nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2017‒12‒03
twenty-two papers chosen by
Bernardo Bátiz-Lazo
Bangor University

  1. Towards 5G: scenario-based assessment of the future supply and demand for mobile telecommunications infrastructure By Edward Oughton
  2. The use of cash by households in the euro area By Esselink, Henk; Hernández, Lola
  3. Crypto-currencies – An introduction to not-so-funny moneys By Aaron Kumar; Christie Smith
  4. Quantum attacks on Bitcoin, and how to protect against them By Divesh Aggarwal; Gavin K. Brennen; Troy Lee; Miklos Santha; Marco Tomamichel
  5. The long-term effect of digital innovation on bank performance: An empirical study of SWIFT adoption in financial services By Scott, Susan V.; Van Reenen, John; Zachariadis, Markos
  6. Travel Information’s Search, Planning and Purchase of Travel Service: The Bulgarian Tourists Behaviour By Zhelyu Vladimirov; Sonia Mileva
  7. Digital Innovation and the Distribution of Income By Dominique Guellec; Caroline Paunov
  8. The geography of city liveliness and consumption: evidence from location-based big data By Wu, Wenjie; Wang, Jianghao; Li, Chengyu; Wang, Mark
  9. Considering the Effects of Mobile Phones on Financial Inclusion in Cambodia By Seng, Kimty
  10. Knowledge Creation and Knowledge Sharing on the Virtual Conference: a Case Study of Disruptive Innovation Festival By Kokoulina, Liudmila O.
  11. The domestic turn: business processing outsourcing and the growing automation of Kenyan organisations By Mann, Laura; Graham, Mark
  12. The 4th Industrial Revolution and R&D Policy By Sung-Uk Park
  13. Monitoring Money for Price Stability By Hevia, Constantino; Nicolini, Juan Pablo
  14. From Ecology to Finance (and Back?): Recent Advancements in the Analysis of Bipartite Networks By Mika J. Straka; Guido Caldarelli; Tiziano Squartini; Fabio Saracco
  15. Parental Monitoring and Children's Internet Use: The Role of Information, Control, and Cues By Francisco Gallego; Ofer Malamud; Cristian Pop-Eleches
  16. Macroeconomics and FinTech: Uncovering Latent Macroeconomic Effects on Peer-to-Peer Lending By Jessica Foo; Lek-Heng Lim; Ken Sze-Wai Wong
  17. Taxation and the Peer-to-Peer Economy By Aqib Aslam; Alpa Shah
  18. Marketing Agencies and Collusive Bidding in Online Ad Auctions By Francesco Decarolis; Maris Goldmanis; Antonio Penta
  19. The Private Production of Safe Assets By Kacperczyk, Marcin; Perignon, Christophe; Vuillemey, Guillaume
  20. From complementary currency to institution: a micro-macro study of the Sardex mutual credit system By Sartori, Laura; Dini, Paolo
  21. Startups and Stanford University By Herv\'e Lebret
  22. Financing Ventures By Greenwood, Jeremy; Han, Pengfei; Sanchez, Juan M.

  1. By: Edward Oughton (Cambridge Judge Business School, University of Cambridge)
    Abstract: Moving from 4G LTE to 5G is an archetypal example of technological change. Mobile Network Operators (MNOs) who fail to adapt will likely lose market share. Hitherto, qualitative frameworks have been put forward to aid with business model adaptation for MNOs facing on the one hand increasing traffic growth, while on the other declining revenues. In this analysis, we provide a complementary scenario-based assessment of 5G infrastructure strategies in relation to mobile traffic growth. This information is required by commercial players in the digital ecosystem for strategy development, and can support management decision-making. Developing and applying an open-source modelling framework, we quantify the uncertainty associated with future demand and supply for a hypothetical MNO, using Britain as a case study example. We find that spectrum strategies require the least amount of capital expenditure and are capable of meeting baseline demand until approximately 2025, after which more spectrum capacity will be required. Alternatively, small cell deployments provide significant capacity but at considerable cost, and hence are likely only in the densest locations, unless MNOs can boost revenues by capturing value from the Internet of Things (IoT), Smart Cities or other technological developments dependent on digital connectivity.
    Date: 2017–11
  2. By: Esselink, Henk; Hernández, Lola
    Abstract: Although euro banknotes and coins have been in circulation for fifteen years, not much is known about the actual use of cash by households. This paper presents an estimation of the number and value of cash transactions in all 19 euro area countries in 2016, based on survey results. It presents an extensive description of how euro area consumers pay at points of sale (POS). The aim of this study is to shed light on consumers’ payment behaviour and in particular to improve the understanding of consumers’ payment choices at POS, based on a large sample of countries. Therefore, it provides central banks and relevant payment system stakeholders with fundamental information for the development of their policies and strategic decisions that can contribute to improving the efficiency of the cash cycle and the payment system as a whole. Previous estimates of the value of cash usage by households in the euro area date from 2008. Since then some central banks have carried out their own research on cash usage. This paper is the first study to measure the transaction demand for cash in the euro area. The results show that in 2016 around 79% of all payments at POS were made with cash, 19% with cards and 2% with other payment instruments. In terms of value, the market share of main payment instruments was 54% for cash, 39% for cards and 7% for other instruments. However, results show substantial differences between euro area countries. JEL Classification: E41, E58, D12, D14
    Keywords: cash, consumer choice, money demand, payment behaviour, payment systems
    Date: 2017–11
  3. By: Aaron Kumar; Christie Smith (Reserve Bank of New Zealand)
    Abstract: This paper introduces the distributed ledger technology of crypto-currencies. We aim to increase public understanding of these technologies, highlight some of the risks involved in using cryptocurrencies, and discuss some of the potential implications of these technologies for consumers, financial systems, monetary policy and financial regulation. Crypto-currencies have no physical existence, but are best thought of as electronic accounting systems that keep track of people’s transactions and hence remaining purchasing power. Cryptocurrencies are typically decentralised, with no central authority responsible for maintaining the ledger and no central authority responsible for maintaining the code used to implement the ledger system, unlike the ledgers maintained by commercial banks for example. As crypto-currencies are denominated in their own unit of account, they are like foreign currencies relative to traditional fiat currencies, such as dollars and pounds.
    Date: 2017–11
  4. By: Divesh Aggarwal; Gavin K. Brennen; Troy Lee; Miklos Santha; Marco Tomamichel
    Abstract: The key cryptographic protocols used to secure the internet and financial transactions of today are all susceptible to attack by the development of a sufficiently large quantum computer. One particular area at risk are cryptocurrencies, a market currently worth over 150 billion USD. We investigate the risk of Bitcoin, and other cryptocurrencies, to attacks by quantum computers. We find that the proof-of-work used by Bitcoin is relatively resistant to substantial speedup by quantum computers in the next 10 years, mainly because specialized ASIC miners are extremely fast compared to the estimated clock speed of near-term quantum computers. On the other hand, the elliptic curve signature scheme used by Bitcoin is much more at risk, and could be completely broken by a quantum computer as early as 2027, by the most optimistic estimates. We analyze an alternative proof-of-work called Momentum, based on finding collisions in a hash function, that is even more resistant to speedup by a quantum computer. We also review the available post-quantum signature schemes to see which one would best meet the security and efficiency requirements of blockchain applications.
    Date: 2017–10
  5. By: Scott, Susan V.; Van Reenen, John; Zachariadis, Markos
    Abstract: We examine the impact on bank performance of the adoption of SWIFT, a network-based technological infrastructure for worldwide interbank telecommunication. We construct a new longitudinal dataset of 6,848 banks in 29 countries in Europe and the Americas with the full history of adoption since SWIFT’s initial operations in 1977. Our results suggest that the adoption of SWIFT (i) has large effects on profitability in the long-term; (ii) is greater for small than for large banks; and (iii) exhibits significant network effects on performance. We use an in-depth field study to better understand the mechanisms underlying the effects on profitability.
    Keywords: Technology adoption; bank performance; financial services; network innovation; SWIFT
    JEL: F3 G3
    Date: 2017–03
  6. By: Zhelyu Vladimirov (Sofia University St. Kliment Ohridski, Faculty of Economics and Business Administration); Sonia Mileva (Sofia University St. Kliment Ohridski, Faculty of Economics and Business Administration)
    Abstract: The search and accumulation of information online for the travel purposes follows three different stages: pre-trip, during-trip, and post-trip. We study the online behavioural patterns before the trip (planning), responsible for the creation of reliable own expectations, obtain ideas and make selection of attractions and places to be visited; evaluation, comparison of alternatives, booking and payment or other transactions to service suppliers. The data are obtained through the standardised questionnaire from 212 tourists in Bulgaria. The research reveals the tourists’ attitudes and practices in respect to the Internet as a source of information and a means for booking and buying online tourist products/services. The obtained results contribute to more in-depth understanding of tourist’s behavioural patterns of tourist in Bulgaria, practical feedback for suppliers and stakeholders in tourism about the quality of the websites and metasearch engines functionalities.
    Keywords: travel information search, on line purchase, behavioural pattern, Bulgaria
    JEL: L83
    Date: 2017–11
  7. By: Dominique Guellec; Caroline Paunov
    Abstract: Income inequalities have increased in most OECD countries over the past decades; particularly the income share of the top 1%. In this paper we argue that the growing importance of digital innovation – new products and processes based on software code and data – has increased market rents, which benefit disproportionately the top income groups. In line with Schumpeter’s vision, digital innovation gives rise to ”winner-take-all” market structures, characterized by higher market power and risk than was the case in the previous economy of tangible products. The cause for these new market structures is digital non-rivalry, which allows for massive economies of scale and reduces costs of innovation. The latter stimulates higher rates of creative destruction, leading to higher risk as only marginally superior products can take over the entire market, hence rendering market shares unstable. Instability commands risk premia for investors. Market rents accrue mainly to investors and top managers and less to the average workers, hence increasing income inequality. Market rents are needed to incentivize innovation and compensate for its costs, but beyond a certain level they become detrimental. Public policy may stimulate innovation by reducing ex ante the market conditions which favor rent extraction from anti-competitive practices.
    JEL: D24 D31 D40 L10 O30
    Date: 2017–11
  8. By: Wu, Wenjie; Wang, Jianghao; Li, Chengyu; Wang, Mark
    Abstract: Understanding the complexity in the connection between city liveliness and spatial configurationsfor consumptive amenities has been an important but understudied research field in fast urbanising countries like China. This paper presents the first step towards filling this gap though location-based big data perspectives. City liveliness is measured by aggregated spacetime human activity intensities using mobile phone positioning data.Consumptive amenities are identified by point-of-interest data from Chinese Yelp website (dian ping). The results provide the insights into the geographic contextual uncertainties of consumptive amenities in shaping the rise and fall in the vibrancy of city liveliness.
    Keywords: big data; local linear estimator; city liveliness; consumption; China
    JEL: Q15
    Date: 2016–11
  9. By: Seng, Kimty
    Abstract: This paper examines the effects of mobile phones on financial inclusion in terms of households’ uptake of microcredit in Cambodia, with data from the Cambodia Socio-Economic Survey conducted in 2014. The analysis is conducted with a propensity score matching approach to address endogeneity issues of the use of mobile phones and to evaluate the effects. The results suggest that mobile phones are very likely to induce households to take up credit offered by microfinance institutions, in particular for non-agricultural investment purpose, but to discourage households from using credit for non-productive purpose.
    Keywords: Mobile phones, financial inclusion, microfinance, Cambodia
    JEL: O10 O12
    Date: 2017–10–27
  10. By: Kokoulina, Liudmila O.
    Abstract: Despite its growing popularity, relatively little is currently known about usefulness of virtual conferences, what counts as successful participation, or how webinar sessions might best be shaped to support scholars` and other participants learning and knowledge sharing. The present study aims to address this gap in existing knowledge by examining data gathered from a web conference hosted by the Disruptive Innovation Festival (DIF). We ask what constitutes webinar participation, what counts as successful and unsuccessful participation, and how the format might be refined in order to maximize successful participation in future online events. Furthermore, the research explores knowledge sharing behavior during the online event with the goal to identify knowledge creation mechanisms. The present study employs case study method, combining content analysis of participant contributions with the analysis of questionnaire data gathered from participants.
    Keywords: knowledge creation, knowledge sharing, online conference, multi-sided platform, case study, virtual conferences, webinar,
    Date: 2016
  11. By: Mann, Laura; Graham, Mark
    Abstract: After observing the growth of the Indian and Filipino Business Processing Outsourcing sectors, Kenyan policy-makers and managers made substantial investments in international internet infrastructure and BPO marketing campaigns. While observers continue to discuss the sector in terms of its international work opportunities, in recent years the sector has increasingly focused on contracts sourced from Kenyan and other East African clients. The government has also refocused efforts on attracting international BPO companies. This domestic turn signals both the difficulties of gaining access to overseas work due to the power of incumbents and the increasing use of the internet and ICT-enabled automation within Kenyan organizations. In effect, better connectivity has enabled a two-way globalisation of services: Kenyan BPO companies have been able to access some international work opportunities but the connectivity has also contributed to the inflow of international service companies and business practices into Kenya. The conclusion examines what these shifts might entail for the sector and its workers in future.
    JEL: R14 J01
    Date: 2016–03–22
  12. By: Sung-Uk Park (KISTI)
    Abstract: In this 4th Industrial Revolution, we are facing a range of new technologies that combine the physical, digital and biological worlds. These new technologies will impact all disciplines, economics and industries, and even challenge our ideas about what it means to be human. These technologies have great potential to continue to connect billions more people to the web, drastically improve the efficiency of business and organizations and help regenerate the natural environment through better asset management, potentially even undoing all the damage previous industrial revolution have caused. (Bernard Marr, 2016). And, More than 70% of South Koreans fear that the advent of the 4th industrial revolution will threaten their jobs. In this paper I studied about 4th Industrial Revolution. Especially I surveyed about between Industrial Revolution and R&D policy of Science & Technology.
    Keywords: 4th Industrial Revolution; R&D; S&T; Budget; Policy
    JEL: L88 L60
    Date: 2017–10
  13. By: Hevia, Constantino (Universidad Torcuato Di Tella); Nicolini, Juan Pablo (Federal Reserve Bank of Minneapolis)
    Abstract: In this paper, we use a simple model of money demand to characterize the behavior of monetary aggregates in the United States from 1960 to 2016. We argue that the demand for the currency component of the monetary base has been remarkably stable during this period. We use the model to make projections of the nominal quantity of cash in circulation under alternative future paths for the federal funds rate. Our calculations suggest that if the federal funds rate is lifted up as suggested by the survey of economic projections made by the members of the Federal Open Market Committee (FOMC), the fall in total currency demanded in the next two years ranges between 50 and 200 billion. Our discussion suggests that specific measures by the Federal Reserve to absorb that cash could be worth considering to make the future path of the price level consistent with the price stability mandate.
    Keywords: Inflation; Money demand; Currency in circulation
    JEL: E31 E41 E51
    Date: 2017–11–14
  14. By: Mika J. Straka; Guido Caldarelli; Tiziano Squartini; Fabio Saracco
    Abstract: Bipartite networks provide an insightful representation of many systems, ranging from mutualistic networks of species interactions to investment networks in finance. The analysis of their topological structures has revealed the ubiquitous presence of properties which seem to characterize many - apparently different - systems. Nestedness, for example, has been observed in plants-pollinator as well as in country-product trade networks. This has raised questions about the significance of these patterns, which are often believed to constitute a genuine signature of self-organization. Here, we review several methods that have been developed for the analysis of such evidence. Due to the interdisciplinary character of complex networks, tools developed in one field, for example ecology, can greatly enrich other areas of research, such as economy and finance, and vice versa. With this in mind, we briefly review several entropy-based bipartite null models that have been recently proposed and discuss their application to several real-world systems. The focus on these models is motivated by the fact that they show three very desirable features: analytical character, general applicability and versatility. In this respect, entropy-based methods have been proven to perform satisfactorily both in providing benchmarks for testing evidence-based null hypotheses and in reconstructing unknown network configurations from partial information. On top of that, entropy-based models have been successfully employed to analyze ecological as well as economic systems, thus representing an ideal, interdisciplinary tool to approach the study of bipartite complex systems. [...]
    Date: 2017–10
  15. By: Francisco Gallego; Ofer Malamud; Cristian Pop-Eleches
    Abstract: This paper explores how asymmetric information between parents and children and direct parental controls can influence children’s internet use in Chile. We designed and implemented a set of randomized interventions whereby approximately 7700 parents were sent weekly SMSs messages with (i) specific information about their children’s internet use, and/or (ii) encouragement and assistance with the installation of parental control software. We separate the informational content from the cue associated with SMS messages and vary the strength of the cues by randomly assigning whether parents received messages in a predictable or unpredictable fashion. Our analysis yields three main findings. First, we find that messages providing parents with specific information reduce children’s internet use by 6-10 percent and help parents mitigate the problem of asymmetric information in the household. Second, we do not find significant impacts from helping parents directly control their children’s Internet access with parental control software. Third, the strength or salience of the cue associated with receiving a message has an independent impact on internet use.
    JEL: D82 I15 J12 J13
    Date: 2017–10
  16. By: Jessica Foo; Lek-Heng Lim; Ken Sze-Wai Wong
    Abstract: Peer-to-peer (P2P) lending is a fast growing financial technology (FinTech) trend that is displacing traditional retail banking. Studies on P2P lending have focused on predicting individual interest rates or default probabilities. However, the relationship between aggregated P2P interest rates and the general economy will be of interest to investors and borrowers as the P2P credit market matures. We show that the variation in P2P interest rates across grade types are determined by three macroeconomic latent factors formed by Canonical Correlation Analysis (CCA) - macro default, investor uncertainty, and the fundamental value of the market. However, the variation in P2P interest rates across term types cannot be explained by the general economy.
    Date: 2017–10
  17. By: Aqib Aslam; Alpa Shah
    Abstract: The growth of the peer-to-peer (P2P) economy over the last decade has captivated both stock markets and policymakers alike. While the means for transacting might be different to existing firm structures—with the emergence of digital platforms that connect individual buyers and sellers directly—the tax behavior of individuals operating in this new economy are very familiar. What is clear is that while the P2P economy has potentially exacerbated existing policy, administrative, and revenue-mobilization challenges associated with small business taxation—such as the choice of the tax base and how to set tax thresholds—, the technology behind P2P platforms presents a valuable opportunity to eventually solve them.
    Date: 2017–08–08
  18. By: Francesco Decarolis; Maris Goldmanis; Antonio Penta
    Abstract: The transition of the advertising market from traditional media to the internet has induced a proliferation of marketing agencies specialized in bidding in the auctions that are used to sell ad space on the web. We analyze how collusive bidding can emerge from bid delegation to a common marketing agency and how this can undermine the revenues and allocative efficiency of both the Generalized Second Price auction (GSP, used by Google and Microsoft-Bing and Yahoo!) and the of VCG mechanism (used by Facebook). We find that, despite its well-known susceptibility to collusion, the VCG mechanism outperforms the GSP auction both in terms of revenues and efficiency.
    JEL: C72 D44 L81 M37
    Date: 2017–10
  19. By: Kacperczyk, Marcin; Perignon, Christophe; Vuillemey, Guillaume
    Abstract: Do claims on the private sector serve the role of safe assets? We answer this question using high-frequency panel data on prices and quantities of certificates of deposit (CD) and commercial paper (CP) issued in Europe. We show that only very short-term private securities benefit from a premium for safety. Using several identification strategies, we show that the issuance of short-term CDs, but not of CPs, strongly responds to measures of safety demand. The private production of safe assets is stronger for issuers with high credit worthiness, and breaks down during episodes of market stress. We conclude that even very short-term private assets are sensitive to changes in the information environment and should not be treated as equally safe at all times.
    Keywords: information sensitivity; safe assets; safety premium
    JEL: E41 E43 E44
    Date: 2017–10
  20. By: Sartori, Laura; Dini, Paolo
    Abstract: The remarkable growth of Sardex as a local currency throughout the island of Sardinia over the past 5 years motivated an in-depth look at its starting assumptions, design and operational principles, and local context. The paper looks at Sardex as a social innovation start-up, a complementary currency, a mutual credit system, and a socio-economic «circuit». The analysis relies on interviews of circuit members and its founders. The main findings are that trust was and continues to be fundamentally important for the creation and operation of the mutual credit system, and that Sardex encompasses both economic and social value(s) in a process of re-embedding of the economy. Sardex configured itself as a crucial mediator of economic exchanges and became a valuable actor acting as an institution at the regional level. These properties make it an ideal space for experimentation in socio-economic innovation that can be characterized as a «laboratory for multi-level governance».
    JEL: F3 G3
    Date: 2016–08–01
  21. By: Herv\'e Lebret
    Abstract: Startups have become in less than 50 years a major component of innovation and economic growth. Silicon Valley has been the place where the startup phenomenon was the most obvious and Stanford University was a major component of that success. Companies such as Google, Yahoo, Sun Microsystems, Cisco, Hewlett Packard had very strong links with Stanford but even these vary famous success stories cannot fully describe the richness and diversity of the Stanford entrepreneurial activity. This report explores the dynamics of more than 5000 companies founded by Stanford University alumni and staff, through their value creation, their field of activities, their growth patterns and more. The report also explores some features of the founders of these companies such as their academic background or the number of years between their Stanford experience and their company creation.
    Date: 2017–11
  22. By: Greenwood, Jeremy (University of Pennsylvania); Han, Pengfei; Sanchez, Juan M. (Federal Reserve Bank of St. Louis)
    Abstract: The relationship between venture capital and growth is examined using an endogenous growth model incorporating dynamic contracts between entrepreneurs and venture capitalists. At each stage of financing, venture capitalists evaluate the viability of startups. If viable, VCs provide funding for the next stage. The success of a project depends on the amount of funding. The model is confronted with stylized facts about venture capital; viz., the average cash-on-cash multiple and statistics by funding round concerning the success rate, failure rate, investment rate, equity shares, and the value of an IPO. Raising capital gains taxation reduces growth and welfare.
    Date: 2017–08–01

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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