Have you ever thought about what life would have been without bank cards? A life without credit and debit cards? Imagine having to go to the bank to withdraw cash over the counter every single time you are in need of some money. It sounds tedious and counterproductive, doesn’t it?
Ever since bank cards hit the financial world more than 50 years ago, they have altered the payments world forever. Credit cards and bank cards have changed how people pay for goods and services, where people can pay and when they can pay for the same.
On a personal level, they have changed many lives for the better, but what is the impact of these cards and other digital money on the economy? To find out, here is a look at the impact of efficient e-payments on the economy and what the future holds for the payments’ world:
Impact of Electronic Money on the Economy
In their 2016 report, Moody’s Analytics, a company providing financial intelligence and analytical tools, attempted to link the use of debit cards and credit cards to macroeconomics and the results are very interesting. In the research which spanned more than 4 years, from 2011 to late 2015, the research covered different businesses and establishments accepting electronic payments and used the data to analyze the overall impact of the e-payments on the countries’ economies.
From the report, it is evident that the e-payment systems have greatly contributed to the economic growth of most countries in the world. In the period of the research alone, Moody Analytics reported an increase in the worldwide gross domestic product by close to $300 billion. This equates to about $75 billion per year which is incredible.
But what is it about credit cards and debit cards that make them contribute so positively to the world economy? Here are the reasons why the economy massively benefits from e-payment systems:
With electronic payments comes instant, quick and instant transactions. Quick transactions encourage people to buy things that they would otherwise (if they need more time and effort) have found needless to purchase.
With these efficient and instant transactions, people have more time to concentrate on other money-generating ventures which contribute to the economy.
E-payment systems increase the number of transactions made by consumers and businesses. Because of the ease of processing payments, merchants can quickly process transactions and move onto the next customer with so much ease.
A perfect example of how electronic payments affect the volume of transactions per day in Kenya’s M-Pesa. The mobile money transfer service enables users to send money using their mobile devices, lets users accept payments for goods and services and other services. Since its inception, Mpesa has seen a tremendous rise in the number of users and transactions and it recently surpassed the $10 billion per quarter.
The story is the same for VISA and Mastercard which are two of the biggest bank card service providers. The number of transactions is always on the rise as more people get access to these services. More transactions mean more money in circulation and growth in the economy.
Electronic payments reduce the risk of loss for both customers and merchants. People can make transactions involving a lot of money without fear of burglary. In the past, transactions involving lots of money attracted a lot of attention as one had to pay in cash and this increased the risk of being waylaid and robbed of your money.
Although there are cases of cyber theft involving electronic money, they are scattered and are easy to prevent and mitigate than those involving liquid cash.
The use of electronic money in government agencies increases transparency and reduces the loss of government resources to corruption. Transactions can be traced and any inconsistencies can be quickly spotted and used to prosecute the perpetrators of the financial crimes.
Corruption is very rampant in third world countries. Africa alone loses more than $50 billion every year to corruption and this really cripples the economies of its countries. With electronic payment inclusion in government agencies, much of this money can be put into good use and boost the continent’s economy.
Electronic payments are widespread and they are taking financial services to areas that used to be unexplored. Even people in most interior regions are able to pay for services using different methods and this means more money in the economy.
People are able to make international transactions right from their phones using their electronic payment modes and this means more money exchanging hands and a better economy all round.
So, now that we have seen the correlation between electronic payments and the economy, what does the future hold for e-payments?
With the world going digital every day, a lot of emphases will be on digital payments as money literally runs the world. The electronic payment avenues are bound to get better and cryptocurrencies are already here signifying the future of digital payments.
Almost every merchant in the next few years will accept electronic payments and the use of fiat currencies will reduce significantly. It is imperative, therefore, for businesses and other merchants to brace themselves for the inevitable change and get ready for the world of tomorrow.
Statistics and the numbers show that increased usage of electronic payments is directly proportional to economic growth and it is not surprising that governments are urging their citizens to embrace the new financial technologies as they boost the economies of countries.
Every single time you swipe to pay for some goods at your local store, book your flight ticket online, pay for your food at the local restaurant or even book for your next holiday using your bank card or any digital payment, you should know that you are positively contributing to the economy of the world.