Digital payments to help Dhaka save $1.5b a year: study

Use of digital payments can help Dhaka save $1.5 billion annually, according to a report recently released by Visa, the global leader in digital payments technology.

The report estimated that relying more on electronic payments, such as cards and mobile payments, could yield a net benefit of up to $470 billion per year across the 100 cities studied – roughly, equivalent to 3 percent of the average gross domestic product (GDP) of these cities.

The study—Cashless cities: realising the benefits of digital payments—was conducted by Roubini Thought Lab and commissioned by Visa.

It examined the economic impact of increasing the use of digital payments in 100 major cities around the world, including Dhaka.

Some 3,000 consumers and 900 businesses have been surveyed in 2016 to examine the use, acceptance and cost-benefit impact of physical and digital money.

For example, Dhaka, with a population of 15.82 million and GDP of $47.8 billion, could gain $1.5 billion in annual net benefits.

Estimated catalytic impacts for the city over the next 15 years include a 34.9 basis point increase in GDP growth rate and 4.4 percent increase in employment.

“Dhaka could achieve, on average, $1.5 billion in annual net benefits – roughly the equivalent to 3 percent of the city's average GDP,” said TR Ramachandran, group country manager of Visa in India and South Asia.

Cities are the new engines of economic growth and they must embrace digital payments to unlock their true economic potential and become globally competitive, he said.

“This global study shows how becoming more cashless delivers real benefits to the governments, businesses and consumers, stimulating long-term economic growth,” said Ramachandran.

By reducing reliance on cash, the study estimated the immediate and long-term benefits for three main groups -- consumers, businesses and governments.

According to the study, these benefits could add up to combined direct net benefits of around $470 billion across the 100 cities.

The study found that 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 savings conducting banking, retail and transit transactions, in addition to a reduction in cash-related crime.

Also, businesses across the 100 cities could achieve more than $312 billion per year in estimated direct benefits.

This impact would be derived 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 cheques 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 and economic growth, cost savings from administrative efficiencies and lower criminal justice costs due to reduced cash-related crime.

“The use of digital technologies -- from smart phones and wearables to artificial intelligence and driverless cars -- is rapidly transforming how city dwellers shop, travel, and live,” said Lou Celi, head of Roubini Thought Lab.

“Without a firm foundation in electronic payments, cities will not be able to fully capture their digital future, according to our analysis.”

The report made 61 recommendations for the policymakers to help their cities become more efficient through greater adoption of digital payments.

Recommendations include undertaking financial literacy programmes to help move the unbanked into the banking system, implementing incentives to stimulate innovation focused on scaling new payment technologies, implementing secure open-loop payment systems across all transportation networks and more.