Use of elec­tronic pay­ments helps boost UAE GDP, jobs

The Pak Banker - - COMPANIES/BOSS -

In­creased use of elec­tronic pay­ment prod­ucts, in­clud­ing credit, debit and pre­paid cards, added $3.7 bil­lion to the UAE's GDP in five years while across 70 coun­tries the im­pact helped add $296 bil­lion to the economies, a study has found. The UAE recorded a 0.23 per cent in­crease in GDP due to in­creased card us­age dur­ing the five-year pe­riod (2011-2015) stud­ied. In­creased elec­tronic pay­ment us­age cre­ated the equiv­a­lent to an av­er­age of 14,170 jobs in the UAE per year be­tween 2011 and 2015.

Like the other no­table mar­kets, UAE ex­pe­ri­enced over a six per­cent­age point in­crease in card us­age, said the study, con­ducted by Moody's An­a­lyt­ics and com­mis­sioned by Visa. In Saudi Ara­bia, in­creased elec­tronic pay­ment us­age added $3.43 bil­lion to the coun­try's GDP from 2011 to 2015 while Egypt recorded $10 mil­lion ad­di­tion to its GDP in five years.

The study said the use of elec­tronic pay­ment prod­ucts also raised house­hold con­sump­tion of goods and ser­vices by an av­er­age of 0.18 per cent per year.

In ad­di­tion, Moody's econ­o­mists es­ti­mate that the equiv­a­lent to 2.6 mil­lion new jobs was cre­ated on av­er­age, an­nu­ally, over the five-year pe­riod as a re­sult of in­creased use of elec­tronic pay­ments. The 70 coun­tries in the study make up al­most 95 per cent of global GDP.

Moody's found that ev­ery one per cent in­crease in us­age of elec­tronic pay­ments across the 70 coun­tries in the study could pro­duce, on av­er­age, an an­nual in­crease of ap­prox­i­mately $104 bil­lion in the con­sump­tion of goods and ser­vices. "As­sum­ing all fu­ture fac­tors re­main the same, this could re­sult in an an­nual av­er­age in­crease of 0.04 per cent to GDP at­trib­ut­able to card us­age," said the study.

"Elec­tronic pay­ments are a ma­jor con­trib­u­tor to con­sump­tion, in­creased pro­duc­tion, eco­nomic growth and em­ploy­ment cre­ation," said 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.

Elec­tronic pay­ments also 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.

"Th­ese find­ings re­in­force the many pos­i­tive ben­e­fits that elec­tronic pay­ments bring to lo­cal economies all over the world," said Char­lie W. Scharf, chief ex­ec­u­tive of­fi­cer, Visa. This re­search also sug­gests that the right pub­lic poli­cies can cre­ate an open, com­pet­i­tive pay­ment en­vi­ron­ment, and con­trib­ute to eco­nomic growth and job cre­ation."

Dur­ing the five-year pe­riod, real con­sump­tion grew at an av­er­age of 2.3 per cent, of which 0.01 per cent is at­trib­ut­able to in­creased card pen­e­tra­tion. This im­plies that card us­age ac­counted for about 0.4 per cent of growth in con­sump­tion. Since con­sump­tion growth is, on av­er­age, faster in emerg­ing economies, those coun­tries also have more to gain by in­creas­ing card us­age.

Coun­tries with the largest in­creases in card us­age ex­pe­ri­enced the big­gest con­tri­bu­tions in growth. For ex­am­ple, big in­creases in GDP were recorded in Hun­gary (0.25 per cent), the UAE (0.23 per cent), Chile (0.23 per cent), Ire­land (0.2 per cent), Poland (0.19 per cent) and Aus­tralia (0.19 per cent).

In most coun­tries, card us­age in­creased re­gard­less of eco­nomic per­for­mance. In­creased card us­age added the equiv­a­lent to al­most 2.6 mil­lion jobs on av­er­age, per year, across the 70 coun­tries sam­pled be­tween 2011 and 2015. No­tably, the two coun­tries with the great­est av­er­age job in­creases were China (427,000 jobs added) and In­dia (336,000 jobs added), which both had large gains in em­ploy­ment due to the com­bi­na­tion of fast grow­ing la­bor pro­duc­tiv­ity and in­creased card us­age.

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