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A new Visa Inc commissioned study by Moody's Analytics that analysed the impact of electronic payments on economic growth across 70 countries between 2011 and 2015 has found that increased use of electronic payment products, including credit, debit and prepaid cards, added $296 billion to GDP globally. The 70 countries in the study make up almost 95 percent of global GDP.

Ireland benefited significantly as the report found that €1.8 billion1 was added to Irish GDP over the five year period. The contribution of the growth of electronic payments in Ireland to Irish GDP was double the European average. Moody’s economists also estimate that an average of approximately 3,700 jobs were created per annum over the five year period as a result of the increased card penetration.

Electronic payments are a major contributor to consumption, increased production, economic growth and employment creation,” noted Mark Zandi, Chief Economist, Moody’s Analytics. “Those countries which saw large increases in card usage also saw larger contributions to overall growth in their economies.”

Findings from the study were shared in the report, “The Impact of Electronic Payments on Economic Growth,” which also indicated that the electronification 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.

Annual spending on Visa cards – debit, credit and prepaid – in Ireland reached a new record of €31.7 billion last year2. As a result, transactions with a Visa card – Debit, Credit or Prepaid – now accounts for more than €1 in every €3 of Irish consumer spending. This is due to the continued shift from cash and cheque usage as consumers opt for the convenience and security of Visa card payments. New technology such as contactless payments for purchases up to €30 has increased overall card usage, with more than one million contactless transactions now being made in Ireland every week.

Philip Konopik, Ireland Country Manager, Visa Europe, added: “Over the last 50 years, the rapid proliferation of electronic payments has enabled and improved how consumers pay for goods and services, how merchants manage their businesses, and how governments make and collect all sorts of payments. 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.

We ultimately want to see this positive trend continue and are working globally with governments, financial institutions, merchants and technology companies to develop innovative payment products and services that will accelerate electronic acceptance, grow commerce, and bring the benefits of card payments to more people everywhere. 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.

Highlights of the global study include:

  • Growth Opportunities:

    Card Penetration: Real consumption grew at an average of 2.3 percent from 2011 to 2015, ofwhich 0.01 percent is attributable to increased card penetration. This implies that card usageaccounted for about 0.4 percent of growth in consumption. Since consumption growth is, onaverage, faster in emerging economies, those countries also have more to gain by increasing cardusage.

    Card Usage: Countries with the largest increases in card usage experienced the biggestcontributions 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.

  • Contribution to Employment:

    Increased card usage added the equivalent to almost 2.6 million jobs on average, per year, acrossthe 70 countries sampled between 2011 and 2015. Notably, the two countries with the greatestaverage job increases were China (427,000 jobs added) and India (336,000 jobs added), whichboth had large gains in employment due to the combination of fast growing labour productivityand increased card usage.

  • Emerging Markets and Developed Countries:

    Both emerging markets and developed countries experienced gains in consumption due to highercard 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 correspondingfigures for GDP were 0.11 percent for emerging economies and 0.08 percent for developedcountries, and suggests that all markets, regardless of current card penetration rates, can benefitfrom increases in consumption due to increases in card usage.

  • Potential Future Growth:

    Across the 70 countries in the study, Moody’s found that every 1 percent increase in usage ofelectronic payments could produce, on average, an annual increase of approximately $104 billionin the consumption of goods and services. Assuming all future factors remain the same, this couldresult in an annual average increase of 0.04 percent to GDP attributable to card usage.The study highlights that expanding electronic payments alone will not necessarily increase a country’sprosperity -- it requires the support of a well-developed financial system and healthy economy to havethe greatest impact. The report recommends at a macro-level, to encourage the further electronificationof payments, countries must promote policies that minimize unneeded regulation, create a robustfinancial infrastructure, and lead to greater consumption.

    The study highlights that expanding electronic payments 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.

The study and additional materials can be found on www.visa.com/moodysanalytics