The Power of Electronic Payments Stimulates Economic Growth in Middle East & Africa

• Debit & credit card usage added approximately US$18 billion to the economies in Middle East & Africa between 2008 & 2012: study

• Card usage adds US$4.2 billion to UAE’s GDP and US$ 4.7 billion to GDP of KSA in the four-year period

Dubai, March 24, 2013 – Growth in the use of electronic payment products, such as credit and debit cards, added approximately US$18 billion to the economies in the Middle East and Africa [MEA] region, according to a study conducted for Visa by Moody’s Analytics, a leading independent provider of economic forecasting.

The study of 56 countries, including the MEA, that represent 93 per cent of global GDP, concluded that “card usage makes the economy more efficient, yielding a meaningful boost to economic growth.”

In absolute terms, the growth in the use of credit and debit cards added US$ 4.2 billion to the GDP of UAE, US$ 4.7 billion to GDP of Saudi Arabia, US$ 7.8 billion to GDP of South Africa, US$ 1.2 to GDP of Kuwait and US$ 0.4 billion to Qatar’s GDP between 2008 and 2012, the study said.

Globally, electronic payments contributed $983 billion to the GDP of the 56 countries examined in the four-year period. Over the same time, GDP in those countries grew by an average of 1.8 percentage points.

“With growing card usage contributing US$ 4.2 billion to the GDP of UAE and approximately US$ 18 billion to the economies in the region, 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. 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 checks, increased efficiency at checkout and a reduction in the grey economy,” said Kamran Siddiqi, Visa General Manager for Middle East and North Africa.

He continued, “We are excited about the prospects of increasing electronic payments in the UAE and beyond through new, innovative solutions, and we look forward to working with local businesses, governments and industry stakeholders to continue to expand and support local economic growth.”

“Despite a challenging global economic landscape, the increasing penetration of payment cards helped increase consumer consumption and on average, added to GDP,” noted Mark Zandi, Chief Economist of Moody’s Analytics. “The increase in consumption parallels the growing popularity and accessibility of electronic payments among global consumers. At the same time these findings point to the need for governments to adopt policies that encourage the shift to efficient and secure electronic forms of payments.”

Highlights of the study include:

• Value of Electronic Payments: The study concluded that increased credit and debit card usage contributes to economic activity by reducing transaction costs and improving efficiency in the flow of goods and services. The advent of credit and debit cards has greatly aided consumers’ ability to optimize consumption decisions by giving them secure and immediate access to all of their funds on deposit or a line of credit. Merchants also benefit because there is less cash and check handling in the system, eliminating the burdens and risks associated with holding cash. In addition, the dramatic growth of eCommerce and mobile payment methods would not be possible without global electronic payment systems which allow the safe and easy transfer of funds and guaranteed payment to merchants.
• Supporting Government: Electronic payments lead to a reduction in the gray economy by increasing transparency and generating additional tax revenue.
• Impact of Future Card Growth: Moody’s Analytics found that a one per cent increase in card usage across the 56 countries in the study produces an annual increase of 0.056 per cent in consumption. Given recent card penetration growth rates and the additive effects calculated on future GDP, Moody’s Analytics estimates a meaningful 0.25 per cent addition to consumption and 0.16 per cent additional GDP.
• Card Growth Boosts Recovery: From 2008 to 2012, global real GDP was only 1.8 per cent per annum. Without increased card usage, that growth would have been 1.6 per cent. Card penetration and usage provided an important boost to economies, helping to mitigate what would otherwise have been an even slower recovery from the global recession.

This survey is the second iteration, following a study conducted by Moody’s Analytics from 2003 to 2008.