Review the Behavior of Cashless Transactions Regarding Economy of Sri Lanka (2010-2020)

Abstract

The technological evolution has encouraged electronic payment methods, which allow for the exchange of goods and services without the usage of physical cash. The digital economy of Sri Lanka, projected to be worth USD 3.47 billion of Gross Domestic Product (GDP), is now steadily growing & COVID-19 pandemic with unexpected decline in the use of physical cash could have influenced this growth. In the Sri Lankan context, there is a tendency of expanding the use of cashless transaction methods among people. Therefore, the research problem of this study was that whether Credit & Debit Card Consumption, Currency in Circulation, Internet Based Financial Transactions, influence the economic growth of Sri Lanka. The main purpose of this study is to identify the factors related to cashless transactions, which affect the GDP of Sri Lanka. Required data were gathered from the Central Bank of Sri Lanka. To evaluate the impact of COVID-19 on the digital economy, purposive sampling was done by the researcher & obtained a sample of 44 data units, which covered the first quarter of 2010 to the fourth quarter of 2020. Vector Error Correction Model was implemented to determine the impact of above factors on the GDP of Sri Lanka. Moreover, the study revealed, Currency in Circulation & Credit and Debit Card Transactions will have a positive impact on economic growth of Sri Lanka, while the Internet-Based Financial Transactions will have a negative impact on economic growth in Sri Lanka for 2010-2020 by Impulse Response Function. However, the government should raise public awareness about the importance of digital literacy, and economic policymakers should address the country’s advanced economic concerns associated with cashless transactions and boost the digital economy via new solutions to make the system more accountable and efficient in the long run.