Digital Payment Systems and their Impact on Inflation

Abstract

Due to the rapid expansion of digital payment systems, global financial transactions have been revolutionized, reducing reliance on physical cash and increasing transaction efficiency. This paper aims to critically explore the impact of digital payment systems on inflation and analyze both their advantages and potential risks. The widespread adoption of credit and debit cards, mobile payment applications, and cryptocurrencies has led to increased money circulation, its velocity and cased inflationary pressures. Moreover, the integration of digital transactions helped government reveal shadow economy and follow up the transparency of transactions. Moreover, digital payments strengthen monetary policy and give the possibility to central banks to respond swiftly to economic fluctuations. However, this system has its disadvantages as cryptocurrencies create volatility on the market and the transition to a fully digital economy is now impossible. CZU: [336.74:336.748.12]: 061.1EU; JEL Classification: E31, E42