A DIGITAL payments system which is fit for the increasingly cashless society of the 21st century could benefit Scotland’s economy by around £40 million a year.

Such a system, according to a leading Scottish think tank, could also create a “level playing field” for smaller independent retailers.

In a new report from the Common Weal, Peter Ryan, a financial services professional for more than 30 years, sets out the case for a new, publicly owned, not-for-profit payment system to be set up and owned by the Scottish Government. Initially it would allow payments for its services to be made without commercial firms taking a share of the payment.

READ MORE: Scots facing an ‘uphill battle’ due to ATM and bank branch closures

The Scottish Payment Initiation Service (SPIS) would then be rolled out to local authorities, allowing them to take payments in a decentralised system that retains and recycles all payment costs into the regional economy.

Paying Our Way: The Case for a Scottish Payment System says the next step would be rolling out the system to any private retailers who want to use it.

“Not only would this reduce the volume of transaction costs lost to the Scottish economy, it would level a playing field which is currently heavily tilted in favour of large corporate retailers who pay less in transaction costs than smaller and independent retailers,” says the paper. “It can be done now within existing state aid rules and does not require the powers of independence – though its implementation would help speed up the implementation of a future Scottish currency if Scotland became independent.”

The report says an electronic payments initiation system would provide the infrastructure for the digital economy.

It adds: “We have a choice whether to provide our most vulnerable members of society access to the cash to allow their local economies to flourish or let free-market economics destroy our poorest and most vulnerable communities.”

Ryan said: “The idea for the payments paper came while listening to a question and answer session from the European Commission on the need to avoid payments being dominated by big tech firms like Google, Amazon or Apple.

“In the 21st century the electronic movement of money is the infrastructure required for a digital economy. I felt this should be done for the benefit of local economies rather than Silicon Valley billionaires. This report should kick-start broad-ranging and representative discussion on these issues. Scotland could, and should, lead the way in this field.”

Ryan calls for the Scottish Government to create the SPIS, using it as its preferred method of payment, before extending it to Scotland’s councils and creating similar local systems in our cities and regions to allow users to withdraw cash from shops, which would then be recycled in the local economy.

Common Weal’s head of policy and research, Dr Craig Dalzell, said: “Our economy is becoming ever more complex, sophisticated and digital. One of the consequences of this is that between each and every one of our transactions ... stands someone taking a cut of your money. Often, this person is a multi-national corporation meaning that the cut doesn’t just leave our local economy, it leaves our country altogether.

“By setting up a network of publicly owned payments systems, Scottish local authorities could recapture that lost money and make sure that it stays in our own local areas.

“Our paper has shown that doing this could be worth around £40m per year across Scotland and could be used to support small and medium businesses.”