nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2016‒12‒11
seven papers chosen by
Bernardo Bátiz-Lazo
Bangor University

  1. Money Illusion and Household Finance By Thomas A. Stephens; Jean-Robert Tyran
  2. The Digital Competence Framework for Consumers By Barbara Brecko; Anusca Ferrari
  3. Systematic Heterogeneity: How to combine Smartphone related Apps with FIspace By Sundmaeker, Harald; Einramhof, Peter
  4. Background Review for Developing the Digital Competence Framework for Consumers: A snapshot of hot-button issues and recent literature By Anna Fielder; Riina Vuorikari; Nuria Rodriguez-Priego; Yves Punie
  5. Naïve advice in financial decision making: Hidden costs of a free offer By Sprenger, Julia
  6. Three Lectures on the Theory of Money and Financial Institutions: Lecture 1: A Nontechnical Overview By Martin Shubik

  1. By: Thomas A. Stephens (Department of Economics, WU Vienna University of Economics and Business); Jean-Robert Tyran (Department of Economics, University of Copenhagen)
    Abstract: We elicit money illusion and match it with financial and sociodemographic data from official registers on a quasi-representative sample of the Danish population. We find that people who are more prone to money illusion hold more of their gross wealth in nominal assets, including bank deposits and bonds, and less in real assets, including real estate and stocks. This bias is robust to controls for education, income, cognitive ability and other relevant characteristics. We further find that money illusion is a costly bias: 10-year portfolio returns are about 10 percentage points lower for individuals with high money illusion.
    Keywords: money illusion, loss aversion, household finance
    JEL: C91 D03 D14 E21 G11
    Date: 2016–12–01
  2. By: Barbara Brecko; Anusca Ferrari
    Abstract: The European Digital Competence Framework for Consumers, also known as DigComp for Consumers, offers a tool to improve consumers’ digital competence. Consumer digital competence is here defined as the competence consumers need to function actively, safely and assertively in the digital marketplace. This definition builds on the previous work done on consumers’ competence and adapts it to digital environment thanks to the use of DigComp 2.0 framework as a starting point. This report introduces the conceptual reference framework of DigComp for Consumers that outlines 14 competences and further gives examples of each competence in the array of knowledge, skills and attitudes.
    Keywords: Digitally-competent educational organisations, innovation in education, European Framework for Digitally-Competent Educational Organisations, educational policy, digital learning technologies, self-assessment questionnaire, ICT for learning and skills
    JEL: I20 I21 I23 I28 I29
    Date: 2016–11
  3. By: Sundmaeker, Harald; Einramhof, Peter
    Abstract: FIspace represents an Internet based B2B collaboration platform that can be used by actors along the supply chain, and specifically the agri-food chain, facilitating the design and usage of inter-organisational workflows. The FIspace platform was developed by using FIWARE, a European initiative to develop technologies for a Future Internet. At the same time, the requirements of actors from an agri-food related B2B environment were analysed. One of the key requirements was the demand for smartphone-based apps that can be easily used by any actor at any time in the scope of a B2B relationship of different organisations. However, realising inter-organisational workflows with a combination of smartphones and a platform for B2B collaboration raises business related requirements that are specifically in relation to interoperability and security. Therefore, the architectural principles of FIspace supported ecosystems are presented and the concept of developing FIspace software applications is detailed. The latter provides domain specific features and enables a systematic usage of heterogeneous components in business related ecosystems. Furthermore, different development strategies for smartphone apps are analysed to discuss the related implications with respect to effort, costs and interoperability when aiming at a combination with a FIspace supported ecosystem. This is compared with the general principles to develop features within a FIspace ecosystem to systematically identify the implications when integrating heterogeneous software and hardware solutions. The purpose of this paper is to present those design principles that shall help to systematically analyse end-user requirements, which need to be taken into account when developing or designing changes and extensions of a FIspace supported business ecosystem with the help of smartphone apps. Therefore, the paper addresses specifically software developers intending to use FIspace as well as business architects intending to change or design an ICT supported collaborative ecosystem.
    Keywords: Business Collaboration, Heterogeneity, Food Chain, App Development, FIWARE, Future Internet, FIspace, Fruits & Vegetables, Agribusiness,
    Date: 2015–05
  4. By: Anna Fielder; Riina Vuorikari (European Commission – JRC); Nuria Rodriguez-Priego (European Commission – DG JUST); Yves Punie (European Commission – JRC)
    Abstract: This report presents the results of a study of the requirements for developing a Digital Competence Framework in the context of a digital marketplace in the EU. Consumer digital competence is defined as the competence consumers need to function actively, safely and assertively in the digital marketplace. This framework will define the skills, knowledge and attitudes that consumers need to navigate the complex digital environment. The research project to create the Digital Competence Framework for Consumers is a joint action of DG Justice and Consumers (JUST), and the Joint Research Centre (JRC), the Commission's science and knowledge service. The work, carried out between 2015-2016, aimed to achieve the goals set out by the European Commission in its two recent Communications: "A New Skills Agenda For Europe - Working together to strengthen human capital, employability and competitiveness" (European Commission, 2016) and "A Digital Single Market Strategy for Europe" (European Commission, 2015). Both these Communications focus on the importance of citizens' digital skills and their capacity to participate more deeply in our digital society and economy. The study presented in this report is designed to elicit user requirements in order to support the development of the Digital Competence Framework for Consumers. The study was commissioned by the Joint Research Centre and it is a result of collaborative work between the authors of the report. Further consultation on requirements was carried out with DG JUST in which experts on various topics gave their input and contributed to the text. The literature and the hot-button issues described in this report reflect the state-of-play in 2015, when the study was carried out. The methodology used to clarify the requirements for a consumer digital competence framework had four main steps. First, a 'broad-but-shallow' look into important emerging issues in the field of online shopping and advertisement was taken. In this phase of the study, a number of European Commission working documents on the issue were reviewed. The focus was also on current relevant literature, both academic and grey literature. Second, the existing terms and major work in consumer competence was reviewed and links were made to behavioural insights. It emerged that lack of digital competence can make consumers vulnerable in today's complex digital environment. Third, part of the work consisted of testing the suitability of the existing Digital Competence Framework for Citizens (DigComp) in an expert workshop to further prompt requirements for the new framework. Lastly, to finalise the process of requirement gathering, a gap analysis was conducted on a number of prominent sources of educational material for consumer competence. The study found that the DigComp framework was a suitable starting point and confirms that it could be adapted to the new context of the digital marketplace. However, the analysis also showed that not all competencies are covered by the existing framework, in particular with regards to emerging digital trends and issues outlined. The final product of the project, the Digital Competence Framework for Consumers, is described in a JRC Science for Policy publication by Brecko & Ferrari (2016). All information is available also at the JRC Science Hub.
    Keywords: Digitally-competent educational organisations, innovation in education, European Framework for Digitally-Competent Educational Organisations, educational policy, digital learning technologies, self-assessment questionnaire, ICT for learning and skills
    JEL: I20 I21 I23 I28 I29
    Date: 2016–11
  5. By: Sprenger, Julia
    Abstract: The current study examines individual decision making in the field of personal finance. A laboratory experiment investigates the way näive advice influences the decisionmaking process. When advice is offered on demand, participants prefer expert over näive advice. Although näive advice is only half the price of expert advice, demand for näive advice is negligible. When näive advice is given unsolicited, however, it has nevertheless a strong impact on the decision process by lowering engagement in information acquisition and promoting a passive adoption of the recommended option. While high levels of financial literacy buffer this effect, issuing a warning does not. In case compliance with näive advice leads to a low decision quality and the saving in information acquisition costs does not make up for this effect, the free offer of näive advice produces financial losses. This can be interpreted as hidden costs of free näive advice resulting from a switch in information strategy. People with low financial literacy are most vulnerable to this effect.
    Abstract: Dieses Papier untersucht individuelles Entscheidungsverhalten im Bereich Finanzen. Ein Experiment beleuchtet auf welche Art naiver Rat den Entscheidungsprozess beeinflusst. Wird Rat nur auf Nachfrage erteilt, so bevorzugen die Teilnehmer den Expertenrat gegenüber dem naiven Rat. Obwohl der näive Rat nur halb so teuer ist wie der Expertenrat, ist die Nachfrage nach naivem Rat verschwindend gering. Wird naiver Rat jedoch ungefragt erteilt, hat er dennoch einen starken Einfluss auf den Entscheidungsprozess, denn er senkt das Engagement in der Informationsbeschaffung versträkt die passive Ausrichtung an der empfohlenen Option. Ein hohes Niveau an financial literacy reduziert diesen Effekt, eine Warnung vermag dies dagegen nicht. Falls die Befolgung des naiven Rats zu einer geringen Entscheidungsqalität führt und die Einsparung bei den Kosten der Informationbeschaffung diesen Effekt nicht ausgleichen, führt das Gratisangebot des naiven Rats zu finanziellen Verlusten. Dies kann als versteckte Kosten des frei verfügbaren naiven Rats interpretiert werden, die aus einem Wechsel in der Informationsstrategie resultieren. Menschen mit geringer financial literacy sind besonders anfällig für diesen Effekt.
    Keywords: Financial literacy,financial decision making,experiment,nä,ive advice
    JEL: C91 G02 D83
    Date: 2016
  6. By: Martin Shubik (Cowles Foundation, Yale University)
    Abstract: This essay is the second of three. The first is nontechnical and in part autobiographical describing the evolution of my approach to developing a micro economic theory of money and financial institutions. This essay is devoted to a mathematical sketch of a closed economic exchange system with general equilibrium GE and rational expectations RE viewed game theoretically. It squeezes the last drop out of statics and an illusory dynamics in the form of the RE extension of GE with no other externalities beyond money and markets. The third essay builds on process models adding uncertainty,innovation, an active government, nonsymmetric information and other externaties that all lead away from a static equilibrium model to an evolving entity where competition involving finance and innovation is part of a dynamic non-equilibrium process.
    Keywords: Process models, Disequilibrium, Minimal institutions, Money, Playable games
    JEL: C7 D50 E4
    Date: 2016–11
  7. By: Cécile Fonrouge (Université du Québec à Trois-Rivières (UQTR))
    Abstract: Crowdfunding is an emerging form of entrepreneurial finance. Financial flows from migrants and their descendants to their homeland are important. Do crowdfunding platforms disrupt this Diaspora financial flow? Our aim is to contrast and compare the sociology of immigration, Diaspora literature and entrepreneurial finance. We have interviewed all the French Diaspora Crowdfunding startups. We highlighted Diaspora motivation typologies and the evolution of these motivations since the beginning of Crowdfunding. By studying this new literature and interviewing key “Fintechs” entrepreneurs of French platforms, we propose a unique description: Diasporas motivations that are applied to Diaspora and trends on Diaspora investment evolution for this new digital industry. The main results are about the equilibrium between emotional and rational motivations for the new generation of migration, the competencies that Diaspora gives back to the country of their origin and the modification of the hierarchy of financing sources due to the possibility to raise money online.
    Keywords: crowdfunding, diaspora
    Date: 2016–11–01

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