nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2017‒11‒19
thirteen papers chosen by
Bernardo Bátiz-Lazo
Bangor University

  1. Revolutionieren Kryptowährungen die Zahlungssysteme? By Walter blocher; Andreas Hanl; Jochen Michaelis
  2. Austria’s digital transition: The diffusion challenge By Rauf Gönenç; Béatrice Guérard
  3. A Model for Use-centered Design of Payment Instruments Applied to Banknotes: Upid-Model By Heij, H.A.
  4. Mobile banking usage, quality of growth, inequality and poverty in developing countries By Simplice Asongu; Nicholas Odhiambo
  5. Generation, Security and Distribution of NationCoins by a Sovereign Authority By Hegadekatti, Kartik; S G, Yatish
  6. Internet and Politics: Evidence from U.K. Local Elections and Local Government Policies By Alessandro Gavazza; Mattia Nardotto; Tommaso M. Valletti
  7. Segmentation versus Agglomeration: Competition between Platforms with Competitive Sellers By Karle, Heiko; Peitz, Martin; Reisinger, Markus
  8. ICT, Conflicts in Financial Intermediation and Financial Access: Evidence of Synergy and Threshold Effects By Simplice Asongu; Paul Acha-Anyi
  9. Cyber Technology and Arms Race By Vesa Kanniainen
  10. Where Do People Get Their News? By Kennedy, Patrick; Prat, Andrea
  11. Knowledge Exchange in Multi-Sided Platforms: A Business Model Approach By Yablonsky, Sergey A.
  12. The Gold Pool (1961-1968) and the fall of the Bretton Woods system. Lessons for central bank cooperation. By Bordo, Michael D; Monnet, Eric; Naef, Alain
  13. The Dollar Auction Game: A laboratory comparison between Individuals and Groups By Morone, Andrea; Nuzzo, Simone; Caferra, Rocco

  1. By: Walter blocher (Universitaet Kassel); Andreas Hanl (Universitaet Kassel); Jochen Michaelis (Universitaet Kassel)
    Abstract: The development of cryptocurrencies such as Bitcoin after the global financial crises from 2007 onwards has put the financial sector into trouble. Some voices even speak of the possibility of abolishing cash. This article shows, first, whether and to what extent cryptocurrencies can replace cash, second, to what extent they change non-cash payment systems, and third, which obstacles have to be overcome on the way to large acceptance. We shall first scrutinize the financial sector's response to the multifaceted phenomenon of the Distributed Ledger Technology (“blockchain”).
    Keywords: Bitcoin, Cryptocurrency, digital Currency, Blockchain, Distributed Ledger Technology, Payment System
    JEL: E42 G20
    Date: 2017
  2. By: Rauf Gönenç (OECD); Béatrice Guérard (OECD)
    Abstract: Austria’s transition to a digital economy and society is slower than in other high-income small open European economies. The rate and pace of utilisation of eight main ICT applications shows that Austrian firms follow peer country counterparts with a gap, which has widened in most areas in recent years. Two dynamics drive digital transitions and Austria has room for progress in both of them. First, the potential for digitalisation in all firms, and especially in the smaller ones (where gaps are largest) should be freed-up by upgrading the full range of ICT-generic, ICT-specific and ICT-complementary skills. Second, Austria needs to make its business environment more conducive to firm entry and exit. The rate of entry of new firms and their growth are crucial for the diffusion of new business models and ICT innovations but fall behind peer countries. The adoption of ICT innovations by households also follows a staggered path: young and highly educated Austrians adopt ICT applications in similar ways to their counterparts in peer countries, while middle and older age cohorts display noticeable gaps. This calls for policies to help lagging groups become more acquainted with innovations. A whole-of-government approach, including large-scale utilisation of e-government applications in enterprises and households, should help to embrace change and facilitate the flourishing of innovative businesses, work practices and lifestyles throughout Austria. This Working Paper relates to the 2017 OECD Economic Survey of Austria ( y-austria.htm)
    Keywords: diffusion of innovations, digitalisation, information technologies, technological innovation
    JEL: D24 L60 L81 L96 M15 O14 O32 O33 O38
    Date: 2017–11–20
  3. By: Heij, H.A.
    Abstract: People use banknotes to pay retailers for person-to-person payments and for travelling. However, in the Netherlands the number of cash payments is declining. People rather use debit cards, as they provide them better services. Modern banknotes face a usage threat, instead of a new counterfeit threat. Banknotes can be made more user-friendly by applying the Model for Use-centered Design of Payment Instruments or Upid-Model. This Model identifies four User Interface Functions (UIFs) and six User Experience Functions (UXFs), ranging from ‘recognising value’ (UIF 1) to ‘linking to information technology’ (UXF 6). How users perceive a banknote is essential knowledge to arrive at user-friendly banknotes. Various contributions are presented, including the 4M Model for the Perception of Banknotes. The Upid-Model offers a framework to map the opinion of the Dutch on the design of gulden and euro banknotes (period 1981-2017). Using the Upid-Model, a new design concept has been developed for a series of MAX-banknotes, Money of Area X. Finally, the Upid-Model proved to be applicable on other means of payments, like debit cards and wallet apps.
    Date: 2017
  4. By: Simplice Asongu (Yaoundé/Cameroun); Nicholas Odhiambo (Pretoria, South Africa)
    Abstract: The transition from Millennium Development Goals to Sustainable Development Goals has substantially shifted the policy debate from development to inclusive development. Using interactive quantile regressions, we examine the correlations between mobile banking and inclusive development (quality of growth, inequality and poverty) among individuals in 93 developing countries for the year 2011. Mobile banking entails: ‘mobile used to pay bills’ and ‘mobile used to receive/send money’. The findings broadly show that increasing mobile banking dynamics to certain thresholds would increase (decrease) quality of growth (inequality) in quantiles at the high-end of inclusive development distributions for the most part. The study is original in that it explores the relationship between mobile banking and inclusive development using three measurements of inclusive development, namely: quality of growth, inequality and poverty. As a main policy implication, encouraging mobile banking applications would play a substantial role in responding to the challenges of immiserizing growth, inequality and poverty in developing countries.
    Keywords: Mobile banking; Quality of growth; Poverty; Inequality; Developing countries
    JEL: G20 O40 I10 I20 I32
    Date: 2017–01
  5. By: Hegadekatti, Kartik; S G, Yatish
    Abstract: NationCoins are cryptocurrencies backed by Sovereign Authority (Simply put, they are Government issued Bitcoin-like cryptocurrencies). In this paper, we explain the generation, security and distribution of NationCoins by a Sovereign Authority. We begin by explaining the concept of cryptocurrencies (also referred to as cryptocoins in this paper). We then discuss the concept of Regulated and Sovereign Backed Cryptocurrencies (RSBCs). Then we envision a scenario where cryptocoins are a main medium of exchange in an economy. The generation, security and distribution of NationCoins by a Sovereign Authority are deliberated. Finally, the paper concludes by outlining the functions of the Sovereign Authority vis-a-vis NationCoins.
    Keywords: NationCoins, K-Y Protocol, Bitcoin, Cryptocurrencies
    JEL: E41 E42 E51 O14 O31 O38
    Date: 2016–12–21
  6. By: Alessandro Gavazza; Mattia Nardotto; Tommaso M. Valletti
    Abstract: We empirically study the effects of broadband internet diffusion on local election outcomes and on local government policies using rich data from the U.K. Our analysis suggests that the internet has displaced other media with greater news content (i.e., radio and newspapers), thereby decreasing voter turnout, most notably among less-educated and younger individuals. In turn, we find suggestive evidence that local government expenditures and taxes are lower in areas with greater broadband diffusion, particularly expenditures targeted at less-educated voters. Our findings are consistent with the idea that voters’ information plays a key role in determining electoral participation, government policies and government size.
    JEL: D72
    Date: 2017
  7. By: Karle, Heiko; Peitz, Martin; Reisinger, Markus
    Abstract: For many products, platforms enable sellers to transact with buyers. We show that the competitive conditions among sellers shape the market structure in platform industries. If product market competition is tough, sellers avoid competitors by joining different platforms. This allows platforms to sustain high fees and explains why, for example, in some online markets, several homogeneous platforms segment the market. Instead, if product market competition is soft, agglomeration on a single platform emerges, and platforms fi ght for the dominant position. These insights give rise to novel predictions. For instance, market concentration and fees are negatively correlated in platform industries, which inverts the standard logic of competition.
    Keywords: endogenous segmentation; intermediation; market structure; price competition; Two-sided markets
    JEL: D43 L13
    Date: 2017–11
  8. By: Simplice Asongu (Yaoundé/Cameroun); Paul Acha-Anyi (Pretoria, South Africa)
    Abstract: In this study we investigate the role of information and communication technology (ICT) in conflicts of financial intermediation for financial access. The empirical evidence is based on contemporary (or current values) and non-contemporary (or lagged by a year) quantile regressions in 53 African countries for the period 2004-2011. The main findings are: First, the net effect of ICT in formalization for financial activity in the banking system is consistently beneficial with positive thresholds. The fact that corresponding, unconditional and conditional effects are persistently positive is evidence of synergy or complementary effects. Second, the net effect of ICT in financial informalization for financial activity in the financial system is negative with a consistent negative threshold. Hence, the positive (negative) complementarity of ICT and financial formalization (informalization) is an increasing (decreasing) function of financial activity. Policy measures on how to leverage the synergy or complementarity between ICT and financial formalization in order to enhance financial access are discussed.
    Keywords: Allocation efficiency; financial sector development; ICT
    JEL: G20 G29 L96 O40 O55
    Date: 2017–01
  9. By: Vesa Kanniainen
    Abstract: Cyber technology represents digital military capability with the purpose of causing damage to the military strength and the social infrastructure of a potential enemy. War using conventional weapons may be preceded by or combined with a war using cyber technology. This paper introduces such technology into the theory of conflicts, suggesting the striking proposal that the expected return on cyber investment is convex. It is shown that an asymmetric successful cyber program results in an option for a pre-emptive cyber attack. These features of the model make the cyber technology a first-ranked military investment. The optimal scale of a cyber program of a country expected to have access to a superior cyber capability is derived. It is shown that the asymmetric cyber capability reduces the international arms race but nevertheless raises the likelihood of a war reducing the deterrence.
    Keywords: military conflicts, cyber war, arms race
    JEL: H12 H56
    Date: 2017
  10. By: Kennedy, Patrick; Prat, Andrea
    Abstract: The media industry is unique in its ability to spread information that may influence the democratic process. This influence depends on where and how citizens get their political information. While previous research has examined news production and consumption on specific media platforms --- such as newspapers, television, or the Internet --- little is known about overall news consumption across platforms. To fill this gap, we use a model of media power and individual-level survey data on news consumption to estimate the potential electoral influence of major news organizations in 18 countries. Our analysis highlights three global patterns: high levels of concentration in media power, dominant rankings by television companies, and a link between socioeconomic inequality and information inequality. We also explore international differences in the role of public-service broadcasting.
    Keywords: inequality; media concentration; media power
    Date: 2017–11
  11. By: Yablonsky, Sergey A.
    Abstract: The paper addresses the problems of knowledge exchange/sharing in multi-sided platforms (MSPs). The paper identifies what are the main business models, mechanisms and factors that explain the knowledge/information/data exchange/share and innovation effects of MSPs and MSP ecosystems. The paper provides a broad overview of MSP intermediaries and ecosystems for exchange/sharing knowledge and examines main business models and cases. Analysis of the main business model pattern of MSP (Yablonsky, 2016b) identifies such main business model blocks that could be used for knowledge/information/data exchange/sharing: key partnership and ecosystem, activities, resources, and digital channels. The five areas of knowledge/information/data exchange/sharing in IT infrastructure platforms were investigated trying to find what counterparts are usually exchanged/shared.
    Keywords: knowledge exchange, multi-sided platforms, intermediaries, ecosystems, business model, exchange/share, innovations,
    Date: 2016
  12. By: Bordo, Michael D; Monnet, Eric; Naef, Alain
    Abstract: The Gold Pool (1961-1968) was one of the most ambitious cases of central bank cooperation in history. Major central banks pooled interventions - sharing profits and losses- to stabilize the dollar price of gold. Why did it collapse? From at least 1964, the fate of the Pool was in fact tied to sterling, the first line of defense for the dollar. Sterling's unsuccessful devaluation in November 1967 spurred speculation and massive losses for the Pool. Contagion occurred because US policies were inflationary and insufficiently credible as well. The demise of the Pool provides a striking example of contagion between reserve currencies.
    Keywords: Bretton Woods; central bank cooperation; Gold Pool; international monetary system; reserve currencies; sterling crisis
    JEL: E42 F31 F33 N14
    Date: 2017–11
  13. By: Morone, Andrea; Nuzzo, Simone; Caferra, Rocco
    Abstract: The aim of this paper is to analyze bidders’ behavior, comparing individuals and groups’ decisions within the dollar auction framework. This game induces subjects to fall prey into the paradigm of escalation, which is driven by agents’ commitment to higher and higher bids. Whenever each participant commits himself to a bid, the lower bidder, motivated by the wish to win as well as to defend his prior investment, finds it in his best interest to place a higher bid to overcome his opponent. The latter mechanism may lead subjects to overbid. We find that the Nash equilibrium of the game is only rarely attained. Second, we detect clean evidence that groups’ decisions are, on average, superior to individuals’ decisions. Learning over time is clearly evident, leading individuals to perform nearly as good as groups in the final rounds of the game.
    Keywords: escalation,winner’s curse
    JEL: 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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.