The role of electronic payment methods in reducing liquidity risks in Iraqi banks

Background Electronic payment methods have experienced tremendous global growth in recent years, facilitating numerous commercial transactions and making them more convenient and efficient, thereby saving time and money. This is particularly true for commercial banks, which can improve their financial and operational performance and reduce risks if used correctly. Aim The objective of this study was to examine the effect of electronic payment systems on reducing liquidity risk in Iraqi commercial banks. To achieve this objective and test its hypotheses, a descriptive-analytical approach was used. The theoretical frameworks related to electronic payment methods and banking liquidity risk were reviewed. Methods The effect of electronic payment methods on the liquidity of Iraqi banks was measured by applying the ARDL model using Eviews 10 software. Results Evidence from econometric analysis suggests a direct relationship between the total number of electronic cards and the bank liquidity risk index, which contradicts theoretical frameworks and empirical studies. The analysis also showed an inverse relationship between the number of electronic wallets and the liquidity risk index, which aligns with economic theory. Conclusion Despite the spread of electronic payment methods in the world, their role in the Iraqi economy is still limited, which necessitates working to enhance customer confidence in the banking sector and providing financial and banking awareness programs to educate them about banking services and how to use them, as well as reducing withdrawals and renewals of personal accounts, which helps banks to provide the necessary liquidity to sustain their operations.