nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2016‒03‒23
twelve papers chosen by
Bernardo Bátiz-Lazo
Bangor University

  1. Achieving European Policy Objectives through Financial Technology By Milne, Alistair
  2. Innovation and competition in Internet and mobile banking: an industrial organization perspective By Mariotto, Carlotta; Verdier, Marianne
  3. Making Money Work: Unconditional cash transfers allow women to save and re-invest in rural Zambia By Luisa Natali; Sudhanshu Handa; David Seidenfeld; Gelson Tembo; Amber Peterman; UNICEF Office of Research - Innocenti
  4. Financial Innovation and Money Demand: Evidence from Sub-Saharan Africa By J Paul Dunne and Elizabeth Kasekende
  5. Informality in Credit Relations Between Banks and Business Entities – a Risk on Standardization and Modernization of Kosovo Economy By Krasniqi, Armand
  6. Five things we need to know about the on-demand economy By Maselli, Ilaria; Lenaerts, Karolien; Beblavý, Miroslav
  7. Relaunching the European Retail Finance Market: Comments on the Commission's Green Paper By Bouyon, Sylvain; Lannoo, Karel
  8. Does financial literacy influence financial decisions? By ARRONDEL, L.; DEBBICH, M.; SAVIGNAC, F.
  9. Determinants of Borrowing and Households’ Risk of Credit in Rural Area in Niger By Ahamadou MAICHANOU
  10. The Dynamics of Bank Location Decisions in Australia By Christopher Heard; Flavio M. Menezes; Alicia Rambaldi
  11. Expanding distribution channels By Noriaki Matsushima
  12. Deposit dollarization in emerging markets: modelling the hysteresis effect By Krupkina, Anna; Ponomarenko, Alexey

  1. By: Milne, Alistair
    Abstract: Alistair Milne argues in this ECRI Commentary that ‘FinTech’ (newly emerging Financial Technologies) can play a crucial role in achieving European policy objectives in the area of financial markets. These notably include increasing access by smaller firms to trade credit and other forms of external finance and completing the banking and capital markets unions. He points out, however, that accomplishing these objectives will require a coordinated European policy response, focused especially on promoting common business processes and the adoption of shared technology and data standards.
    Date: 2015–11
  2. By: Mariotto, Carlotta; Verdier, Marianne
    Abstract: Over the recent years, the development of Internet banking and mobile banking has had a considerable impact on competition in the retail banking industry. In some countries, the regulatory framework has been adapted to allow non-banks to operate in retail payments and compete with banks for deposits. Several platforms or large retailers have started to offer innovative financial products to their customers. In this paper, we survey the issues related to innovation and competition in Internet banking and mobile banking and discuss some perspectives for future research.
    Keywords: bank competition, bank regulation, non-banks, payment systems, Internet banking, mobile banking, platform markets
    JEL: E42 G21 L96
    Date: 2015–11–25
  3. By: Luisa Natali; Sudhanshu Handa; David Seidenfeld; Gelson Tembo; Amber Peterman; UNICEF Office of Research - Innocenti
    Abstract: Savings play a crucial role in faciliating investment in income-generating activities and the pathway out of poverty for low-income households in developing settings. Yet, there is little evidence of successful programmes that increase savings, particularly those that are simultaneously cost effective, scaleable and address gender inequalities. This paper examines the impact of the Government of Zambia’s Child Grant Programme (CGP), an unconditional cash transfer targeted to women in households with young children, on women’s savings and participation in non-farm enterprises. Findings show that the CGP enabled poor women to save more cash and that the impact is larger for women who had lower decision-making power at baseline. The results support the proposition that cash transfers have the potential for long-term sustainable improvements in women’s financial position and household well-being by promoting savings and facilitating productive investments among low-income rural households.
    Keywords: cash transfers; savings; small farms; small scale enterprises; social benefits; women in development; women's empowerment; zambia;
    JEL: O22
    Date: 2016
  4. By: J Paul Dunne and Elizabeth Kasekende
    Abstract: While the effect of financial innovation on money demand has been widely researched in industrialised countries, because of its major role in monetary policy, few studies have focussed on developing countries. This is surprising given the considerable growth in financial innovation in Sub-Saharan Africa in recent years and its potential implications for developing country macroeconomic policy. This paper investigates the development of financial innovation and its impact on money demand in the region using panel data estimation techniques for 34 countries between 1980 and 2013. The results indicate that there is a negative relationship between financial innovation and money demand. This implies that financial innovation plays a crucial role in explaining money demand in Sub-Saharan Africa and given innovations such as mobile money in the region this can have important implications for future policy design.
    Keywords: Money demand, financial innovation
    JEL: E41
    Date: 2016
  5. By: Krasniqi, Armand
    Abstract: In terms of modern societies, the definition of the notion of certain forms of informal activities in the economy has evolved dynamically. In general, the definition used for the informal economy by lawyers and economists, involves economic transactions or operations in which state institutions not only have no control over them, but they also fail to take action to stop them. Precisely in this form, informality has become one of the most discussed problems in Kosovo politics. Reducing it is vital for the national economy to improve. However, it seems that the passive path which the relevant government institutions are taking in combating this negative phenomenon, not only is not right and adequate, but, above all, presents factors that are of high risk and multidimensional. Unfortunately, the relatively new local banking system, especially in commercial banks, has gradually become a serious stimulus segment of this informal activity. Among other things, the commercial banks, upon establishing credit relations with certain business entities, mainly during the provision of loans and being fully aware, base their credit risk analysis on financial and accounting records that are not official, i.e. are not identical to those provided to the Tax Administration. Now is the last moment that the government must focus its efforts on limiting and reducing the informal economy in the country. Enhancing the role of the Tax Administration and the Financial Intelligence Unit for the purpose of increasing their operational efficiency bears no alternative.
    Keywords: economy, informality, law, tax, bank
    JEL: K2
    Date: 2016–01–03
  6. By: Maselli, Ilaria; Lenaerts, Karolien; Beblavý, Miroslav
    Abstract: The last few years have witnessed the exponential growth of platforms like Uber and Airbnb and the creation of countless other less well-known examples. The expansion of the on-demand economy puts huge pressure on regulators to adapt it to the existing frameworks for labour and taxation. The rapid growth of the sector also divides experts: it is seen by many as threat for working conditions, and by others as an incredible opportunity. The purpose of this essay is to take a balanced perspective on what we know about the on-demand economy and what needs further investigation. More research is needed on the individual cases before one can draw conclusions on how this new sector works. The political economy of the sector is made even more interesting by the fact that the technology is developing faster than the regulation. Yet, our plea to policy-makers is to refrain from legislating too early and to take the time to understand how the supply and the demand of these services behave and their equilibrium. This CEPS Essay presents groundbreaking work on the on-demand economy, drawing on the most salient findings debated during the CEPS Winter School “From Uber to Amazon Mechanical Turk: Non-traditional labour markets driven by technological and organisational change”, 23-25 November 2015, financed by the InGRID FP7 project.
    Date: 2016–01
  7. By: Bouyon, Sylvain; Lannoo, Karel
    Abstract: The European Commission’s Green Paper on retail financial services, published on December 10th, provides valuable insights into the possible benefits of a single market, as well as the obstacles to its development and the possible remedies. While a greater diversity of products within countries could have a positive impact on both consumers and providers, it is also important to highlight that it could contribute to more effective macroeconomic policies at European level. The development of such a single market for Europe where consumers can confidently purchase more profitable financial products abroad necessitates the establishment of a European body along the lines of the US Consumer Financial Protection Bureau (CFPB), or at least the establishment of closer European supervisory cooperation and enforcement. A framework for the digitalisation of financial services should not only focus on mitigating specific types of risk, such as cyber insecurity, lack of privacy and financial exclusion, but it should also continue to maintain a “space of creation” for innovative financial firms.
    Date: 2015–12
    Abstract: Financial literacy is a specific component of human capital which allows individuals to deal with fundamental financial issues so as to take adequate financial decisions. This Rue de la Banque presents recent studies about the link between financial literacy and the financial decisions of the population in France. Using an original survey, individuals’ level of financial literacy is assessed. The results suggest that financial literacy varies across the population. It is correlated with education but also with gender, age and political affiliation. This latter point could reflect differences in opinion regarding the role of the welfare state and individual responsibility. Finally, the link between financial literacy and some financial behaviors (the propensity to formulate a specific financial plan in the long run on the one hand and the propensity to own stocks on the other hand) is evaluated: in both cases positive correlations with financial literacy variables are found.
    Date: 2015
  9. By: Ahamadou MAICHANOU
    Abstract: This article focuses on borrowers default in rural credit in Niger, according to their food needs situation. Given that economic agents are likely to adopt opportunistic behavior rather than mutually beneficial relations when facing natural hazards, this analysis is taken from the perspective of contract theory with asymmetric information. In the case of rural Niger, it empirically addresses the determinants of involuntary default, voluntary default and repayment effort, while managing the difficulties of applying the concepts of information economy and uncertainty to the complexity of rural area credit in a developing country. Results show more involuntary default than voluntary one and a real willing to repay. These results make us to provide support for households with effort repayment willing and establish an incentives structure for all kind of borrowers.
    Keywords: ontract, credit, risk of default, asymmetry of information, rural, Niger
    JEL: D13 D86
    Date: 2016
  10. By: Christopher Heard (School of Economics, The University of Queensland); Flavio M. Menezes (School of Economics, The University of Queensland); Alicia Rambaldi (School of Economics, The University of Queensland)
    Abstract: This paper exploits a large panel to study trends in, and determinants of, the decisions made by the four largest Australian banks about whether to establish or maintain branch†and ATM†level presence in a local market between 2002 and 2013. These decisions are potentially important for competition in local banking markets. Our analysis suggests that past presence is the most important factor for explaining current presence in a particular local market. Moreover, we present evidence that the four largest banks co†locate branches. The impact of the location of other (smaller) banks on the location of the four largest banks is less clear; there is some limited evidence that this impact is negative for two of the four largest banks. Our results also suggest that the four largest banks responded differently to the GFC in terms of their branch location decisions. Our analysis of ATM location decisions reveals that the four largest banks follow different strategies. These results suggest that Australian banks did not shy away from competition, either before or after the GFC. Creation-Date: 2016-03-08
    Keywords: branch location; exit; entry; banking
  11. By: Noriaki Matsushima
    Abstract: We provide a model in which upstream producers, whose production cost is quadratic in quantity, sell their products through two distribution channels, a traditional channel and an external retailer. Some producers (called "large" producers) supply to both channels, whereas other producers (called "small" producers) are only able to supply to the traditional channel. All producers compete in quantity in the traditional channel. The external retailer offers a nondiscriminatory per unit payment to upstream producers. We show that distribution channel expansion executed by a small producer can decrease the producer's profit and the sum of the upstream producers' profits.
    Date: 2015–02
  12. By: Krupkina, Anna; Ponomarenko, Alexey
    Abstract: We apply empirical modelling set-ups developed to capture the hysteresis effect in the data on deposit dollarization in a cross-section of emerging market economies. Specifically, we estimate a nonlinear relationship that determines two equilibrium levels of deposit dollarization depending on the current value of dollarization and previous episodes of sharp depreciation of the national currency over the past five years. When exchange rates are stable, convergence to a higher equilibrium level of dollarization begins when the 45–50% thresh-old of deposit dollarization is exceeded. We estimate the model for short-run dynamics of dollarization and find that the speed of convergence to the higher equilibrium implies quarterly increases of 1.2–3 percentage points in the ratio of foreign currency deposits to total deposits.
    Keywords: dollarization, hysteresis, nonlinear model, emerging markets
    JEL: C23 E41 F31
    Date: 2015–11–10

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