Cashless Europe: Assessing the Impact of Digital Payment Systems on GDP Growth in Nordic Countries

Abstract

This study investigates the impact of the transition toward a cashless economy on economic growth in Nordic countries, recognized as global leaders in digital payment adoption. It examines the effect of digital payment systems on GDP growth in Denmark, Sweden, Norway, Finland, and Iceland over 2005–2024. The study employs panel econometric techniques, including unit root tests, panel cointegration analysis, fixed effects estimation, and dynamic GMM robustness checks. All estimations are conducted using R statistical software, ensuring efficient econometric analysis. Results show that digital payments have a positive and statistically significant effect on economic growth, where higher card payment adoption increases GDP growth. Financial development and trade openness reinforce this relationship, while inflation has a negative impact. Internet penetration and government expenditure are positive but not significant, reflecting infrastructure saturation. Overall, digital payment systems act as a structural driver of economic performance in highly digitalized economies. The study recommends strengthening digital infrastructure, enhancing financial literacy, and improving regulatory frameworks to support sustainable cashless economic development.