nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2017‒01‒08
ten papers chosen by
Bernardo Bátiz-Lazo
Bangor University

  1. Panel dataset description for econometric analysis of the ISP-OTT relationship in the years 2008-2013 By Chiara Perillo; Angelos Antonopoulos; Christos Verikoukis
  2. Social Media Use and Children's Wellbeing By McDool, Emily; Powell, Philip; Roberts, Jennifer; Taylor, Karl
  3. The Impact of Anti-Money Laundering Regulation on Payment Flows: Evidence from SWIFT Data - Working Paper 445 By Matt Collin , Samantha Cook and Kimmo Soramäki
  4. Does Bitcoin Hedge Global Uncertainty? Evidence from Wavelet-Based Quantile-in-Quantile Regressions By Elie Bouri; Rangan Gupta; Aviral Kumar Tiwari; David Roubaud
  5. The Blockchain: A Gentle Four Page Introduction By Jan Hendrik Witte
  6. Some Simple Economics of the Blockchain By Christian Catalini; Joshua S. Gans
  7. Crowdfunding: Platform Dynamics under Asymmetric Information By Wessel, Michael
  8. Digitalisation: An engine for structural change - A challenge for economic policy By Hüther, Michael
  9. Contract Law 2.0: «Smart» Contracts as the Beginning of the End of Classic Contract Law By Alexander Savelyev
  10. The formation of partnerships in social networks By Bloch, Francis; Dutta, Bhaskar; Robin, Stéphane; Zhu, Min

  1. By: Chiara Perillo (University of Zurich, Department of Banking and Finance, Zurich, Switzerland); Angelos Antonopoulos (Telecommunications Technological Centre of Catalonia); Christos Verikoukis (Telecommunications Technological Centre of Catalonia)
    Abstract: The latest technological advancements in the telecommunications domain (e.g., widespread adoption of mobile devices, introduction of 5G wireless communications, etc.) have brought new stakeholders into the spotlight. More specifically, Over-the-Top (OTT) providers have recently appeared, offering their services over the existing deployed telecommunication networks. The entry of the new players has changed the dynamics in the domain, as it creates conflicting situations with the Internet Service Providers (ISPs), who traditionally dominate the area, motivating the necessity for novel analytical studies for this relationship. However, despite the importance of accessing real observational data, there is no database with the aggregate information that can serve as a solid base for this research. To that end, this document provides a detailed summary report for financial and statistic data for the period 2008-2013 that can be exploited for realistic econometric models that will provide useful insights on this topic. The document summarizes data from various sources with regard to the ISP revenues and Capital Expenditures (CAPEX), the OTT revenues, the Internet penetration and the Gross Domestic Product (GDP), taking into account three big OTT providers (i.e., Facebook, Skype, WhatsApp) and ten major ISPs that operate in seven different countries.
    Date: 2016–12
  2. By: McDool, Emily (University of Sheffield); Powell, Philip (University of Sheffield); Roberts, Jennifer (University of Sheffield); Taylor, Karl (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
  3. By: Matt Collin , Samantha Cook and Kimmo Soramäki
    Abstract: Regulatory pressure on international banks to fight money laundering (ML) and terrorist financing (TF) increased substantially in the past decade. At the same time there has been a rise in the number of complaints of banks denying transactions or closing the accounts of customers either based in high risk countries or attempting to send money there, a process known as de-risking. In this paper, we investigate the impact of an increase in regulatory risk, driven by the inclusion of countries on an internationally-recognized list of high risk jurisdictions, on subsequent cross-border payments. We find countries that have been added to a high risk greylist face up to a 10 percent decline in the number of cross border payments received from other jurisdictions, but no change in the number sent. We also find that a greylisted country is more likely to see a decline in payments from other countries with weak AML/CFT institutions. We find limited evidence that these effects manifest in cross border trade or other flows. Given that countries that are placed on these lists tend to be poorer on average, these impacts are likely to be more strongly felt in developing countries.
    Keywords: Money laundering, de-risking, banking, payment flows
    Date: 2016–12
  4. By: Elie Bouri (USEK Business School, Holy Spirit University of Kaslik, Lebanon); Rangan Gupta (Department of Economics, University of Pretoria, Pretoria, South Africa.); Aviral Kumar Tiwari (Center for Energy and Sustainable Development (CESD), Montpellier Business School, Montpellier, France); David Roubaud (Center for Energy and Sustainable Development (CESD), Montpellier Business School, Montpellier Research in Management, Montpellier, France)
    Abstract: In this study, we analyse whether Bitcoin can hedge uncertainty using daily data for the period of 17th March, 2011, to 7th October, 2016. Global uncertainty is measured by the first principal component of the VIXs of 14 developed and developing equity markets. We first use wavelets to decompose Bitcoin returns into various frequencies, i.e., investment horizons. Then, we apply standard OLS regressions and observe that uncertainty negatively affects raw Bitcoin return and its longer-term movements. However, given the heavy tails of the variables, we rely on quantile methods and reveal much more nuanced and interesting results. Quantile regressions indicate that Bitcoin does act as a hedge against uncertainty, that is, it reacts positively to uncertainty at both higher quantiles and shorter frequency movements of Bitcoin returns. Finally, when we use quantile-on-quantile regressions, we observe that hedging is observed at shorter investment horizons, and at both lower and upper ends of Bitcoin returns and global uncertainty.
    Keywords: Bitcoin, global uncertainty, wavelet, quantile regressions
    JEL: C22 G15
    Date: 2016–12
  5. By: Jan Hendrik Witte
    Abstract: Blockchain is a distributed database that keeps a chronologically-growing list (chain) of records (blocks) secure from tampering and revision. While computerisation has changed the nature of a ledger from clay tables in the old days to digital records in modern days, blockchain technology is the first true innovation in record keeping that could potentially revolutionise the basic principles of information keeping. In this note, we provide a brief self-contained introduction to how the blockchain works.
    Date: 2016–12
  6. By: Christian Catalini; Joshua S. Gans
    Abstract: We rely on economic theory to discuss how blockchain technology and cryptocurrencies will influence the rate and direction of innovation. We identify two key costs that are affected by distributed ledger technology: 1) the cost of verification; and 2) the cost of networking. Markets facilitate the voluntary exchange of goods and services between buyers and sellers. For an exchange to be executed, key attributes of a transaction need to be verified by the parties involved at multiple points in time. Blockchain technology, by allowing market participants to perform costless verification, lowers the costs of auditing transaction information, and allows new marketplaces to emerge. Furthermore, when a distributed ledger is combined with a native cryptographic token (as in Bitcoin), marketplaces can be bootstrapped without the need of traditional trusted intermediaries, lowering the cost of networking. This challenges existing revenue models and incumbents's market power, and opens opportunities for novel approaches to regulation, auctions and the provision of public goods, software, identity and reputation systems.
    JEL: D4 D47 O16 O3 O31 O32 O33 O34
    Date: 2016–12
  7. By: Wessel, Michael
    Abstract: Platform ecosystems are a growing trend in various industries and many companies that rely on this organizational structure have seen unprecedented growth rates in recent years. Compared to traditional service providers, platforms do not offer products or services directly to their customers, but almost exclusively through complementors who develop and deliver complementary content. Platforms therefore create value by enabling and coordinating interactions between the demand and the supply side. As these platforms are two-sided markets, they are characterized by distinct cross-side network effects, meaning that each side of the market derives externalities from the participation of the respective other group. Crowdfunding platforms rely on this concept and facilitate transactions between individuals who seek funding for a specific project or venture and prospective investors. Crowdfunding platforms are, however, special as the transactions made via the platforms are particularly risky for end-users because of a high level of information asymmetry existing between the market sides. Though a certain level of information asymmetry exists between the distinct market sides in every two-sided market, a number of factors amplify this problem in the crowdfunding context. For instance, there is usually little to no publicly available information such as customer reviews to evaluate the investments ex-ante. The creators of crowdfunding campaigns are therefore able to overstate quality or withhold information as they control the flow of information towards potential investors. Furthermore, many of the projects that are published on crowdfunding platforms are still in their infancy, making it difficult to accurately predict project outcomes. Compared to other types of two-sided markets, the issue of information asymmetry is also more difficult to resolve in crowdfunding because mechanisms such as reputation systems that are frequently applied in other contexts to mitigate this issue are less relevant on crowdfunding platforms. The actual utility of crowdfunding projects is therefore difficult to ascertain at the time the investment decision has to be made and dynamics of crowdfunding are thus different from those in other platform settings. Many open questions still remain with respect to the optimal market design of crowdfunding platforms in order to mitigate information asymmetries. Against this backdrop, four research studies have been conducted to investigate how the behaviors and actions of the distinct groups of market participants (i.e., platform provider, project creators, backers) influence the decision-making of potential backers on crowdfunding platforms. The first study is concerned with the effects actions taken by platform providers can have for the decision-making of backers. More specifically, it is examined how relaxing the input control for crowdfunding projects on Kickstarter affected the decision-making of backers. The second and third study are concerned with the role of social buzz and contribution behavior by previous backers. While the second study is focused on the dynamic interplay of social buzz, prior-contribution behavior, and the respective effects on backer decision-making, the third study describes the repercussions of non-genuine social media likes for project creators. The final study is focused on the influence project creators can have on backers by signaling certain personality traits through their project description and video. Overall, this thesis highlights that, as a result of the high level of information asymmetry on crowdfunding platforms, prospective backers seek alternative information and signals to use for decision support in the face of uncertainty. Platform providers and project creators may use the results to better understand how and why certain actions or behaviors of market participants on crowdfunding platforms affect the decision-making of prospective backers. The findings may therefore help platform providers to optimize the market design of crowdfunding platforms in order to avoid information-related market failure in the long term.
    Date: 2016–12–07
  8. By: Hüther, Michael
    Abstract: Digitalisation is in everyone's hands. During the last nine years the smartphone tremendously changed private lifestyle. Anytime and everywhere we are connected, we have options for decision making and controlling in real-time. Producer of hardware as well as software service provider of platforms are driving these current structural change's aspects. However - although less visible publicly - digital transformation also includes traditional industry, this is what the buzzword "Industrie 4.0" stands for. The political and public debate on necessary control of this transformation is as much hallmarked by the search for starting points as by heated demands for targeted competition law based interventions. In this context, it has to be noted that the digital transformation's different aspects are neither adequately differentiated nor systematically captured. That is the task this contribution tackles. A classification for digital business models is developed, in order to analytically exploit the different scopes and consistently infer politico-economic need for action.
    JEL: L16 O33 L52
    Date: 2016
  9. By: Alexander Savelyev (National Research University Higher School of Economics)
    Abstract: The paper analyzes legal issues associated with application of existing contract law provisions to so-called Smart contracts, defined in the paper as “agreements existing in the form of software code implemented on the Blockchain platform, which ensures autonomy and self-executive nature of Smart contract terms based on predetermined set of factors”. The paper consists of several sections. In the first section, the paper outlines peculiarities of Blockchain technology as currently implemented in Bitcoin cryptocurrency and which forms the core of Smart contracts. In the second section, the main characteristic features of Smart contracts are described. Finally, the paper outlines key tensions between classic contract law and Smart contracts.. The conclusion section sets the core question for analysis of the perspectives of implementation of this technology by governments: “How to align the powers of the government with Blockchain if there is no central authority but only distributed technologies”. The author suggests two solutions, which are not optimal: 1) providing the state authorities with the status of a Superuser with extra powers and 2) relying on traditional remedies and enforcement practices, by pursuing specific individuals – parties to Smart contract - in offline mode. It is emphasized that those jurisdictions, which have the most Blockchain-friendly regulations will have competitive advantage in attraction of new innovative business models and companies willing to exploit them in a legal way.
    Keywords: contract, obligation, Blockchain, Bitcoin, Smart contract.
    JEL: Z
    Date: 2016
  10. By: Bloch, Francis (Université Paris 1 and Paris School of Economics); Dutta, Bhaskar (University of Warwick and Ashoka University); Robin, Stéphane (Université de Lyon); Zhu, Min (Beijing Normal University)
    Abstract: This paper analyzes the formation of partnerships in social networks. Agents randomly request favors and turn to their neighbors to form a partnership. If favors are costly, agents have an incentive to delay the formation of the partnership. In that case, for any initial social network, the unique Markov Perfect equilibrium results in the formation of the maximum number of partnerships when players become infinitely patient. If favors provide benefits, agents rush to form partnerships at the cost of disconnecting other agents and the only perfect initial networks for which the maximum number of partnerships are formed are the complete and complete bipartite networks. The theoretical model is tested in the lab. Subjects generally play according to their equilibrium strategy and the efficient outcome is obtained over 78% of the times. Decisions are affected by the complexity of the network. Two behavioral rules are observed during the experiment: subjects accept the formation of the partnership too often and reject partnership offers when one of their neighbors is only connected to them.
    Keywords: social networks ; partnerships ; matchings in networks ; non-stationary networks ; laboratory experiments JEL classification numbers: D85 ; C78 ; C91
    Date: 2017

This nep-pay issue is ©2017 by Bernardo Bátiz-Lazo. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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