Retail Payments and Economic Growth

41 Pages Posted: 5 Jul 2012

See all articles by Iftekhar Hasan

Iftekhar Hasan

Fordham University ; Bank of Finland; University of Sydney

Tania De Renzis

European Securities and Markets Authority

Heiko Schmiedel

European Central Bank - Securities Settlement Systems Policy Division

Date Written: April 20, 2012


This paper examines the fundamental relationship between retail payments and overall economic growth. Using data from across 27 European markets over the period 1995–2009, the results confirm that migration to efficient electronic retail payments stimulates overall economic growth, consumption and trade. Among different payment instruments, this relationship is strongest for card payments, followed by credit transfers and direct debits. Cheque payments are found to have a relatively low macroeconomic impact. Retail payment transaction technology itself is also associated positively to real economic aggregates. We also show that initiatives to integrate and harmonise retail payment markets foster trade and consumption and thereby have a beneficial effect for whole economy. Additionally, the findings reveal that the impact of retail payments on economic growth is more pronounced in euro area countries. Our findings are robust to different regression specifications. The study supports the adoption of policies promoting a swift migration to efficient and harmonised electronic payment instruments.

Keywords: retail payments, economic growth, financial development

JEL Classification: G20, G21

Suggested Citation

Hasan, Iftekhar and De Renzis, Tania and Schmiedel, Heiko, Retail Payments and Economic Growth (April 20, 2012). Bank of Finland Research Discussion Paper No. 19/2012. Available at SSRN: or

Iftekhar Hasan (Contact Author)

Fordham University ( email )

NEW YORK, NY 10023
United States

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101

University of Sydney ( email )

P.O. Box H58
Sydney, NSW 2006

Tania De Renzis

European Securities and Markets Authority ( email )

103 Rue de Grenelle
Paris, 75007

Heiko Schmiedel

European Central Bank - Securities Settlement Systems Policy Division ( email )

Directorate General Payment Systems
Kaiserstrasse 29
D-60311 Frankfurt am Main
+49-69 13 44 70 59 (Phone)
+49-69 13 44 60 00 (Fax)

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