The Role of Digital Payments in Financial Development: Comparative Analysis Between BRICS and G7 Countries, with Implications for Central Bank Digital Currencies (CBDCs)
DOI:
https://doi.org/10.32890/ijbf2026.21.2.4Keywords:
Digital payments, electronic money, central bank digital currency, financial development, emerging economies, developed economies, BRICS and G7Abstract
This study examines the impact of digital payments on financial development by comparing emerging and developed economies, specifically BRICS and G7 countries, over the period from 2012 to 2023. This study assesses how digital payment deepening, measured by the volume of electronic money payments, influences financial development and what this may imply for future CBDC readiness. The analysis considers macroeconomic variables, including interest rate, inflation, unemployment, and gross domestic product growth. Financial development is measured by domestic credit to the private sector as a percentage of gross domestic product. Panel data econometric techniques are employed, with model selection guided by statistical tests and robustness checks. The findings reveal that digital payment expansion significantly enhances financial development in BRICS economies, likely due to improved access to digital financial services and inclusion. In contrast, the effect is statistically insignificant in G7 countries, where mature financial systems may reduce the marginal impact of additional payment digitalization. This divergence highlights the varying developmental roles of digital currencies across economic structures. The results also offer implications for CBDCs, suggesting that economies with stronger digital payment ecosystems may be better positioned to support CBDC implementation and diffusion. Recommendations include integrating digital currency initiatives with broader financial inclusion and employment strategies in emerging markets and enhancing regulatory and cybersecurity frameworks in developed nations.
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