Rarely use cash to pay for purchases? You may be helping to boost Canada’s GDP, a new study has found.
The growth in the use of electronic payment products, such as credit and debit cards, added US$9.7 billion to Canada’s gross domestic product (GDP) over the past four years, according to the study, conducted for Visa by Moody’s Analytics.
“We can see from the data that the positive impact in economic growth is a direct result of card usage and is tied to the benefits electronic payments offer, including enhanced security, convenience of operating without cash or cheques, increased efficiency at checkout and a reduction in the grey economy,” said Jim Allhusen, Visa country manager for Canada, in a statement on the findings.
The study examined 56 countries, representing 93 percent of the global GDP. Electronic payments contributed $983 billion to the GDP of these countries between 2008 and 2012, the study found, and GDP in those countries grew by an average of 1.8 percentage points in the same time period.
Without increased card usage, that growth would have been 1.6 percent, according to the study.
“Card penetration and usage provided an important boost to economies, helping to mitigate what would otherwise have been an even slower recovery from the global recession,” the study stated.
These findings point to the need for governments to adopt policies that encourage the shift to efficient and secure electronic forms of payments.
— Mark Zandi, chief economist of Moody’s Analytics
In addition to the US$9.7 billion increase in Canada, throughout North America electronic payments helped increase GDP in the U.S. by US$127.4 billion and in Mexico by $7.8 billion. Moody’s Analytics found that a 1 percent increase in card usage across the 56 countries produced an annual increase of 0.056 percent in consumption.
“Despite a challenging global economic landscape, the increasing penetration of payment cards helped increase consumer consumption and on average, added to GDP,” Mark Zandi, chief economist of Moody’s Analytics, said in the statement.
Zandi added that although the growing popularity of electronic payments clearly demonstrates a shift in consumer behaviour, governments may need to adopt new policies in order to catch up to this reality.
“These findings point to the need for governments to adopt policies that encourage the shift to efficient and secure electronic forms of payments,” he said.
The study concluded that increased credit and debit card usage contributes to economic activity primarily by reducing transaction costs and improving efficiency in the flow of goods and services.
By giving consumers secure and immediate access to all of their funds, credit and debit cards have aided consumers’ ability to make purchasing decisions. Merchants also benefit because there is less cash and cheque handling in the system, eliminating the burdens and risks associated with holding cash.
“Card usage makes the economy more efficient, yielding a meaningful boost to economic growth,” stated the study.
The research also credited electronic payment systems for paving the way for the growth of eCommerce and mobile payment methods, saying it “would not be possible” to advance these new forms of payment without first laying the foundation through trusted, safe, and easy electronic money transfer systems.
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