Nexus between Cashlessness and Economic Growth: Comparative Evidence from Developing and Developed Economies

Abstract

An economic system defined as the "cashless payment system" replaces the traditional physical national exchange stream with modern technological platforms, including internet banking, plastic card introductions, and online transactions. The transition from a cash payment system to a cashless system often occurs in four fundamental stages, according to Thomas (2013), which are categorized as inception, transitioning, tipping, and advanced. This study explores the impact of cashless payments on economic growth in developed and developing countries. Besides, it also scrutinizes how economic growth varies in each transitional phase of cashless payments. Using a sample of 38 countries and utilizing panel data spanning from 2010 to 2021, our study identifies the following outcomes: Firstly, cashless payment positively impacts the economic growth in both developing and developed economies. Moreover, the effect of cashless payments on economic growth is relatively higher in developed economies than in developing economies. Secondly, empirical analysis reports that growth varies with the level of transitional stages of cashless payments. To be more explicit, it is found that the response of growth against the inception stage of cashless payment is relatively lower as compared to the corresponding transition, tipping, and advanced stages.