nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2018‒02‒26
fifteen papers chosen by
Bernardo Bátiz-Lazo
Bangor University

  1. Are cryptocurrencies connected to forex? A quantile cross-spectral approach By Baumohl, Eduard
  2. Can Technology Undermine Macroprudential Regulation? Evidence from Peer-to-Peer Credit in China By Braggion, Fabio; Manconi, Alberto; Zhu, Haikun
  3. Interbank payment system architecture from a cyber security perspective By Antonino Fazio; Fabio Zuffranieri
  4. Is Equity Crowdfunding a Good Tool for Social Enterprises? By Stefano Cosma; Alessandro G. Grasso; Francesco Pagliacci; Alessia Pedrazzoli
  5. Measuring the Return to Online Advertising: Estimation and Inference of Endogenous Treatment Effects By Shakeeb Khan; Denis Nekipelov; Justin Rao
  6. Democratization or Vulgarization - The Impact of Facebook on Cultural Capital By Carmela Milano; Sandra Rothenberger
  7. The Technological Elements of Artificial Intelligence By Matt Taddy
  8. Inside the Engine Room of Digital Platforms: Reviews, Ratings, and Recommendations By Paul Belleflamme; Martin Peitz
  9. Pros and cons of the impact factor in a rapidly changing digital world By Michael McAleer; Judit Oláh; József Popp
  10. Platform Price Parity Clauses with Direct Sales By BjØrn Olav Johansen; Thibaud Vergé
  11. Can digital technologies help reduce the immigrant-native educational achievement gap? By Margarida Rodrigues
  12. An overview of European Platforms: Scope and Business Models By Brian Fabo; Miroslav BEBLAVY; Karolien LENAERTS; Zachary KILHOFFER
  13. Follow The Money: Online Piracy and Self-Regulation in the Advertising Industry By Michail Batikas; Jörg Claussen; Christian Peukert
  14. Artificial Intelligence and Consumer Privacy By Ginger Zhe Jin
  15. Internet of Things By World Bank Group

  1. By: Baumohl, Eduard
    Abstract: This paper aims to elucidate the connectedness between major forex currencies and cryptocurrencies using the quantile cross-spectral approach recently proposed by Baruník and Kley (2015). The sample covers six forex currencies and six cryptocurrencies over the period of 1 September 2015 to 29 December 2017. Compared with the results obtained from standard correlations and detrended moving-average cross-correlation analysis (DMCA), the quantile cross-spectral approach provides richer information on the dependence structure across different quantiles and frequencies. The most interesting result is that the intra-group dependencies are positive in the lower extreme quantiles, while inter-group dependencies are negative. This result holds in both the short- and long-term perspectives. Thus, it is worth diversifying between these two currency groups.
    Keywords: cryptocurrencies,fiat currencies,quantile dependence,cross-spectral analysis,diversification
    JEL: G11 G15 F31
    Date: 2018
  2. By: Braggion, Fabio; Manconi, Alberto; Zhu, Haikun
    Abstract: We study whether and to what extent peer-to-peer (P2P) credit helps circumvent loan-to-value (LTV) caps, a key macroprudential tool to contain household leverage. We exploit the tightening of mortgage LTV caps in a number of cities in China in 2013 as our testing ground, in a difference-in-differences setting, and we base our tests on a novel, hand-collected database covering all lending transactions at RenrenDai, a leading Chinese P2P credit platform. P2P loans increase at the cities affected by the LTV cap tightening relative to the control cities, consistent with borrowers tapping P2P credit to circumvent the regulation. The granularity of our data allows us to separate credit demand from credit supply effects, with a fixed effects strategy. Our results also indicate that P2P lenders do not adjust their pricing and screening to the influx of new borrowers after 2013, despite the fact that their loans ex post have higher delinquency and default rates. Symmetric effects are associated with a loosening of mortgage LTV caps in 2015. Our test provides empirical evidence on the capacity of P2P credit to undermine LTV caps. More broadly, our analysis informs the debate on the challenges posed by the interaction between FinTech and credit regulation.
    Keywords: peer-to-peer credit; household leverage; macroprudential regulation; loan-to-value caps
    JEL: G01 G23 G28
    Date: 2018–01
  3. By: Antonino Fazio (Bank of Italy); Fabio Zuffranieri (Bank of Italy)
    Abstract: AThis paper outlines how a paradigm shift is required when approaching cyber risk management for interbank payment systems, which are affected by the growing interconnectedness of systems, the digitalization of financial services and continuously evolving cyber threats. In this scenario, cyber threats may derive from a wider number of actors, who are constantly active on the Internet and able to exploit an increasing number of vulnerabilities and attack vectors to achieve their goals. Financial institutions should therefore assume that specific cyber threats can overcome any defence. Firstly, the paper outlines the theoretical reasons for this necessary paradigm shift; secondly, it aims to highlight the importance of all the stakeholders in strengthening the cyber resilience of payment systems, in particular the central and enabling role of messaging service operators, by providing an analysis of a real case study - the recent Bangladesh Bank cyber fraud; and finally, the paper aims to encourage discussion on the new paradigm and the adequacy of current regulatory frameworks and supervisory approaches.
    Keywords: payment systems, cyber security, cyber resilience
    JEL: E42 F50 L50
    Date: 2018–01
  4. By: Stefano Cosma; Alessandro G. Grasso; Francesco Pagliacci; Alessia Pedrazzoli
    Abstract: Equity crowdfunding is an emerging financing tool that can help social start-ups and firms to bring people and resources together around a project. This paper focuses on equity crowdfunding. We look at this as a complementary financing channel useful for promoting innovation and social change by paring down the traditional features of financial investment. Our unique dataset regards all the Italian Equity Crowdfunding campaigns launched by different platforms on the Italian equity crowdfunding market from 2013 to 2018. Our aim is twofold: a) to describe some characteristics of the Italian Equity crowdfunding market; b) to describe the characteristics of the social firms which have had recourse to equity crowdfunding, in order to investigate which factors influence the campaign’s success. The results suggest that social firms’ investment offerings are not different from those of non-social ones, but so far, the Italian equity crowdfunding market does not seem suitable for supporting the financial needs of this type of firm, on the side of either investors or firms.
    Keywords: equity crowdfunding; sustainability; social enterprises; entrepreneurial finance
    JEL: G23 G24
    Date: 2018–02
  5. By: Shakeeb Khan (Boston College); Denis Nekipelov (University of Virginia); Justin Rao (Microsoft Research)
    Abstract: In this paper we aim to conduct inference on the “lift” effect generated by an online advertisement display: specifically we want to analyze if the presence of the brand ad among the advertisements on the page increases the overall number of consumer clicks on that page. A distinctive feature of online advertising is that the ad displays are highly targeted- the advertising platform evaluates the (unconditional) probability of each consumer clicking on a given ad which leads to a higher probability of displaying the ads that have a higher a priori estimated probability of click. As a result, inferring the causal effect of the ad display on the page clicks by a given consumer from typical observational data is difficult. To address this we use the large scale of our dataset and propose a multi-step estimator that focuses on the tails of the consumer distribution to estimate the true causal effect of an ad display. This “identification at infinity” (Chamberlain (1986)) approach alleviates the need for independent experimental randomization but results in nonstandard asymptotics. To validate our estimates, we use a set of large scale randomized controlled experiments that Microsoft has run on its advertising platform. Our dataset has a large number of observations and a large number of variables and we employ LASSO to perform variable selection. Our non-experimental estimates turn out to be quite close to the results of the randomized controlled trials.
    Keywords: Endogenous treatment effects, randomized control trials, online advertising, lift effect
    JEL: C14 C31 C90 M37
    Date: 2018–02–01
  6. By: Carmela Milano; Sandra Rothenberger
    Abstract: This paper investigates the impact of Facebook on cultural audience, putting the emphasis on the transmission of cultural capital in elitist circles. Our purpose is to provide important evidence concerning the digital opportunities and challenges for the use of social networks in cultural management. Based on an exploratory study, we look closely at the attitudes and reactions of cultural audience to the use of Facebook by theaters. We focus hereby on the democratization (acceptance) or the vulgarization (rejection) effects of the use of Facebook. We conclude that demographics and psychographics such as the generational effect and the personalities of the influence “the acceptance”, while environmental factors such as peer and media influence “the rejection” of the use of Facebook. The present findings help cultural institutions to have a better understanding of the profile of the actual theater audience, their needs, desires and fears.
    Keywords: social networks and Facebook; arts consumer research; theater management; cultural capital; vulgarization; democratization; structural equation modeling
    JEL: D23 D83
    Date: 2018–02–19
  7. By: Matt Taddy
    Abstract: We have seen in the past decade a sharp increase in the extent that companies use data to optimize their businesses. Variously called the `Big Data' or `Data Science' revolution, this has been characterized by massive amounts of data, including unstructured and nontraditional data like text and images, and the use of fast and flexible Machine Learning (ML) algorithms in analysis. With recent improvements in Deep Neural Networks (DNNs) and related methods, application of high-performance ML algorithms has become more automatic and robust to different data scenarios. That has led to the rapid rise of an Artificial Intelligence (AI) that works by combining many ML algorithms together – each targeting a straightforward prediction task – to solve complex problems. We will define a framework for thinking about the ingredients of this new ML-driven AI. Having an understanding of the pieces that make up these systems and how they fit together is important for those who will be building businesses around this technology. Those studying the economics of AI can use these definitions to remove ambiguity from the conversation on AI's projected productivity impacts and data requirements. Finally, this framework should help clarify the role for AI in the practice of modern business analytics and economic measurement.
    JEL: C01 C1 O33
    Date: 2018–02
  8. By: Paul Belleflamme (Aix-Marseille Univ., CNRS, EHESS, Centrale Marseille, AMSE; KEDGE Business School; and CESifo); Martin Peitz (Department of Economics and MaCCI, University of Mannheim; CEPR; CESifo; and ZEW)
    Abstract: The rise and success of digital platforms (such as Airbnb, Amazon, Booking, Expedia, Ebay, and Uber) rely, to a large extent, on their ability to address two major issues. First, to effectively facilitate transactions, platforms need to resolve the problem of trust in the implicit or explicit promises made by the counterparties; they post reviews and ratings to pursue this objective. Second, as platforms operate in marketplaces where information is abundant, they may guide their users towards the transactions that these users may have an interest in; recommender systems are meant to play this role. In this article, we elaborate on review, rating, and recommender systems. In particular, we examine how these systems generate network effects on platforms.
    Keywords: platforms, network effects, ratings, recommender systems, digital economics
    JEL: D43 L13 L86
    Date: 2018–02
  9. By: Michael McAleer (Department of Quantitative Finance National Tsing Hua University, Taiwan and Econometric Institute Erasmus School of Economics Erasmus University Rotterdam, The Netherlands and Department of Quantitative Economics Complutense University of Madrid, Spain And Institute of Advanced Sciences Yokohama National University, Japan.); Judit Oláh (Faculty of Economics and Business Institute of Applied Informatics and Logistics University of Debrecen, Hungar.); József Popp (Faculty of Economics and Business Institute of Sectoral Economics and Methodology University of Debrecen, Hungary.)
    Abstract: The purpose of the paper is to present arguments for and against the use of the Impact Factor (IF) in a rapidly changing digital world. The paper discusses the calculation of IF, as well as the pros and cons of IF. Editorial policies that affect IF are examined, and the merits of open access online publishing are presented. Scientific quality and the IF dilemma are analysed, and alternative measures of impact and quality are evaluated. The San Francisco declaration on research assessment is also discussed.
    Keywords: Impact Factor, Quality of research, Pros and Cons, Implications, Digital world, Editorial policies, Open access online publishing, SCIE, SSCI.
    JEL: O34 O31 D02
    Date: 2018–01
  10. By: BjØrn Olav Johansen (Department of Economics, University of Bergen); Thibaud Vergé (CREST; ENSAE; Université Paris-Saclay; Norwegian School of Economics)
    Abstract: We analyze the effects of price parity clauses in a setting where competing sellers distribute their products directly as well as through competing platforms. These clauses prevent a seller from offering its product at a lower price on other platforms or through its own direct sales channel. We show that when we account for the sellers? participation constraints, price parity clauses do not always lead to higher commissions and ?final prices. Instead, we fi?nd that they may simultaneously bene?fit all the actors (platforms, sellers and consumers), even in the absence of traditional efficiency arguments.
    Date: 2016–09–01
  11. By: Margarida Rodrigues (European Commission - JRC)
    Abstract: This report analyses the use of digital technologies by immigrant students and examine whether digital technologies play a role in the existent immigrant-native educational achievement gap and whether they could contribute to its reduction. PISA 2015 data are used for this purpose. We find evidence that ICT-related policies have the potential to decrease immigrant-native achievement gap, among which those targeting the use of ICT seem the most promising. In particular, our findings purport that the immigrants' achievement could be improved by a more intense use of ICT at home for schoolwork and for general purposes. At school, the evidence indicates that immigrant students may be overusing ICT at school for educational purposes, suggesting that the use of ICT by immigrants needs to be balanced with other face-to-face interactions and support. There are significant cross-country differences in our results, which should be taken into account to guide policy actions.
    Keywords: digital technology, immigrants, educational achievement, PISA
    Date: 2018–01
  12. By: Brian Fabo (Centre for European Policy Studies); Miroslav BEBLAVY (Centre for European Policy Studies); Karolien LENAERTS (Centre for European Policy Studies); Zachary KILHOFFER (Centre for European Policy Studies)
    Abstract: The platform economy has become an important consideration within the European Commission’s Digital Economy agenda. By mapping the platform economy within the 28 European Union (EU) Member States, this report draws on a database of 200 service platforms active in Europe, and aims to serve as a resource for the development of a European policy response. It identifies a huge diversity of platforms within the EU in terms of size, geographical scope, services offered and business models. Further, the innovative potential of platforms is confirmed, notably the way in which they employ technology to facilitate socially beneficial activities, such as volunteering or ridesharing. At the same time, we note the tendency of a number of platforms to withhold information about their functioning. There are also inconsistencies in the treatment of service providers, whose autonomy in organising their work is quite limited even though their status is almost universally that of independent contractors, which raises questions about the protection of workers. The European platform environment comprises both domestic and international actors, with the latter usually being the market leaders. These platforms often operate across national boundaries, strengthening the case for EU-level intervention.
    Keywords: Digital labour platform, collaborative economy
    Date: 2017–12
  13. By: Michail Batikas; Jörg Claussen; Christian Peukert
    Abstract: In this paper, we study the effects of a self-regulatory effort, orchestrated by the European Commission, that aims to reduce advertising revenues for publishers of copyright infringing content. Historical data lets us follow how the third-party advertising and tracking services associated with a large number of piracy websites and a corresponding set of legitimate “placebo” websites change after the agreement to self-regulate went in place. We find that larger EU-based advertisers comply with the initiative and reduce their connections with piracy websites. We do not find reductions for other non-advertising services that track consumers, which has potentially important implications for the efficiency of targeted advertising.
    Keywords: piracy, copyright enforcement, online advertising, natural experiment
    JEL: K40 L50 L80
    Date: 2018
  14. By: Ginger Zhe Jin
    Abstract: Thanks to big data, artificial intelligence (AI) has spurred exciting innovations. In the meantime, AI and big data are reshaping the risk in consumer privacy and data security. In this essay, I first define the nature of the problem and then present a few facts about the ongoing risk. The bulk of the essay describes how the U.S. market copes with the risk in current policy environment. It concludes with key challenges facing researchers and policy makers.
    JEL: D04 D18 D8 L15 L51
    Date: 2018–01
  15. By: World Bank Group
    Keywords: Governance - E-Government Information and Communication Technologies - ICT Applications Information and Communication Technologies - ICT Policy and Strategies Private Sector Development - E-Business Private Sector Development - E-Commerce
    Date: 2017–11

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