nep-fle New Economics Papers
on Financial Literacy and Education
Issue of 2023‒05‒15
five papers chosen by
Viviana Di Giovinazzo
Università degli Studi di Milano-Bicocca

  1. Mobile Money, Interoperability and Financial Inclusion By Markus K. Brunnermeier; Nicola Limodio; Lorenzo Spadavecchia
  2. Analysis of the Fintech Landscape in the Philippines By Quimba, Francis Mark A.; Barral, Mark Anthony A.; Carlos, Jean Clarisse T.
  3. Central Bank Digital Currency and Financial Inclusion By Brandon Tan
  4. Fintech, investor sophistication and financial portfolio choices By Leonardo Gambacorta; Romina Gambacorta; Roxana Mihet
  5. Fintech in a Changing World By Patrick T. Harker

  1. By: Markus K. Brunnermeier; Nicola Limodio; Lorenzo Spadavecchia
    Abstract: This paper explores the tradeoff between competition and financial inclusion given by the vertical integration between mobile network and money operators. Joining novel data on mobile money fees built through the WayBack machine, with sources on network coverage and financials, we examine the staggering across African operators and countries of platform interoperability – a policy that promotes transactions and competition across mobile money operators. Our findings show that interoperability lowers mobile money fees and reduces network coverage and mobile towers, especially in rural and poor districts. Interoperability also results in a decline in various survey metrics of financial inclusion. Keywords: Mobile Money, Interoperability, Financial inclusion JEL Codes: E42, L14, O10
    Date: 2023
  2. By: Quimba, Francis Mark A.; Barral, Mark Anthony A.; Carlos, Jean Clarisse T.
    Abstract: Financial technology (fintech) in the Philippines has gained more attention in recent years, especially during the onset of the COVID-19 pandemic when lockdowns were prevalent and cashless payments were encouraged. Thus, digital payments and engagements through various platforms have increased, resulting in more diversified financial products and services. Despite these developments, financial inclusion in the Philippines has lagged behind other Association of Southeast Asian Nations member-states. This paper analyzes the state of the fintech industry and investigates how the government can support the development of its ecosystem to ensure its contribution to the country’s development goals. It concludes that the Philippines has a strong fintech industry, as indicated by a growing number of fintechs (particularly in payments, lending, and banking technology verticals) and increasing capitalization. Finally, for the fintech industry to support the country’s financial inclusion goals, the availability of talent and credit for the sector must be improved.
    Keywords: business models;financial literacy;financial inclusion;e-money;fintech;FinTech ecosystem;lending
    Date: 2023
  3. By: Brandon Tan
    Abstract: In this paper, we develop a model incorporating the impact of financial inclusion to study the implications of introducing a retail central bank digital currency (CBDC). CBDCs in developing countries (unlike in advanced countries) have the potential to bank large unbanked populations and boost financial inclusion which can increase overall lending and reduce bank disintermediation risks. Our model captures two key channels. First, CBDC issuance can increase bank deposits from the previously unbanked by incentivizing the opening of bank accounts for access to CBDC wallets (offsetting potential flows from deposits to CBDCs among those already banked). Second, data from CBDC usage allows for the building of credit to reduce credit-risk information asymmetry in lending. We find that CBDC can increase overall lending if (1) bank deposit liquidity risk is low, (2) the size and relative wealth of the previously unbanked population is large, and (3) CBDC is valuable to households as a means of payment or for credit-building. CBDC can still be optimal for household welfare even when overall lending decreases as households benefit from the value of using CBDC for payments, CBDC provides an alternative "safe" savings vehicle, and CBDC generates greater surplus in lending by reducing credit-risk information asymmetry. Most countries are considering a "two-tier" CBDC model, where central banks issue CBDC to commercial banks which in turn distribute them to consumers. If non-bank payment system providers can distribute CBDC, fewer funds will flow into deposit accounts from the unbanked because a bank account is no longer needed to access CBDC. If CBDC data is shareable with banks, those without bank accounts can still build credit and access lower interest rate loans. This design is optimal for welfare if the gains from greater access to CBDC outweigh the contraction in lending.
    Keywords: CBDC; Financial Inclusion; Digital currency; CBDC issuance; credit-risk information asymmetry; CBDC data; CBDC model; CBDC wallet; Central Bank digital currencies; Commercial banks; Deposit rates; Loans; Global
    Date: 2023–03–17
  4. By: Leonardo Gambacorta (Bank for International Settlements); Romina Gambacorta (Bank of Italy); Roxana Mihet (HEC Lausanne)
    Abstract: This paper analyses the links between advances in financial technology, investors' sophistication, and their financial portfolios' composition and returns. We develop a simple portfolio choice model under asymmetric information and derive some theoretical predictions. Using detailed micro data from the Bank of Italy, we test these predictions for Italian households over the period 2004-2020. In general, heterogeneity in portfolio composition and in returns between sophisticated and unsophisticated investors grows with improvements in financial technology. This heterogeneity is reduced only if financial technology is accessible by everyone and if investors have a similar capacity to use it.
    Keywords: inequality, inclusion, fintech, innovation, Matthew effect
    JEL: G1 G5 G4 D83 L8 O3
    Date: 2023–04
  5. By: Patrick T. Harker
    Abstract: Patrick T. Harker, president and chief executive officer of the Philadelphia Fed, told an audience at the Sixth Annual Fintech Conference in Philadelphia that “fintech can help foster financial inclusion.” Especially when used with alternative methods of evaluating creditworthiness, “the opportunities to use fintech to reach the economically constrained and financially marginalized are truly exciting, ” he said.
    Keywords: fintech
    Date: 2022–08–03

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