Davizro Photography - stock.adob
UK payments upgrade to add more than £3bn to GDP, but much more on offer
UK GDP will increase when its ageing payments infrastructure is replaced with the latest technology to enable real-time payments
The UK upgrade to its payments infrastructure is expected to add more than £3bn to GDP by 2026, but the potential of real-time payments is far greater.
According to a study from the Centre for Economics and Business Research (Cebr), software firm ACI Worldwide, and Global Data, if all payments were theoretically real-time, UK GDP could be up by £85bn by 2026.
A five-year programme led by retail payments authority Pay.uk, known as the UK’s New Payments Architecture programme, is modernising the UK’s legacy payment infrastructure, promising more choice in terms of payments options over more traditional payment types such as cards. This includes the increasing availability of real-time payments.
According to the report, real-time payments will add £3.3bn to the UK’s GDP by 2026. These payments add more liquidity to economies and generate more economic activity. However, it added that “untapped potential” is far greater.
Owen Good, head of economic advisory at the Centre for Economics and Business Research, said: “By enabling money to transfer between parties within seconds rather than days, real-time payments can significantly improve overall market efficiencies in the UK economy and play an important role in helping facilitate growth.”
He added that real-time payments improve liquidity in the financial system, which can stimulate economic growth.
“Our theoretical modelling suggests the impact of all payments being real-time could add 2.7% to formal GDP by 2026,” said Good. “However, this by no means suggests there is not a place for non-instant electronic payments or paper-based cash payments in the future.”
Read more about payments
- Covid-19 pushes the use of contactless payments for face-to-face transactions to 90% of total.
- The company bringing Google-like processing to core banking for banks has added the same proposition in payments.
Craig Ramsey, head of real-time payments at software supplier ACI Worldwide, said real-time payments will be at the heart of the global payments landscape and could unlock economic growth.
He said that developing nations are getting ahead of developed countries because they don’t have legacy payments systems to deal with. For example, India and Brazil are forecast to add $45.9bn and $37.6bn of additional GDP by 2026 respectively, fuelled by strong real-time payments growth.
“As it stands, emerging countries are leading the way and are outpacing developed nations in real-time adoption, growth and the associated economic benefits,” said Ramsey. “This is largely down to the agility and flexibility of the modernised payments infrastructure in those countries, and the new, innovative payments services that are being offered to consumers and businesses because of it.”
He said the UK must modernise its ageing payments infrastructure and embrace the New Payments Architecture with open arms if it is to enjoy the economic benefits.