Percentage of Personal Consumer Expenditure transacted on Visa cards in the GCC still less than 6 percent creating a cost for local economies
Dubai: Electronic payments are more efficient than cash and bring significant benefits to consumers, merchants, banks and economies as a whole, said Anne L Cobb, President Visa International, CEMEA speaking at the Channels 2005 Global Banking Strategy Summit in Dubai.
"Efficient, safe and convenient electronic payments carry with them a significant range of macro-economic benefits," said Mrs Cobb. "The impact of introducing electronic payments is akin to using the gears on a bicycle. Add an efficient electronic payments system to an economy, and you kick it into a higher gear. Add better-controlled consumer and business credit, and you notch up economic velocity even further."
Mrs Cobb noted, however, that despite rapid progress in the GCC and a 39 percent increase in Retail Sales Volume (spending at the point of sale using Visa cards) during the year ending 30 September 2004, "cash is still king" with the percentage of Personal Consumer Expenditure (PCE) that is transacted on Visa cards less than 6 percent.
While the high level of cash transactions creates an opportunity for the electronic payment industry, said Mrs Cobb, it also imposes a cost on local economies. "Cash has to be minted, securely transported, counted and reconciled, kept secure and maintained for re-use time and time again," said Mrs Cobb. "The per-payment cost is high, and will always remain high whereas the costs of the electronic system are fixed" she said. "Once the infrastructure has been built, the costs per-transaction of Visa are very low."
Cobb noted the virtuous circle created by the strong link between a healthy payment card sector, a healthy banking sector and a healthy economy. "When cardholders use their cards at point of sale they are helping to keep money in the banking system - using cards at point of sale leads to an increase in household deposits. In the UAE alone household deposits increased by 14% in 2003. All these good things are connected," she said.
Speaking about the healthy state of the GCC financial sector with strong growth and over 8 million Visa cards already issued, Mrs Cobb highlighted the additional macro-economic benefits of electronic payments that are often overlooked. "They can help displace shadow economies, bring hidden transactions into the banking system and increase transparency, confidence and participation in the financial system. "
Referring to research carried out by Global Insight, the leading US-based econometric forecasting firm, on the country-specific responsiveness of PCE to changes in payment card expenditure as a share of total consumer expenditure, Dr Said Al Shaikh, Chief Economist at National Commercial Bank noted the correlation in Saudi Arabia between the increase in point of sales volumes and the rise in demand deposits.
"Automated electronic payments act as a gateway into the banking system and as a powerful engine for growth," said Dr Al Shaikh. "Such payments draw cash out of circulation and into bank accounts, providing low-cost funds that can be used to support bank lending for investment - a driver of overall economic activity. The process creates greater transparency and accountability, leading to greater efficiency and better economic performance."
Global Insight's research model, which draws on data from across 50 countries over a 10-year period, including the UAE, Kuwait and Saudi Arabia, suggests that a 10 per cent rise electronic payments' share of consumer expenditure in the MENA region can result in a one per cent rise in Gross Domestic Product (GDP).
"Electronic payments can thus lower transaction costs, stimulate higher consumption and GDP, increase government efficiency, boost financial intermediation and improve financial transparency," concluded Mrs Cobb adding that "governments play a critically important role in creating an environment in which these benefits can be achieved in a way consistent with their own economic development plans."
-Ends-
About Visa:
Visa is the world's leading payment brand generating nearly US$3 trillion in annual card sales volume. Visa has unsurpassed acceptance in more than 150 countries. The Visa organisation plays a pivotal role in developing innovative payment products and technologies to benefit its 21,000 member financial institutions and their cardholders. Visa is a leader in Internet based payments and is pioneering the creation of u-commerce, or universal commerce--the ability to conduct commerce anywhere, anytime, and any way. For more information, visit www.corporate.visa.com
Visa International is committed to working with governments, regulators and its member banks to support the development of a cashless society. Electronic payments such as Visa card payments support economic growth through increased banking deposits, which provide additional funds for commercial loans - the lifeblood of a growing economy - bringing benefits to consumers, merchants, the banking sector and the economy.
For further information please contact:
Fakher Daghestani / Sudha Hemmad
ASDA'A Public Relations
ASDA'A Public Relations
Tel: + 9714 3344550
Fax: + 9714 3344556
Email: f.daghestani@asdaa.com
s.hemmad@asdaa.com
© Press Release 2005
