Keywords
Digital Payments
COVID-19
Payment Substitution
How to Cite
Abstract
This study investigates shifts in payment method usage in the Maldives before, during, and after the COVID-19 pandemic using a Seemingly Unrelated Regression (SUR) framework. The analysis draws on aggregated quarterly transaction data from 2017 to 2024, obtained from the Maldives Monetary Authority (MMA), which includes ATM withdrawals (used as a proxy for cash), debit cards, cheques, and account transfers. Expenditure shares for each payment method are computed and analysed within the SUR framework. The model incorporates real income, inflation, pandemic and post-pandemic period dummy variables, and a time trend as explanatory factors. The results indicate a substantial and statistically significant decline in the use of cash and cheques during the pandemic, followed by further reductions in the post-COVID period. In contrast, account transfers exhibited a sustained and sharp increase. Debit card usage, however, showed no statistically significant change, suggesting limited behavioural substitution in that category. These findings identify the pandemic as a structural break that accelerated the adoption of digital payment methods in the Maldives. The evidence also points to a strong and lasting shift away from traditional payment methods toward digital alternatives in the Maldives. While such trends have been documented in larger economies, there is limited research on payment-dynamics in small island nations like the Maldives. This study contributed to the gap in literature by providing empirical evidence of how the pandemic catalysed a lasting transformation in payment practices in the Maldives—a small, tourism-dependent economy. The findings of the study underscore the need to strengthen digital financial infrastructure and ensure inclusive access during the ongoing transition.
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