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Retail payments and economic growth

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  • Hasan, Iftekhar
  • De Renzis, Tania
  • Schmiedel, Heiko

Abstract

This paper examines the fundamental relationship between retail payments and overall economic growth. Using data from across 27 European markets over the period 1995-2009, the results confirm that migration to efficient electronic retail payments stimulates overall economic growth, consumption and trade. Among different payment instruments, this relationship is strongest for card payments, followed by credit transfers and direct debits. Cheque payments are found to have a relatively low macroeconomic impact. Retail payment transaction technology itself is also associated positively to real economic aggregates. We also show that initiatives to integrate and harmonise retail payment markets foster trade and consumption and thereby have a beneficial effect for whole economy. Additionally, the findings reveal that the impact of retail payments on economic growth is more pronounced in euro area countries. Our findings are robust to different regression specifications. The study supports the adoption of policies promoting a swift migration to efficient and harmonised electronic payment instruments.

Suggested Citation

  • Hasan, Iftekhar & De Renzis, Tania & Schmiedel, Heiko, 2012. "Retail payments and economic growth," Bank of Finland Research Discussion Papers 19/2012, Bank of Finland.
    • Handle: RePEc:zbw:bofrdp:rdp2012_019
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    1. Yi-Xun Pang & Sin-Huei Ng & Wei-Theng Lau, 2022. "Digital Cashless Payments and Economic Growth: Evidence from CPMI Countries," Capital Markets Review, Malaysian Finance Association, vol. 30(2), pages 63-89.

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    More about this item

    Keywords

    retail payments; economic growth; financial development;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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