New Job Places Increasing by 2.6 Million Annually Thanks to Electronic Payments, says Moody’s

According to a Moody’s study commissioned in 2011-2015 by Visa Inc and conducted in 70 countries, which constitute 95 percent of the global GDP, the increased usage of electronic payment products, including credit, debit and prepaid cards has increased while the use of consumption products has risen by 0.18 percent per year. As a result of increased electronic payments over the five-year period, 2.6 million new jobs have been created annually.

“Electronic payments represent an important contributor to economic growth and employment creation. In those countries where card usage occurred most, economic growth also increased,” said Mark Zandi, Chief Economist of Moody’s.

The report release by Visa Inc shows that payment electrification has benefited governments and contributed to the creation of a more stable and transparent business environment. At the same time, the electronic payments system has minimized the shadow economy, creating a high tax revenue basis for governments. It has also created an additional benefit for low-budget cash expenses and offered a guarantee for trade subjects, says the report.

“The study shows that the right public policy can create an open, competitive tax environment which will benefit both economic growth and job creation,” noted Charles W. Scharf, Chief Executive Officer, Visa Inc. “Visa Inc is in partnership with numerous governments, financial institutions, trade and technology companies globally, together with whom we create innovative products,’ he added.

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. In Russia GDP increase was estimated at 0.33%, in Ukraine – 0.07%, while in Azerbaijan and Kazakhstan GDP increase reached 0.03% and 0.02% respectively.

Contribution to Employment

Increased card usage added the equivalent of 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. In the CIS region, 235,000 new jobs were created in Russia, and around 13,520 news jobs were added in Ukraine. In Kazakhstan and Azerbaijan increased card usage added the equivalent of 2,080 and 1,130 jobs respectively.

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 suggest 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 USD 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, in order to encourage the further electrification of payments, countries must promote policies that minimize unneeded regulation, create a robust financial infrastructure, and lead to greater consumption.

“Consumers are using cards for payments more and more. In 2011-2015 a stable growth of Visa card usage was seen across the Visa CISSEE markets. As the Moody’s results suggest, migration to electronic payments added nearly USD 460 million to the GDP in Ukraine, USD 70 million in Azerbaijan and USD 210 million in Kazakhstan,” said Dmytro Krepak, Visa Country Manager for Ukraine, Georgia and Armenia. “This is the result of close partnership between all industry stakeholders, including Visa client-banks, regulators, merchants and other players. We’re committed to working further with all interested parties to reach our common goal – accelerated migration to electronic payments for the benefit of national economies.”

Meri Taliashvili