Retail payments and economic growth

Discussion Papers
Retail payments and economic growth
19/2012
Author(s):
Iftekhar Hasan – Tania De Renzis – Heiko Schmiedel
2012. 37 pages.
Publisher:
Bank of Finland
ISBN:
978-952-462-806-8
(Web publication)
ISSN:
1456-6184
(Web publication)
 
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.