THE IMPACT OF CASHLESS PAYMENT SYSTEMS AND MONEY SUPPLY ON MONEY CIRCULATION IN INDONESIA DURING THE 2019–2024 PERIOD

Abstract

The development of digital technology has driven significant changes in the payment system in Indonesia, marked by the increasing use of non-cash (cashless) payment instruments such as e-money, QRIS, and digital banking services. These changes have the potential to affect monetary mechanisms, particularly the velocity of money. In addition, the increase in the money supply (M2) as a monetary policy instrument is also an important factor in the dynamics of money circulation. This study aims to analyze the effect of cashless payment systems and the money supply on the velocity of money in Indonesia during the 2019–2024 period. The research method employed is a quantitative approach using secondary data obtained from official publications of Bank Indonesia and the Central Statistics Agency. Data analysis is conducted using multiple linear regression to examine the partial and simultaneous effects of the independent variables on the dependent variable. The results show that partially, the money supply does not have a significant effect on the velocity of money, while the cashless payment system has a positive but statistically insignificant effect. Simultaneously, both variables also do not show a significant effect on the velocity of money. Nevertheless, the high coefficient of determination indicates that cashless payment systems and the money supply have a substantial economic contribution in explaining variations in the velocity of money. This study is expected to serve as a consideration in the formulation of monetary policy and the development of digital payment systems in Indonesia.