Electronic Payments Boost Growth in Canada by 25%, Report Shows

Making transactions more efficient has long been a driving force behind the conversion of paper-based to electronic systems, but now a new report shows how efficiencies derived from electronically processed payments contribute to a national economy. The report, entitled “The Benefits of Electronic Payments in the Canadian Economy,” was released last week by Visa Canada and indicates that efficiencies from credit and debit card transactions, together with other electronically processed payments, accounted for almost 25% of Canada's cumulative economic growth since 1983. This represents C$107 billion ($79 billion) in growth over that span that would not have occurred without electronic transactions. In the past 10 years, the report says, the fraction of all consumer transactions accounted for by electronic payment methods has grown to almost half from about 20%. “This study makes it clear that electronic payments drive the economy by enhancing transactional efficiencies and expanding payment channels,” said Jack Carr, an economist at the University of Toronto who advised on the economic model in the report, in a statement. The study, sponsored by Visa Canada and conducted by Global Insight Inc., says the “transactional efficiencies” of electronically processed payments stem from lower costs for payment systems and increased economies of scale in transaction processing. It estimates these efficiencies at as much as 1% of the value of goods and services produced by the economy. Beyond its overall contribution to the economy, electronic payments also have enhanced personal consumption in Canada, the report found, with C$60 billion ($44 billion) in personal spending added over the past 20 years. It attributes more than 82% of this growth to credit cards and about 17% to debit cards. “Although both card types contribute to transactional efficiencies, credit cards have a greater economic impact by virtue of the liquidity provided to users at the point of sale,” the report notes. Global Insight, at the behest of Visa Canada, developed a model to measure the effect on economic growth of electronic transactions, the report says, because “while it is widely understood that electronic payments help drive economic growth, there are few empirical studies to support this assumption.”