New study reveals that card payments significantly benefit UK economic growth
Card payments have become an integral part of everyday life in the UK. They are used for small, spontaneous transactions due to their ease of use, and for larger purchases given the consumer protection they can offer. They enable spending and more efficient business operations, which can support economic growth and employment. Mastercard's Kelly Devine, president for UK & Ireland explores why cards are such a critical element of the economic landscape in the UK.
With credit and debit card payments estimated to account for 57 per cent of consumer spending according to the ONS, their popularity in the UK is undeniable. And a new report from EY, commissioned by Mastercard, entitled Economic contribution of card payments to the UK economy, seeks to quantify the overall economic impact of card payments on UK GDP, and the results are striking.
Modelling based on the relationship between card payment volumes and economic activity suggests that every one per cent increase in card penetration results in a 0.12 per cent increase in GDP per capita – as measured across the group of OECD countries.
In the UK, with card penetration of 57 per cent, this suggests that card payments facilitated up to an estimated 6.5 per cent of GDP in 2022, or up to £161bn. This is a sizeable contribution to UK economic activity, equivalent in scale to the number of people employed in the financial, insurance and real estate sectors combined.
The study found that card payments contribute to improved GDP because they lower the costs to consumers from transacting, leading to increased consumer spending and additional economic activity. Moreover, the study noted that high card penetration results in increased levels of consumer satisfaction, as well as making the UK economy more competitive. It does so by reducing payment frictions and enhancing the security, stability, and transparency of the payment network.
By reducing friction when it comes to making purchases, it was noted that cards increase the ease of doing business − particularly for SMEs. Put another way, cards allow full and almost immediate access to the money received from customers, and for payments to be made securely through the supply chain. These are sizeable benefits for firms operating in a fast-moving and increasingly digital economy.
Card payments are one of the many examples of the UK’s financial services strength, representing a combination of forward-looking businesses and entrepreneurs, advanced technology and supportive regulation which has got us to where we are today − a world-leading market across fintech and payments innovation.
Cards have already facilitated a range of innovations such as mobile wallets, contactless payments and the rise of innovative fintechs. The continued growth of the UK fintech sector, in particular, should remain a priority area for policymakers and regulators.
But the impact of card payments is not just about GDP. As shown by anecdotal case studies from small businesses and innovative start-ups in the report, the UK’s card payment infrastructure is helping to boost financial inclusion among consumers and providing a platform for SMEs to grow through increased efficiencies and a better understanding of their customers.
The economic and quality of life benefits provided to consumers and businesses alike show why cards are such a critical element of the payments landscape in the UK, and the importance of nurturing the UK fintech sector.
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