Electronic payments contribute to economic growth
Feb 16, 2013 Dave King
Electronic payments represent a massive opportunity to drive growth in the modern era, as more consumers and businesses continue to procure and use new devices that enable the transaction capability. Companies have increasingly turned to automated payments, such as ACH cards and wire transfers, for a variety of regular payables including payroll and vendor transactions.
Studies indicate that electronic payment processing will continue to grow, and has largely contributed to the economic recovery. These types of transactions have proven more efficient, streamlined and affordable than traditional transaction methods, and have also reached demographics that were once impossible to penetrate, such as the unbanked and underbanked populations.
Companies can launch prepaid card programs, as well as electronic payment processing capabilities to boost engagement with consumers and drive revenues. Still, security needs to be the biggest priority for any business using ACH cards, wire transfers and other electronic payments, as identity thieves and other criminals have increasingly targeted these transactions in recent years.
Contributing to overall revenue growth
BankCreditNews recently reported that a new study by Moody's Analytics found electronic payments have helped to strengthen global gross domestic product (GDP) in the past four to five years. The research indicated that global GDP increased $983 billion between 2008 and 2012, which Moody's believes to have created almost two million jobs.
According to the news provider, researchers surveyed people in nearly 60 countries that comprise more than 90 percent of overall GDP, looking to see the impact electronic payments have had on local economies, as well as the global financial situation. Plastic card usage was a major component of increased GDP growth through electronic payments.
"Card usage makes the economy more efficient, yielding a meaningful boost to economic growth, year after year, through a multitude of factors including transaction efficiencies, consumer access to credit and consumer confidence in the payment system overall," read the report, according to the source.
The study found that credit and debit card usage alone helped to boost GDP by 0.3 percent, translating to a much needed $127 billion of additional production and revenues in the harshest years of the Great Recession and those directly following.
BankCreditNews noted that electronic payment processing has been especially helpful for the merchant sector, as these professionals have been able to circumvent a variety of risks associated with cash.
"The increase in consumption parallels the growing popularity and accessibility of electronic payments among global consumers, and the findings point to the need for governments to adopt policies that encourage the shift to efficient and secure electronic forms of payments," Mark Zandis, Chief Economist of Moody's Analytics, explained.
Growth in the north
A separate release from Moody's indicated that the Canadian GDP was largely improved by electronic payments. According to the firm, electronic payment processing was among the biggest drivers of economic health in the North American nation throughout the years surveyed.
"With growing card usage contributing $9.7 billion to Canada's GDP, there's no denying the benefits of electronic payments here, or the importance of maintaining an open marketplace to encourage competition and innovation within the industry," Jim Allusen of Visa, which funded the study, explained. "We can see from the data that the positive impact in economic growth is a direct result of card usage and is tied to the benefits electronic payments offer, including enhanced security, convenience of operating without cash or check, increased efficiency at checkout and a reduction in the grey economy."
Security a priority
While the efficiency and economic gains of electronic payments are undeniable, businesses still need to focus on security to ensure the most profitable and protected strategy. By keeping a close eye on all accounts payable and receivable activities, companies can mitigate the risks of fraud and identity theft.