Non-Cash Payment System Innovation and Its Implications on Financial System Stability in Indonesia

Almira Shabrina; Akhmad Syakir Kurnia

doi:10.14710/jdep.6.3.226-247

DOI: https://doi.org/10.14710/jdep.6.3.226-247

Non-Cash Payment System Innovation and Its Implications on Financial System Stability in Indonesia

Almira Shabrina , Akhmad Syakir Kurnia

Department of Economics and Development Studies, Faculty of Economics and Business, Universitas Diponegoro, Semarang, Indonesia

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Abstract

This study examines the impact of non-cash payment innovations on Indonesia’s financial system stability from 2009 to 2019. As technological advancements reshape payment systems, they present both opportunities and risks to financial stability. By utilizing the Structural Vector Auto Regression (SVAR) method, the study finds that the shift towards cashless payments reduces M1, indicating a decrease in the money supply. Additionally, innovations in the payment system increase the velocity of money circulation, which tends to drive inflationary pressures. However, the inflationary effect of non-cash payment transactions diminishes over time. This research highlights the dual nature of non-cash payment instruments in influencing both financial stability and inflation dynamics.

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Keywords: Financial System Stability; Non-Cash Payment Instruments; SVAR

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Section: Research Article

Language : EN

In Vol 6, No 3 (2023): DECEMBER

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