Digital Payments drive the world economy and global trade.

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Cash isn't king. Cash-intensive economies expand slowly and lose financial gains. A study reveals that switching to digital may improve GDP by 3%.

Cashless payments are economic drivers in many countries. Bangladesh's bKash allows mobile phone transfers, boosting development and financial inclusion. Digital's positive is that it simplifies transmitting and receiving payments. Sweden and South Korea have ditched cash. Despite the data, there's little hint of a cashless future. Cash is the most-used payment method. The worldwide cash-to-GDP ratio climbed to 14.5% in 2021 from 8.16% in 2011. In Europe, 80% of sales are cash. People are emotionally attached to cash and mistrust digital alternatives.

Cash Versus Digital Payments

Smartphone use and demand for digital banking have grown tremendously, yet most nations still rely largely on cash. According to the World Bank, there are around 2 billion individuals in the world who do not have bank accounts. In many wealthy countries, cash is firmly ingrained in the economy. The total amount of money in circulation in the United Kingdom, including coins, notes, and other money-like objects.

For convenience's sake, cash has become a popular currency. It is open to everybody, trustworthy (as no third parties are involved), usable, and dependable. Without the use of point-of-sale (POS) technology, this method is impervious to hacking or system failure. Expenditure does not establish a data point that may be used for cross-selling purposes.

Even now, currency has intrinsic flaws. Payments made in cash that aren't reported cause tax problems, and there are also expenses connected with handling cash and generating receipts, moving it, and securing it. About $5 billion is spent each year by a big North American bank on cash and check transactions and ATM service. The annual cost of free ATM withdrawals in the United Kingdom is estimated to be over $1 billion. ATM fees are regressive, affecting lower-income groups more than others, when they are imposed.

?In contrast, payments made using a card, app, or computer are clear, orderly, and generally straightforward. Using this method eliminates the necessity for frequent visits to the ATM and the danger of having large sums of cash on you when out in public. There are no additional expenses associated with this (although those savings are more than offset by card fees paid by merchants and indirectly by customers).

Aside from this, the simplicity with which digital solutions like credit cards and apps enable people to send and receive money leads to increased economic activity and several financial and non-financial advantages.

A shift to a cashless economy will boost yearly GDP by roughly 1% in developed nations and by more than 3% in developing ones. One of the reasons is that mobile money may speed up the transmission of money. In addition, digital transactions allow for more transparency, making it simpler to provide and get finance more quickly and efficiently.

Impact of Electronic Payments?

The widespread usage of credit cards and debit cards contributes to the acceleration of economic growth on a global scale. Because of the rapid proliferation of electronic payment methods, particularly credit, debit, and prepaid cards, there has been a significant transformation in the manner in which individuals and businesses pay for goods and services over the course of the last half-century.?

Consumers have quicker access to their money, merchants have to handle less cash and cheques, and there is an increase in the number of customers who can be depended on to pay when they use electronic payment methods. Additionally, they seek to improve financial inclusion by providing these services to those who do not presently have access to a formal banking system. This aspect of their work contributes to their overall mission.?

Electronic payments enable governments to collect more tax revenue because they reduce the number of transactions related to the shadow economy that are able to escape detection. Because of this, the economy as a whole becomes more productive, and as a consequence of this, individuals are more willing to spend money. As a consequence of this positive economic cycle, increased consumption leads to an increase in employment, which in turn leads to improved salaries and a more affluent economy.

Buyers (also known as consumers) and sellers (also known as sellers) are two of the most significant stakeholders in the ecosystem of electronic payments (merchants).?

The transition away from cash and checks toward electronic payments has changed the behavior of customers and, in certain contexts, the dynamic of the relationship that exists between those customers and the companies that serve them.?

When there is widespread availability of electronic payment systems, an increase in consumption leads to increased production, which in turn leads to more employment, improved income, and a quicker expansion of the economy.?

Even while this study does not go into depth regarding the sources of the rise in GDP that has been ascribed to card usage, there are a number of reliable explanations available.?

Because they provide consumers quick access to all of their available funds and so make it much simpler for customers to make more financially responsible purchasing decisions, debit cards and credit lines have become more popular (credit cards).?

As a result of the reduced volume of cash and check transactions that need to be processed by the system, retailers may have access to a wider pool of customers who are reliable in timely bill payments.?

In today's rapidly evolving world of eCommerce, paying with cash or a check is becoming an increasingly rare alternative. As a result, the use of electronic payment methods has become absolutely necessary.

Electronic payments provide access to financial resources.

Consumers using cash or checks may be limited in the number of funds they have for particular transactions. With cash, consumers are limited to the funds they have on hand. Merchants may be reluctant to accept checks for bigger transactions because of the risk of non-payment.

Access to credit helps calibrate periodic income with continuous consumption.

Wages and salaries are typically paid weekly, biweekly or monthly. Consumer spending, however, has no time profile. Putting food on the table or fixing a broken-down vehicle should not have to wait for the next paycheck. Credit smooths out the consumption of durable and nondurable goods by lessening the need to wait for paydays.

Cards provide consumers the means to participate in the digital economy.

In most cases, online shoppers are required to use cards for purchases. Cardholders thereby have a larger variety of goods and vendors to choose from and a broader international marketplace is made available to consumers.

Security

Trust in electronic transactions further drives consumption. With electronic payments, consumers have recourse for fraudulent transactions. The peace of mind that merchants have with guaranteed payment also extends to consumers, who feel more comfortable making purchases when they can pay with a card.

Cards provide convenience and lower business costs.

Consumers cite the convenience of electronic payments, whether it means not having to visit the ATM to obtain cash or not having to count out the cash at the point of transaction. This convenience benefits merchants as well.

Transparency

Electronic payments reduce central bank costs in providing currency. By reducing paper transactions, electronic payments can reduce the cost to central banks of providing notes and coins or to Treasury or Finance departments of processing paper money, thereby improving overall efficiency in commerce and the economy.

Electronic transactions eliminate a substantial portion of the Grey economy. Retailers who do not report some or all of their transactions to avoid paying certain taxes usually prefer cash transactions. Electronic transactions, on the other hand, are “above board” and create an audit trail that greatly reduces unreported transactions, thereby raising tax revenues.

Speed

When it comes to payment transactions, the speed of the payment method matters the most. That is why online sellers, like Amazon sellers, prefer those methods that are quick and efficient when receiving a payment. Sellers are more inclined to receive their payments either simultaneous with the purchase transaction or within the day. And this is why sellers would choose modern online payment methods due to quick transaction clearing.

Revenue Increase

Apart from speed, one of the benefits of e-payment is the increase in profit. As years pass by, more and more consumers are turning to online shops for their purchases rather than going to traditional stores.

Conclusion,?

The widespread use of credit and debit cards has been shown to have a positive impact on economic growth on a yearly basis through a number of different channels, including the effectiveness of financial transactions, the availability of credit to customers, and the confidence of customers in the financial system. The increased usage and market penetration in an economy lead to an increase in individual consumption.

The numerous players in the payment ecosystem were affected by the efficiencies in a variety of different ways; nonetheless, there is a positive relationship between increased card penetration and usage and economic growth across all countries and markets. When more individuals use credit cards, it has a positive impact on consumption as well as GDP. The effect of such a boost will increase in proportion to the level of market penetration.

It is in the interest of the economy to increase the usage of credit and debit cards since this lowers the costs associated with transactions and improves the efficiency of the flow of goods and services. It is not necessary to carry cash while using a credit or debit card, which removes the potential hassle that comes along with doing so in both developed and underdeveloped nations. Electronic payments and regulations that promote their usage will continue to stimulate economic growth.