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Digital Payments Linked to GDP Growth

The Bank for International Settlements (BIS) has published a working paper examining the relationship between innovation, economic growth and informal activities. This is based on data from 101 economies from 2014-2019.

The paper found that a 1% increase in digital payments use is associated with increases in the growth of GDP per capita of 0.10% over a two-year period, and a decline in the share of informal sector employment of 0.06% over a two-year period. Given that the uptake of digital payments varies widely between zero and 100%, the paper sees this as being substantial.

There does not appear to be a strong linkage between digital payments and total factor productivity, since the linkage observed appears to reflect that digital payments are highly correlated with measures of internet penetration and government effectiveness, which themselves boost productivity growth. There is, however, a link to greater financial inclusion and credit access.