Abstract
The payment system accumulates through an interbank fund transfer system, banking procedures, and a set of instruments that guarantee the circulation of money (Hancock & Humphrey, 1997). The theory of money expressed by Fisher is very striking and different from Marx’s. Marx only emphasizes monetary developments as contemporary capitalism. However, Fisher on the form of money and the function of money in a certain amount (as cited in Ivanova, 2020). The flow of electronic and digital transactions has continued to innovate over the past decade. An important point of this research is to identify electronic transactions and digital transactions against the velocity of money (VoM) in Indonesia. Fisher’s theory of money is applied to this study. Through a quantitative approach, time-series data for 2009–2019 was collected from the Bank of Indonesia and BPS-Indonesia. Multiple linear regression analysis is useful in interpreting the data. As a result, we find electronic transactions measured by credit cards appear to have a negative effect on VoM, but the impact is significant. Meanwhile, debit cards actually have a positive and significant effect on the value of VoM. Interestingly, other empirical results explore the relationship of digital transactions represented by e-money with VoM, where the effect is negative and insignificant. This finding is also very relevant to banking efforts to harmonize and adopt advanced technology in the financial system
Highlights
The role of the movement of money because of transactions from economic activities requires monetary policy and guaranteed smooth financial system stability. Prasetyo (2018) evaluates the need for money for transactions to increase in line with the demand for money in society and the intensity of trading volume (Farajnejad & Lau, 2017)
We find electronic transactions measured by credit cards appear to have a negative effect on velocity of money (VoM), but the impact is significant
This study has the ambition to verify VoM, which is influenced by the enthusiasm of customers who use electronic transactions and digital transactions in Indonesia from 2009 to 2019
Summary
The role of the movement of money because of transactions from economic activities requires monetary policy and guaranteed smooth financial system stability. Prasetyo (2018) evaluates the need for money for transactions to increase in line with the demand for money in society and the intensity of trading volume (Farajnejad & Lau, 2017). The smooth running of the payment system in economic sectors influences the velocity of money (VoM) in Indonesia. The fantastic figures on the progress of noncash payments represent it has educated the public on these instruments This is a fairly serious phenomenon and certainly describes the economic conditions in many countries, such as Indonesia, from a financial perspective (Wasiaturrahma, Wahyuningtyas, & Ajija, 2019; Harasim, 2016). The payment system accumulates through an interbank fund transfer system, banking procedures, and a set of instruments that guarantee the circulation of money (Hancock & Humphrey, 1997) Through these considerations, it draws attention to explicitly investigating the effects of electronic transactions (credit cards, debit cards, and e-money) on VoM in Indonesia.
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