Visa commissioned an independent study conducted by Roubini ThoughtLab examining the economic impact of increasing the use of digital payments in major cities around the world. The study found that relying more on electronic payments, such as cards and mobile payments, could yield a net benefit of up to U.S. $470 billion per year across 100 cities around the world, roughly the equivalent to 3% of the average GDP for these cities.
Named “Cashless Cities: Realizing the Benefits of Digital Payments”, the study quantifies the potential net benefits experienced by cities which move to an “achievable level of cashless-ness”, defined as the entire population of a city moving to digital payment usage equal to the top 10% of users in that city today. The study estimates the immediate and long-term benefits for three main groups (consumers, businesses, and governments) and offers 61 recommendations for policymakers to help their cities become more efficient through greater adoption of digital payments.
Nairobi, Kenya, is ranked as “digitally transitioning” as it has a moderate adoption readiness, low digital payments usage, and a high unbanked population. The pace of digital change, however, is accelerating around the world, and in Kenya, the national and county governments and businesses are embracing smart technology and cashless payment solutions for services offered. With the right infrastructure, the country will move to be a digital leader of mobile money payments, which are a great accelerator of a cashless society.
Roubini Thoughtlab found that adding to the combined direct net benefits of approximately U.S. $470 billion across the 100 cities, more benefits arise:
- Consumers across the 100 cities could achieve nearly $28 billion per year in estimated direct net benefits. This impact would be derived from factors including up to 3.2 billion hours in time-saving conducting banking, retail and transit transactions, in addition to a reduction in cash-related crime.
- Businesses across the 100 cities could achieve more than $312 billion per year in estimated direct benefits. This impact would derive from factors including up to 3.1 billion hours in time savings processing incoming and outgoing payments and increased sales revenues stemming from extended online and in-store customer bases. The study also found that accepting cash and checks costs businesses 7.1 cents of every dollar received compared to 5 cents of every dollar collected from digital sources.
- Governments across the 100 cities could achieve nearly $130 billion per year in estimated direct benefits. This impact would be derived from factors including increased tax revenues, increased economic growth, cost savings from administrative efficiencies and lower criminal justice costs due to reduced cash-related crime.
Ellen Richey, Visa’s vice chairman, and chief risk officer commented: “This study demonstrates the substantial upside for consumers, businesses, and governments as cities move toward greater adoption of digital payments. Societies that substitute digital payments for cash see benefits from greater economic growth, less crime, more jobs, higher wages, and increased worker productivity.”
Lou Celi, Head of Roubini ThoughtLab, said: “The use of digital technologies—from smartphones and wearables to artificial intelligence and driverless cars—is rapidly transforming how city dwellers shop, travel and live. Without a firm foundation in electronic payments, cities will not be able to fully capture their digital future, according to our analysis.”
The positive impacts can extend beyond financial benefits to consumers, businesses, and government, as the study predicts a catalytic effect on the city’s overall economic performance, including GDP, employment, wage, and productivity growth.
Financial literacy programs, incentives to stimulate innovation focused on scaling new payment technologies, and secure open-loop payment systems across all transportation networks, are a few recommendations to help develop cashless cities.