Author: Mei Ling Tan

Increased use of electronic payments, including credit, debit and prepaid cards, added US$3.18 billion (approximately THB 113 billion) or 0.19% GDP growth to Thailand’s economy from 2011 to 2015, the largest weighted average increase in Asia, according to research conducted by Moody’s Analytics for Visa.

Thailand’s growth triples that of the regional average GDP increase of 0.06% with Vietnam following at 0.14% and Singapore at 0.1%. Increased electronic payment usage also created the equivalent to an average of 75,730 jobs in Thailand per year in the same period.

Suripong Tantiyanon, Visa Country Manager, Thailand said: “These findings reinforce the many positive benefits that electronic payments bring to local economies not just in Thailand but all over the world. This research also suggests that the right public policies can create an open, competitive payment environment, and contribute to economic growth and job creation.”

“In Thailand, Visa has partnered with financial institutions, merchants, technology companies, and government agencies such as Tourism Authority of Thailand to make electronic payment accessible to everyone – accelerating electronic acceptance, growing commerce both online and offline, facilitating tourism, and in general bringing the benefits of card payments nationwide,” added Mr. Suripong.

The Moody’s Analytics study analyzed the impact of electronic payments on economic growth across 70 countries between 2011 and 2015. The Visa-commissioned study found that increased use of electronic payment products, including credit, debit and prepaid cards, added US$296B to GDP, while raising household consumption of goods and services by an average of 0.18 percent per year.

In addition, Moody’s economists estimate that the equivalent to 2.6 million new jobs were 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 percent of global GDP.

“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 minimize 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.

Highlights of the global study include:

• Growth Opportunities:

Card Penetration: Real consumption grew at an average of 2.3 percent from 2011 to 2015, of which 0.01 percent is attributable to increased card penetration. This implies that card usage accounted for about 0.4 percent 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.

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%), 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, 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.

• Emerging Markets and Developed Countries:

Both emerging markets and developed countries experienced gains in consumption due to higher card 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 corresponding figures for GDP were 0.11 percent for emerging economies and 0.08 percent for developed countries, and suggests that all markets, regardless of current card penetration rates, can benefit from 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 of electronic payments 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 percent to GDP attributable to card usage.

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 streamline regulation, create a robust financial infrastructure, and lead to greater consumption.