nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2017‒01‒01
fifteen papers chosen by
Bernardo Bátiz-Lazo
Bangor University

  1. The Opportunities and Challenges of Fintech : a speech at the Conference on Financial Innovation at the Board of Governors of the Federal Reserve System, Washington, D.C., December 2, 2016. By Brainard, Lael
  3. Cities and the Structure of Social Interactions: Evidence from Mobile Phone Data By Konstantin Büchel und Maximilian von Ehrlich
  4. Determinants of borrowers' default in P2P lending under consideration of the loan risk class By Michal Polena; Tobias Regner
  5. Disappearing Routine Jobs: Who, How, and Why? By Guido Matias Cortes; Nir Jaimovich; Henry E. Siu
  6. Not only a workplace : Reshaping creative work and urban space By Sihvonen, Tanja; Cnossen, Boukje
  7. Technology Disruptions as Enablers of Organizational and Social Innovation in Digitalized Environment By Koski, Heli; Melkas, Helinä; Mäntylä, Martti; Pieters, Roel; Svento, Rauli; Särkikoski, Tuomo; Talja, Heli; Hyyppä, Juha; Kaartinen, Harri; Hyyppä, Hannu; Matikainen, Leena
  8. Digitalization and Collective Value Creation By Isaksson, Darja; Wennberg, Karl
  9. Prices and Depreciation in the Market for Tablet Computers By David M. Byrne; Wendy E. Dunn; Eugenio P. Pinto
  10. How Home Equity Extraction and Reverse Mortgages Affect the Credit Outcomes of Senior Households By Stephanie Moulton; Donald Haurin; Samuel Dodini; Maximilian D. Schmeiser
  11. Box Office Buzz: Does Social Media Data Steal the Show from Model Uncertainty When Forecasting for Hollywood? By Steven Lehrer; Tian Xie
  12. Harnessing the digital economy for developing countries By Carl Dahlman; Sam Mealy; Martin Wermelinger
  13. E-Communication in Personal Sales: Internet Usage and Performance By Nadezda Kolesnik
  14. Social Media Use and Children’s Wellbeing By Emily McDool; Phillip Powell; Jennifer Roberts; Karl Taylor
  15. Not all that Glitters is Gold: ICT and Inclusive Human Development in Sub-Saharan Africa By Simplice Asongu; Jacinta C. Nwachukwu

  1. By: Brainard, Lael (Board of Governors of the Federal Reserve System (U.S.))
    Date: 2016–12–02
  2. By: Gergely Patrik Balla (Magyar Nemzeti Bank (Central Bank of Hungary)); Tamás Ilyés (Magyar Nemzeti Bank (Central Bank of Hungary))
    Abstract: In our study we analysed the effect of the introduction of an instant payment system in Hungary, using a large number of transaction level data of an extended time period, simulating the operation of the payment system. We analysed the two main theoretical models of instant payments: instant settlement in central bank money, and instant clearing with prefunded cyclical settlement. For both models we estimated the effect of using low and high transaction limits. We differentiated three liquidity costs associated with the operation of such a system. First, we estimated the impact on settlement queues in the real-time gross settlement system and calculated the costs of extra liquidity needed to dissolve the queues and support the continuous operation of the system. In the second step we estimated the liquidity needs of a prefunded instant payment system by different confidence levels and prudential requirements. Lastly, we analysed the effects of the different models on the stability of the payment system. The results clearly show that the costs associated with the dissolution of queues are marginal because retail payments comprise a very small percentage of the inter-bank payment flows, thus the instant payment system would not generate additional settlement queues. On the other hand, liquidity needs of a prefunded model can be significant, especially with high collateral confidence levels and high transaction value limits. However, these liquidity needs can be lowered by seasonal adjustments to the prefunded amounts and by using a robust but rational collateral confidence level. We also show that these costs are relatively higher for institutions with fewer customers as their payments turnover is more volatile, and so they have to make relatively larger prefunded deposits.
    Keywords: instant payments, retail payments, liquidity management, RTGS
    JEL: C53 G17 G29
    Date: 2016
  3. By: Konstantin Büchel und Maximilian von Ehrlich
    Abstract: Social interactions are considered pivotal to urban agglomeration forces. This study employs a unique dataset on mobile phone calls to examine how social interactions differ across cities and peripheral areas. We first show that geographical distance is highly detrimental to interpersonal exchange. We then reveal that individuals residing in high-density locations do not benefit from larger social networks, but from a more efficient structure in terms of higher matching quality and lower clustering. These results are derived from two complementary approaches: Based on a link Formation model, we examine how geographical distance, network overlap, and sociodemographic (dis)similarities impact the likelihood that two agents interact. We further decompose the effects from individual, location, and time specific determinants on micro-level network measures by exploiting information on mobile phone users who change their place of residence.
    Keywords: Social Interactions; Agglomeration Externalities; Network Analysis; Sorting
    JEL: R1 R23 Z13 D85
    Date: 2016–12
  4. By: Michal Polena (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Tobias Regner (School of Economics and Business Administration, Friedrich-Schiller-University Jena)
    Abstract: We study the determinants of borrowers' default in P2P lending with a new data set consisting of 70,673 loan observations from Lending Club. Previous research identified a number of default determining variables but did not distinguish between different loan risk levels. We define four loan risk classes and test the significance of the default determining variables within each loan risk class. Our findings suggest that the significance of most variables depends on the loan risk class. Only few variables are consistently significant across all risk classes. The debt-to-income ratio, inquiries in the past 6 months and a loan intended for a small business are positively correlated with the default rate. Annual income and credit card as loan purpose are negatively correlated.
    Keywords: crowdfunding, peer-to-peer lending, P2P, credit grade, FICO score, default risk
    JEL: D14 E41 G23
    Date: 2016–12–14
  5. By: Guido Matias Cortes; Nir Jaimovich; Henry E. Siu
    Abstract: We study the deterioration of employment in middle-wage, routine occupations in the United States in the last 35 years. The decline is primarily driven by changes in the propensity to work in routine jobs for individuals from a small set of demographic groups. These same groups account for a substantial fraction of both the increase in non-employment and employment in low-wage, non-routine manual occupations observed during the same time period. We analyze a general neoclassical model of the labor market featuring endogenous participation and occupation choice. We show that in response to an increase in automation technology, the model embodies an important tradeoff between reallocating employment across occupations and reallocation of workers towards non-employment. Quantitatively, we find that advances in automation technology on their own account for a relatively small portion of the joint decline in routine employment and associated rise in non-routine manual employment and non-employment.
    JEL: E0 J0
    Date: 2016–12
  6. By: Sihvonen, Tanja; Cnossen, Boukje (Tilburg University, School of Economics and Management)
    Abstract: This research article examines the intersection of two current topics: the ongoing flexibilisation of creative work on the one hand, and the emergence of urban temporary working landscapes on the other. Their interrelatedness is inspected through a case study of one particular creative hub, the former Volkskrant building in Amsterdam, and through analysing its transformation into a ‘creative’ hotel. Based on intensive qualitative fieldwork in 2012 and 2013, we argue that the importance of such temporary hubs lies beyond the fact that these places provide professionals in the creative industries with desk space. By mobilising the concept of engagement, we draw parallels between the ways in which creative urban professionals shape the physical spaces they use, and the ways digital media users appropriate virtual spaces. We argue that an understanding of the changing practices of creative workers might benefit from a revisiting of the concepts ‘loose space’ and ‘Thirdspace’, as these notions help challenge the false dichotomy between ‘real’ and ‘imagined’ space. We believe that this continuous re-imagining and repurposing of space while working in it, together with the possibility of actual, physical modification as afforded by the particular countercultural heritage of Amsterdam, reveals the creative potentialities of these flexible work practices.
    Date: 2016
  7. By: Koski, Heli; Melkas, Helinä; Mäntylä, Martti; Pieters, Roel; Svento, Rauli; Särkikoski, Tuomo; Talja, Heli; Hyyppä, Juha; Kaartinen, Harri; Hyyppä, Hannu; Matikainen, Leena
    Abstract: This paper illustrates how disruptive technologies primarily shaking the functioning of service sector are spreading to the manufacturing industries, and vice versa, and further change the roles of consumers and users. Software and data that first transformed the provision of services now lead the transition of traditional manufacturing companies towards the production of smart, connected products and fundamentally transform their operation and management. Along with the datafication of manufacturing companies, certain advanced digital technologies such as robotics originally developed for manufacturing purposes find their applications in services. Co-evolution of technology and service innovation will be in the center of transformation of health services towards the adoption of new service and care models with assistive and socially intelligent robots. Our paper also addresses that technology disruptions in a digitalized environment enable and facilitate transformation of consumers from mere end-users to active market participants who may not only design or customize products for their own needs but also to become active market players on the supply side. Technology disruptions may also challenge existing institutions. For instance, convergence of robotics and surveying resulting in decentralized, distributed collection of geographic data by vehicles equipped with sensors may make national mapping agencies obsolete.
    Keywords: Technology disruptions, digitalization, IoT, robotics, point clouds, renewable energy
    Date: 2016–12–22
  8. By: Isaksson, Darja (Future transparent); Wennberg, Karl (The Ratio Institute and Linköping University)
    Abstract: We discuss the spread and impact of digitalization as a disruptive technological change. We show how digitalization is intimately connected to globalization by first, being dependent on globalization for its impact, and second, enhancing the speed of globalization. Digitalization lowers barriers to funding, marketing, sales and distribution, and enables an increasing global flow of goods, services, and financial transactions. We discuss how digitalization also contributes to changing consumer habits and a blurring line between producers and consumers where the latter now have capabilities to build collective knowledge by they themselves becoming producers. Digital platforms are emerging, aggregating data and providing new business models where contact costs are approaching zero. These platforms wield strong economic power and the algorithms by which they operate also change incentives and transaction costs for producers and consumers. We sketch the patterns by which industries digitialize as being characterized by one or a few ‘platforms’ dominating a global market, but where such platforms also facilitate the emergence of more narrow niche businesses and products and allow new types of micro-multinationals to reach out to a larger global crowd and satisfy latent demand. These changes have already happened in media and music, and the principles seen in these industries can be seen as emerging in other sectors. We conclude by highlighting the potential of digitalization to enhance the value of collective goods. We particularly highlight the cases of health care and the energy, and discuss how digital technologies can contribute to collective value creation in these areas.
    Keywords: Entrepreneurship
    JEL: L26
    Date: 2016–12–22
  9. By: David M. Byrne; Wendy E. Dunn; Eugenio P. Pinto
    Abstract: Spurred by advances in electronic miniaturization and power efficiency, lightweight, powerful and inexpensive tablet computers entered the mass market in significant volumes in 2010. Since that time, sales of tablet computers have increased to account for over half of personal computer (PC) units sold worldwide.
    Date: 2016–12–05
  10. By: Stephanie Moulton (The Ohio State University); Donald Haurin (The Ohio State University); Samuel Dodini (Cornell University); Maximilian D. Schmeiser (Amazon and the University of Wisconsin)
    Abstract: This paper examines how the extraction of home equity, including but not limited to equity extracted through reverse mortgages, affects credit outcomes of senior households. We use data from the Federal Reserve Bank of New York/Equifax Consumer Credit Panel, supplemented with our unique credit panel dataset of reverse mortgage borrowers. We track credit outcomes for seniors who extracted equity through cash-out refinancing, home equity lines of credit or home equity loans between 2008 and 2011, and a random sample of nonextractors. We estimate differences-in-differences by extraction channel using individual, fixed-effects panel regression. We find that seniors extracting equity through reverse mortgages have greater reductions in consumer debt, and are less likely to become delinquent or foreclose three years post origination relative to other extractors and nonextractors. These effects are greater among households who experienced a credit shock within the two years prior to loan origination. To help isolate the effect of the extraction channel on credit outcomes, we re-estimate our models with a matched sample of consumers at the time of extraction. We find that otherwise similar HECM borrowers have larger reductions in credit card debt post-extraction than other equity borrowers and non-borrowers, with no significant difference in the rates of delinquency on non-housing debt post extraction. For HECM borrowers, we find that increased initial withdrawal and increased monthly cash flow contribute to the reduction in credit card debt.
    Date: 2016–09
  11. By: Steven Lehrer; Tian Xie
    Abstract: Substantial excitement currently exists in industry regarding the potential of using analytic tools to measure sentiment in social media messages to help predict individual reactions to a new product, including movies. However, the majority of models subsequently used for forecasting exercises do not allow for model uncertainty. Using data on the universe of Twitter messages, we use an algorithm that calculates the sentiment regarding each film prior to, and after its release date via emotional valence to understand whether these opinions affect box office opening and retail movie unit (DVD and Blu-Ray) sales. Our results contrasting eleven different empirical strategies from econometrics and penalization methods indicate that accounting for model uncertainty can lead to large gains in forecast accuracy. While penalization methods do not outperform model averaging on forecast accuracy, evidence indicates they perform just as well at the variable selection stage. Last, incorporating social media data is shown to greatly improve forecast accuracy for box-office opening and retail movie unit sales.
    JEL: C52 C53 M21
    Date: 2016–12
  12. By: Carl Dahlman (OECD); Sam Mealy (OECD); Martin Wermelinger (OECD)
    Abstract: This report makes a call for why the digital economy matters for developing countries and what they need to consider when developing a national digital strategy. The world is undergoing a digital revolution with significant implications for global economies and livelihoods. This revolution is predicated on the ever-increasing pace of technological innovation and diffusion. Digital technologies and their attendant applications are reshaping whole domains of human activity, and are spreading across the world faster than previous waves of technological innovation. The digital revolution is thus too important for any country to overlook. As outlined in Section II, the digital economy can be harnessed for inclusive and sustainable growth: digital technologies make life easier for citizens and consumers, raise the productivity of workers and firms, and help governments extend key services to those who need them most. However, this does not just happen randomly: governments must engage in strategic planning to maximise the development impact of digitalisation and ensure that its benefits are evenly distributed. Using the experience of leading economies in the digital space, Section III looks at some of the broad and generic enabling factors that developing countries can develop and use as foundations for their digital economies. The concluding section, Section IV, examines three key lessons developing countries can learn from other countries’ digital experiences. It provides some guiding principles around thinking about how to craft a national digital strategy that builds on top of the enablers of the digital economy.
    Keywords: digitalisation, inclusive growth, policy, technology
    JEL: O31 O32 O35 O38
    Date: 2016–12–22
  13. By: Nadezda Kolesnik (National Research University Higher School of Economics)
    Abstract: Interpersonal face-to-face communication is the key value creation aspect of direct selling business model. Nowadays more and more sellers employ virtual communication channels. The study explores whether usage of Internet technologies for communication with customers brings benefits or extinguish performance of direct selling individual distributors. The research is based on the quantitative analysis of country-wide paper based survey from 5694 respondents. The statistical analysis of total sample revealed that usage of Internet in general does not give advantages for distributors. However, usage of person-to-person Internet communication tool, such as e-mail, allows achieving better performance as measured by earnings per hour worked and earning per month. Surprising is the fact that the most successful young distributors (at the age under 35 years) do not use Internet for communication with customers at all. For distributors over 35 years old neither Internet nor e-mail usages have got impact on performance. In rural areas users of Internet communication tools show lower influence on performance. In big cities usage of e-mail provides significantly higher performance, but general usage of Internet does not. Consequently, the effects from usage of Internet technologies for communication with customers are achieved in case of person-to-person communication. Moreover the most productive sellers give priority to the live communication
    Keywords: direct selling, Internet, performance, communication
    JEL: Z
    Date: 2016
  14. By: Emily McDool (Department of Economics, University of Sheffield); Phillip Powell (Department of Economics, University of Sheffield); Jennifer Roberts (Department of Economics, University of Sheffield); Karl Taylor (Department of Economics, University of Sheffield)
    Abstract: Childhood circumstances and behaviours have been shown to have important persistent effects in later life. One aspect of childhood that has changed dramatically in the past decade, and is causing concern among policy makers and other bodies responsible for safeguarding children, is the advent of social media, or online social networking. This research explores the effect of children’s digital social networking on their subjective wellbeing. We use a large representative sample of 10-15 year olds over the period 2010 to 2014 from the UK Household Longitudinal Study, and estimate the effect of time spent chatting on social websites on a number of outcomes which reflect how these children feel about different aspects of their life, specifically: school work; appearance; family; friends; school attended; and life as a whole. We deal with the potential endogeneity of social networking via an instrumental variables approach using information on broadband speeds and mobile phone signal strength published by Ofcom. Our results suggest that spending more time on social networks reduces the satisfaction that children feel with all aspects of their lives, except for their friendships; and that girls suffer more adverse effects than boys. As well as addressing policy makers’ concerns about the effects of digital technology on children, this work also contributes to wider debates about the socioeconomic consequences of the internet and digital technologies more generally, a debate which to date has largely been based on evidence from outside of the UK.
    Keywords: digital society, social media, wellbeing, children
    JEL: D60 I31 J13
    Date: 2016–12
  15. By: Simplice Asongu (Yaoundé/Cameroun); Jacinta C. Nwachukwu (Coventry University, UK)
    Abstract: This paper examines the short and long term effects of information and communication technology (ICT) on inclusive human development in a panel of 49 Sub-Saharan African countries for the period 2000-2012. ICT is measured in terms of mobile phone penetration, internet penetration and telephone penetration rates. While mobile phone penetration has positive short run and long term effects on inclusive human development, the effects of internet and telephone penetrations are insignificant. Moreover, the long term inclusive human development benefits of the mobile phone are higher than the corresponding short term rewards. Policy implications are discussed.
    Keywords: ICT; inclusive human development; Africa
    JEL: G20 I10 I32 O40 O55
    Date: 2016–12

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