nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2018‒03‒12
sixteen papers chosen by
Bernardo Bátiz-Lazo
Bangor University

  1. The Future of Retail Financial Services: What policy mix for a balanced digital transformation? By Bouyon, Sylvain
  2. Impact of Digital Finance on Financial Inclusion and Stability By Ozili, Peterson Kitakogelu
  3. A Change is in the Air Emerging Challenges for the Cloud Computing Industry By Marlon Graf; Jakub P. Hlavka; Bonnie L. Triezenberg
  4. Female Economic Participation with Information and Communication Technology (ICT) Advancement: Evidence from Sub-Saharan Africa By Uchenna Efobi; Belmondo Tanankem; Simplice Asongu
  5. The Impact of Digital Technologies on Worker Tasks: Do Labor Policies Matter? By Rita K. Almeida; Carlos H. L, Corseuil; Jennifer Poole
  6. Nowcasting economic activity with electronic payments data: A predictive modeling approach By Carlos León; Fabio Ortega
  7. Banker My Neighbour: Matching and Financial Intermediation in Savings Groups By Cassidy, Rachel; Fafchamps, Marcel
  8. Information Frictions, Internet and the Relationship between Distance and Trade* By Leuven, Edwin; Akerman, Anders; Mogstad, Magne
  9. Spillovers between Bitcoin and other Assets during Bear and Bull Markets By Elie Bouri; Mahamitra Das; Rangan Gupta; David Roubaud
  10. Innovations in digital government as business facilitators: implications for Portugal By João Martins; Linda Veiga
  11. ICT Adoption in Micro and Small Firms: Can Internet Access Improve Labor Productivity? By Mariana Viollaz
  12. Ctrip: China’s Online Travel Platform - Local Giant or Global Competitor? By Shao, Tianyi; Kenney, Martin
  13. EU regulation on "conflict minerals": A step towards higher accountability in the extractive sector? By Küblböck, Karin; Grohs, Hannes
  14. Role of Verification in Peer-to-Peer Lending By Oleksandr Talavera; Haofeng Xu
  15. La précarité au bout du smartphone By Mathieu Strale
  16. Natural Resource Governance: Does Social Media Matter? By Kodila-Tedika, Oasis

  1. By: Bouyon, Sylvain
    Abstract: In recent years, the digitalisation of retail financial services – retail payments, current/savings accounts, consumer/housing credit, car insurance, property insurance and health insurance – has accelerated significantly. While policy-makers are gradually creating the necessary conditions to strengthen this digital transformation, there remain numerous policy issues and unanswered questions to resolve. Against this background, CEPS-ECRI formed a Task Force to explore four specific core questions: What type of level playing field is needed to ensure a successful transition to the digital transformation? What are the opportunities and risks related to big (alternative) data and increasingly sophisticated algorithms? What kind of regulatory framework is the most appropriate for pre-contractual information duties in a digital era? How can the regulatory framework for digital authentication be improved?
    Date: 2017–02
  2. By: Ozili, Peterson Kitakogelu
    Abstract: This article provides a discussion on some issues associated with digital finance – an area which has not been critically addressed in the literature. Digital finance and financial inclusion has several benefits to financial services users, digital finance providers, governments and the economy; notwithstanding, a number of issues still persist which if addressed can make digital finance work better for individuals, businesses and governments. The digital finance issues discussed in this article are relevant for the on-going debate and country-level projects directed at greater financial inclusion via digital finance in developing and emerging economies.
    Keywords: Financial Inclusion, Fintech, Digital Finance, Financial Stability, Financial Risk, Financial Institutions
    JEL: A1 A11 G2 G21 G23 G28 G3
    Date: 2018–01–08
  3. By: Marlon Graf; Jakub P. Hlavka; Bonnie L. Triezenberg
    Abstract: A growing number of individuals, companies and regulators are concerned about who has access to data stored on the cloud and where exactly that cloud is. Actions taken in response to those concerns take the form of lawsuits, restrictive contracts, and government regulation of cloud computing. This trend toward restricting information storage to specific geographic boundaries is called "data localization" and leads to growing uncertainty about the future of digital commerce and communication that is the economic engine of the information age. This paper offers an overview of recent regulatory trends in cloud computing around the world, assesses key regional differences and problems, and draws on expert interviews in charting the way forward for the industry. We show that while more restrictions and greater data localization are likely to characterize the internet of the future, new business opportunities will emerge for providers of cloud computing technology and services who succeed in developing products that satisfy differential regulation and consumer preferences.
    Date: 2016–04
  4. By: Uchenna Efobi (Ogun State, Nigeria); Belmondo Tanankem (Yaoundé, Cameroon); Simplice Asongu (Yaoundé, Cameroon)
    Abstract: This study complements existing literature by investigating how the advancement in information and communication technology affects the formal economic participation of women. The focus is on 48 African countries for the period 1990-2014. The empirical evidence is based on Ordinary Least Squares, Fixed Effects and the Generalized Method of Moments regressions. The results show that improving communication technology increases female economic participation with the following consistent order of increasing magnitude: mobile phone penetration; internet penetration, and fixed broadband subscriptions. The findings are robust to the control for heterogeneities across countries. Policy implications are discussed.
    Keywords: Africa; Gender; ICT; Inclusive development; Technology
    JEL: G20 I10 I32 O40 O55
    Date: 2018–01
  5. By: Rita K. Almeida; Carlos H. L, Corseuil; Jennifer Poole
    Abstract: Between 1999 and 2006, Brazilian cities experienced strong growth in the provision of internet services, driven in part by the privatization of the telecommunications industry. A main concern of policymakers is that digital technology replaces routine, manual tasks, displacing lower-skilled workers. In Brazil, stringent labor market institutions exist to protect workers from such shocks, but by increasing labor costs, labor policy may also constrain firms from adjusting the workforce and fully benefiting from technology adoption. We show that digital technology adoption shifted the demand for skills toward an increased use of non-routine and cognitive tasks. Furthermore, and in contrast with labor policy intentions, we show that de facto labor market regulations differentially benefit the most skilled workers, particularly those workers employed in non-routine and cognitive tasks. Our results point to important changes in the future of labor markets in middle-income settings and warn for distortive and unintended consequences of labor market policies.
    Keywords: digital technology, skills, labor regulations
    JEL: J24 J48 O30 O15
    Date: 2017
  6. By: Carlos León; Fabio Ortega (Banco de la República de Colombia; Banco de la República de Colombia)
    Abstract: Economic activity nowcasting (i.e. making current-period estimates) is convenient because most traditional measures of economic activity come with substantial lags. We aim at nowcasting ISE, a short-term economic activity indicator in Colombia. Inputs are ISE’s lags and a dataset of payments made with electronic transfers and cheques among individuals, firms, and the central government. Under a predictive modeling approach, we employ a nonlinear autoregressive exogenous neural network model. Results suggest that our choice of inputs and predictive method enable us to nowcast economic activity with fair accuracy. Also, we validate that electronic payments data significantly reduces the nowcast error of a benchmark non-linear autoregressive neural network model. Nowcasting economic activity from electronic payment instruments data not only contributes to agents’ decision making and economic modeling, but also supports new research paths on how to use retail payments data for appending current models. Classification JEL: C45, C53, E27
    Keywords: forecasting, machine learning, neural networks, retail payments, NARX.
    Date: 2018–02
  7. By: Cassidy, Rachel; Fafchamps, Marcel
    Abstract: Efforts to promote financial inclusion have largely focused on microcredit and microsaving separately, and less so on promoting financial intermediation across poor borrowers and savers. Village Savings and Loan Associations (VSLAs) and other Self-Help Groups have features of both a borrowing and a commitment savings technology, potentially enabling savers and borrowers to meet each other's needs. Intermediation may however be impeded by limited liability and imperfect information. To investigate this, we use a large-scale survey of mature VSLA groups in rural Malawi to analyse how members sort across groups. Wefindthat present-biased members tend to group with time-consistent members, suggesting that the former may be gaining a commitment savings technology by lending to the latter. In contrast, members of the same occupation sort into groups together, suggesting unrealised intermediation possibilities between farming and non-farming households. This has implications for the design of such groups.
    Keywords: commitment savings; financial inclusion; Microfinance; savings groups
    JEL: O1 O12 O16
    Date: 2018–02
  8. By: Leuven, Edwin (Dept. of Economics, University of Oslo); Akerman, Anders (Stockholm University, Department of Economics); Mogstad, Magne (University of Chicago)
    Abstract: Recent work suggests the patterns of international trade may be distorted because of information frictions. Little is known, however, about how advancements in information communication technology (ICT) affect trade patterns. The goal of our paper is to analyze how and why the adoption of such technology affects bilateral trade flows. Our context is the adoption of broadband internet in Norwegian firms over the period 2000-2008. We use panel data with information on Norwegian firms with regards to their production, technology, and trade. A public program with limited funding rolled out broadband access points, and provides plausibly exogenous variation in the availability and adoption of broadband internet in firms. We find that adoption of broadband internet makes trade patterns more sensitive to distance and economic size. Going from no broadband availability to full coverage increases the magnitude of the elasticity of trade with respect to distance by 0.12, and the elasticity of trade with respect to destination size by 0.06. For distance, this means that an increase in internet availability of 10 percentage points increases trade for a country at the 25th distance percentile by 1.1% more than for a country at the 75th distance percentile. The same difference for the GDP of a destination is 2.1%. We interpret the empirical results through a gravity theory of trade patterns, augmented with information frictions. We provide comparative statics predictions with respect to a reduction in information frictions, and show that these predictions are consistent with our empirical findings. Taken together, our results point to the importance of incorporating information frictions in the frequently used gravity equation, and they may help explain the so-called “distance puzzle” in international trade.
    Keywords: Internet; Trade; Information Frictions; Gravity model; Distance
    JEL: F12 F15 O33
    Date: 2018–02–15
  9. By: Elie Bouri (USEK Business School, Holy Spirit University of Kaslik (USEK), Jounieh, Lebanon); Mahamitra Das (Economic Research Unit, Indian Statistical Institute, Kolkata, India); Rangan Gupta (Department of Economics, University of Pretoria, Pretoria, South Africa); David Roubaud (Montpellier Research in Management, Montpellier Business School, Montpellier, France)
    Abstract: This paper contributes to the embryonic literature on the relations between Bitcoin and conventional investments by studying return and volatility spillovers between this largest cryptocurrency and four asset classes (equities, stocks, commodities, currencies, and bonds) in bear and bull market conditions. We conducted empirical analyses based on a smooth transition VAR GARCH-in-mean model covering daily data from July 19, 2010 to October 31, 2017. We found significant evidence that Bitcoin returns are related quite closely to those of most of the other assets studies, particularly commodities, and therefore, the Bitcoin market is not isolated completely. The significance and sign of the spillovers exhibited some differences in the two market conditions and in the direction of the spillovers, with greater evidence that Bitcoin receives more volatility than it transmits. Our findings have implications for investors and fund managers who are considering Bitcoin as part of their investment strategies and for policymakers concerned about the vulnerability that Bitcoin represents to the stability of the global financial system.
    Keywords: Bitcoin, asset classes, return and volatility spillovers, asymmetry, smooth transition, bivariate GARCH-M
    JEL: C11 G15
    Date: 2018–02
  10. By: João Martins (University of Minho and NIPE, Escola de Economia e Gestão; United Nations University-Operating Unit on Policy Driven Electronic Governance (UNU-EGOV)); Linda Veiga (University of Minho and NIPE, Escola de Economia e Gestão; United Nations University-Operating Unit on Policy Driven Electronic Governance (UNU-EGOV))
    Abstract: Administrative and regulatory burden reduction is considered nowadays a priority to improve governmental efficiency and economic competitiveness. Innovations in government through Information Communication Technology (ICT) are seen as key tools in designing policies to achieve those goals. Using a large panel dataset, covering 174 countries from 2004 to 2016, we investigate a possible contribution of innovations in digital governments to facilitate business, and extract implications for Portugal. Progress in digital government is proxied by the United Nations’ e-gov index, while the business environment is proxied by the World Bank’s Ease of Doing Business indicators. Empirical results suggest that progress in e-gov may contribute to the creation a more business-friendly environment in several areas, particularly at starting a business, dealing with construction permits, getting electricity, paying taxes, getting credit, trading across borders, and protecting minority investors. Although Portugal has been evolving positively both in the Doing Business and e-gov rankings, it is still far from the top performers in several aspects, and gains could be obtained from improvements in digital government intended to facilitate business. Among the variables used in the construction of the Ease of Doing Business indicators, Portugal is always below the best performing countries in those that measure the number of procedures, time, costs and transparency. These are aspects where we can easily foresee a positive role of e-gov. Creating a favourable environment for business is particularly relevant for a country whose economy has been growing slowly over the last decades, has a GDP per capita that represents 80% of the EU average, and a public debt level of 130% of GDP. We believe that in a constantly evolving world, in which only the most innovative remain competitive, governments can play a strategic role as business facilitators
    Keywords: Doing business, digital government, Portugal
    JEL: O3 D2 H5
    Date: 2018–03
  11. By: Mariana Viollaz
    Abstract: This paper analyzes the impact of internet adoption on labor productivity in Peruvian micro and small manufacturing firms over the period 2011-2013. Instrumental variables estimates show that internet adoption: (i) increases firms’ labor productivity; (ii) reallocates employment away from temporary administrative workers and non-remunerated workers and expands employment of permanent production workers; (iii) leads to the formalization of labor relationships, to the implementation of new organizational practices, and to the improvement of training measures. These findings point to the implementation of combined policies, where ICT expansion is accompanied by the development of digital skills.
    Keywords: internet adoption, labor productivity, micro and small firms, employment structure, organizational practices
    JEL: J23 J24 O32 O33
    Date: 2017
  12. By: Shao, Tianyi; Kenney, Martin
    Abstract: In a large number of sectors, Chinese internet platform firms have grown to enormous size leveraging a rapidly growing, largely protected domestic market This paper describes the formation and growth of the largest Chinese travel and tourism platform, Ctrip within the context to the changing Chinese economy. In 2018, Ctrip was one of the largest travel platforms in the world and, though still significantly smaller than the US travel and tourism platforms that dominate most of the rest to the world, it was growing far faster than them. Ctrip’s remarkable success is explained within the context to the rising tide of Chinese tourism. The paper explores Ctrip’s recent globalization strategies suggesting that it intends to expand beyond just serving the Chinese market or Chinese tourists in global markets. At this point, the globalization strategy appears to have two prongs: The first prong has been using its enormous cash flow to acquire or co-invest in local firms that dominate other developing country markets that are expanding rapidly. The two cases in point are its equity investment in the Indian travel giant, MakeMyTrip, and investments in Southeast Asia. The second prong is investing or acquiring firms/websites in developed nation markets that can either service the enormous flow of Chinese tourists it controls or provide services to Western travelers. For these investments, Ctrip can provide infrastructural and capital support to allow these operations to expand more quickly. It is uncertain how successful Ctrip’s initiatives in international markets will be. However, given that Chinese tourism is likely to continue its rapid growth and that Ctrip monopolizes this market, it has significant financial resources, enormous leverage in directing this flow of tourists for strategic advantage, and a rapidly developing capability in analyzing the enormous inflow of data that it receives. For the reasons we describe, Ctrip is likely to be an increasingly formidable competitor to the US global travel and tourism platform giants, Expedia, Priceline, and TripAdvisor.
    Date: 2018–03–05
  13. By: Küblböck, Karin; Grohs, Hannes
    Abstract: "No blood in my cell phone" - In the early 2000s, NGO-campaign slogans pointed out the links between raw materials in electronic products and the financing of armed conflicts. These campaigns focused on the responsibility of companies for their supply chain. In July 2017, an EU regulation came into effect that aims to prevent companies from financing armed conflicts via their procurement of raw materials. This Policy Note explains how the debates on 'conflict minerals' led to the formulation of various regulatory initiatives and analyses the scope and potential impact of the current EU-regulation.
    Date: 2017
  14. By: Oleksandr Talavera (School of Management, Swansea University); Haofeng Xu (School of Management, Swansea University)
    Abstract: Using data from a leading Chinese Peer-to-Peer (P2P) lending platform from 2012 to 2015, we investigate the role of verification in the P2P lending market. We find that borrowers with thorough and complete verification are more likely to obtain funding and also less likely to default on loans. We also find that borrowers that have incomplete verification are more likely to upwardly misrepresent their income. This leads to higher default rates for this group when compared to the default rates of more thoroughly verified borrowers. The further analysis documents that returning borrowers are more likely to maintain a good credit record. We discuss the implications of our findings for the role of verification in the growing P2P lending sector and the design of a stable financial system.
    Keywords: Information asymmetry, verification, P2P, income exaggeration
    JEL: G21 G23
    Date: 2018–03–02
  15. By: Mathieu Strale
    Keywords: Travail; politique
    Date: 2016–10–24
  16. By: Kodila-Tedika, Oasis
    Abstract: In this paper we study the relationship between communication and ”transparency of information” and governance by exploring the link between social media and natural resource governance. Using a cross-country analysis, we document a robust and statistically significant positive relationship between Facebook penetration (a proxy for social media) and natural resource governance. It follows that countries with higher facebook penetration levels enjoy natural resource governance of better quality than countries with low levels of facebook penetration. The positive effect of facebook is robust to controlling for other determinants of institutional quality, additional controls, outliers, inter alia.
    Keywords: Natural Resources, Rents, Institutions, Governance, Social Media, Facebook, Internet, Transparency of information
    JEL: D73 D8 G14 H11 O1 P26 P48 Q34 Z13
    Date: 2018–02–24

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