MasterCard, the leading technology company in the global payments industry, has unveiled the results of a study, Evaluating the Social Cost of Cash, that demonstrates how the use of cash in T&T slows economic growth because it stimulates informality, increases corruption and limits financial inclusion.
The results of the study show that T&T’s economy can grow by 3.5 per cent if the country increased electronic payments by 30 per cent in a four-year period. The study further shows that while in the past cash was an engine for economic development, it now generates direct and indirect costs that limit its ability as an engine of progress.
“Contrary to what many people think, there are costs associated with cash. From direct costs, like production and transportation of bills and coins, to indirect costs such as corruption, social insecurity, financial exclusion, timely state aid payments and tax collection complications. These are all absorbed by the Trinidadians,” said Gabriele Zuliani, senior vice president and general manager for MasterCard’s Caribbean Region.
The cost of cash is an indicator of the size of a market’s shadow economy. In T&T, nearly more than 30 per cent of the economy is informal. We are in a position to shift this, by promoting the integration of electronic payments, which can help achieve economic growth similarly to the success seen in other regions of the world,” Zuliani said.
The Caribbean includes countries with a wide range of penetration of financial services and financial inclusion challenges but they all share a common high dependency on cash, low electronic payment usage and large shadow economies, that represent about 30 per cent of their GDP.
All countries, including those with a comparative higher GDP per person in countries such as T&T, share the above challenges and all would benefit from a change of consumer and SME behaviour to a higher usage of electronic payments, in addition to the implementation of efficient disbursement solutions that would lead to increased financial inclusion. Such efforts are an integral part of strategies aimed to tackle the social cost of cash.
“A greater financial inclusion and greater use of storage of electronic values and electronic payments are key drivers of economic development and the reduction of indirect costs such as the informal economy,” the study said.