nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2018‒10‒22
nineteen papers chosen by
Bernardo Bátiz-Lazo
Bangor University

  1. 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
  2. Assessing the Impact of Central Bank Digital Currency on Private Banks By Andolfatto, David
  3. Fintech, Inclusive Growth and Cyber Risks: Focus on the MENAP and CCA Regions By Inutu Lukonga
  4. Online fundraising, self-image, and the long-term impact of ask avoidance By Adena, Maja; Huck, Steffen
  5. Does the internet increase the job finding rate? Evidence from a period of internet expansion By Denzer, Manuel
  6. Trust in other people and the usage of peer platform markets By Carin van der Cruijsen, Maurice Doll and Frank van Hoenselaar
  7. What Determines Bitcoin’s Value? By Jamal Bouoiyour; Refk Selmi; Aviral Kumar Tiwari; Olaolu Richard Olayeni
  8. Financial Inclusion of Germany’s Refugees: Current Situation and Road Ahead By Swati Mehta Dhawan
  9. How Local Authorities Can Exploit the Potential for Effective Property Taxes: A Case Study of Harare By Nengeze, Munatswi
  10. The Impact of Uber and Lyft on Taxi Service Quality: Evidence from New York City By Mishal Ahmed; Erik Johnson; Byung-Cheol Kim
  11. Mycelium – the future of office buildings By Dieter Rebitzer; Mark Renz; Martin Tomasson
  12. The influence of online-shopping on demand for retail space By Erik Louw; Dennis Coster
  13. On the Benefits of Currency Reform By Krishna, R. Vijay; Leukhina, Oksana
  14. Monetary Policy with Negative Interest Rates: Decoupling Cash from Electronic Money By Katrin Assenmacher; Signe Krogstrup
  15. Technological Diversification in European Regions: The Role of E-skills By Fulvio Castellacci; Davide Consoli; Artur Santoalha
  16. Technological unemployment revisited: Automation in a search and matching framework By Cords, Dario; Prettner, Klaus
  17. Crowdfunding for Entrepreneurs- analysis of the Institutional Work By Kavitha P; Pankaj Kumar Baag
  18. The Microstructure of the Bond Market in the 20th Century By Biais, Bruno; Green, Richard
  19. Completing Markets With Contracts: Evidence From the First Central Clearing Counterparty By Vuillemey, Guillaume

  1. 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: N20 O33
    Date: 2017–06–01
  2. By: Andolfatto, David (Federal Reserve Bank of St. Louis)
    Abstract: In this paper, I investigate the impact of central bank digital currency (CBDC) on banks in a model where the banking sector that is not perfectly competitive. The theoretical framework combines the Diamond (1965) model of government debt with the Klein (1971) and Monti (1972) model of a monopoly bank. There are two main results. First, the introduction of interest-bearing CBDC increases financial inclusion and diminishes the demand for cash. Second, the introduction of interest-bearing CBDC need not disintermediate banks in any way and may, in fact, expand their depositor base if the added competition compels banks to raise their deposit rates.
    Keywords: Digital Currency; Central Banks; Monopoly; Markups
    JEL: E4 E5
    Date: 2018–10–05
  3. By: Inutu Lukonga
    Abstract: Financial technology (fintech) is emerging as an innovative way to achieve financial inclusion and the broader objective of inclusive growth. Thus far, fintech in the MENAP and CCA remains below potential with limited impact on financial inclusion. This paper reviews the fintech landscape in the MENAP and CCA regions, identifies the constraints to the growth of fintech and its contribution to inclusive growth and considers policy options to unlock the potential.
    Date: 2018–09–11
  4. By: Adena, Maja; Huck, Steffen
    Abstract: We provide the first field evidence pointing at the role of pure self-image, inde-pendent of social image, in charitable giving. In an online fundraising campaign for a social youth project run on an opera ticket booking platform we document how individuals appear to engage in self-deception to preserve their self-image. In addition, we provide evidence on stark adverse long-run effects of the fund-raising campaign for ticket sales. “Avoiding the ask,” opera customers who faced more insistent online fundraising buy fewer tickets in the following season. Our results suggest that fundraising management should not decide in isolation about their campaigns, even if very successful. Rather broader operational concerns have to be considered.
    Keywords: online fundraising,quasi-experiment,self-image
    JEL: D64 D03 D12 C93 L31
    Date: 2018
  5. By: Denzer, Manuel
    Abstract: We examine the impact of household access to the internet on job finding rates in Germany during a period (2006_2009) in which internet access increased rapidly, and job-seekers in-creased their use of the internet as a search tool. During this period, household access to the internet was almost completely dependent on connection to a particular technology (DSL). We therefore exploit the variation in connection rates across municipalities as an instrument for household access to the internet. OLS estimates which control for differences in individual and local area characteristics suggest a job-finding advantage of about five percentage points. The IV estimates are substantially larger, but much less precisely estimated. However, we cannot reject the hypothesis that, conditional on observables, residential computer access with internt was as good as randomly assigned with respect to the job-finding rate. The hypothesis that residential computer access with internet helped job-seekers find work because of its affect on the job search process is supported by the finding that residential internet access greatly increased the use of the internet as a search method. We find some evidence that computer access reduced the use of traditional job search methods, but this effect is outweighed by the increase in internet-based search methods.
    Keywords: Job search,unemployment,job finding rate,internet,DSL
    JEL: J64 L86 R23 J64 C26 L86
    Date: 2018
  6. By: Carin van der Cruijsen, Maurice Doll and Frank van Hoenselaar
    Abstract: The use of online peer-to-peer marketplaces is growing rapidly. It is important to understand what drives consumers' usage of these markets. Based on detailed survey data collected among a representative panel of Dutch consumers, we report a significant positive relationship between trust in other people and current and expected future usage of peer platform markets (PPMs). People who in general trust others are 10 percentage points more likely to use PPMs than people who distrust others. Less uncertainty about the reliability of other persons, the quality of goods and services offered and payments can stimulate usage of PPMs.
    Keywords: peer platform markets; generalised trust; consumer behaviour; consumption; consumer survey
    JEL: D12 D14 O33
    Date: 2018–10
  7. By: Jamal Bouoiyour (CATT - Centre d'Analyse Théorique et de Traitement des données économiques - UPPA - Université de Pau et des Pays de l'Adour); Refk Selmi (CATT - Centre d'Analyse Théorique et de Traitement des données économiques - UPPA - Université de Pau et des Pays de l'Adour); Aviral Kumar Tiwari (ICFAI University Tripura - ICFAI University Tripura); Olaolu Richard Olayeni
    Abstract: Despite its great popularity and gradual worldwide acceptance, most people are still confused as to what a Bitcoin actually is. This paper tries to reach clearer knowledge about what determines the Bitcoin's value. . Due to the intrinsic complexity of crypto market, standard approaches often fail to capture the non-stationary and nonlinear properties and properly depict the moving tendencies. This problem can be solved by an objective data analysis method, i.e. Empirical Mode Decomposition. By decomposing Bitcoin price into intrinsic modes based on scale separation, we will be able to explain its generation from a novel perspective. Specifically, the intrinsic modes are composed into a fluctuating process, a slowly varying part and a trend. By doing so, the short-term fluctuations appear the major contributor of this new crypto-currency, without overlooking the power of long term trend. The first outcome suggests that Bitcoin is backed up by nothing other than the expectation of people' willingness to accept it and thus displays characteristics of purely speculative bubble. The second one implies that if traders appreciate risky investments, a trend can be identified and serious disappointments may await the unwary Bitcoiners.
    Keywords: Crypto market,Bitcoin price,Empirical mode decomposition
    Date: 2018–09–24
  8. By: Swati Mehta Dhawan
    Abstract: One of the most common misperceptions of the refugee populations is that they are highly transitory and not permanent. However, increasingly refugees find themselves in protracted situations in the host countries (spending more than five years) or in a legal limbo (long legal processes for establishing their refugee status or those who have a ban on deportation but no refugee status). In such situations, they often are economically engaged, formally or informally, to sustain themselves beyond the government benefits. For this reason, it is critical that access to affordable and safe financial services be included in the comprehensive solution for refugee integration. These financial tools reduce their vulnerability by helping them save, lowering reliance on informal channels, dealing with emergencies, and making investments to build their capacities.This research paper aims to describe and analyse different aspects of the financial lives of refugees and asylum seekers (collectively ‘newcomers’) in Germany. It maps out the current situation of access to financial services for the newcomers, their unique financial needs, and the challenges from demand as well as supply-side perspective. The findings of the research are based on a thorough review of existing literature, qualitative in-depth interviews with newcomers, and interviews with key informants from the financial sector and other stakeholders involved in refugee integration (NGOs, social workers, researchers, international organisations). While the focus of the research is on financial strategies used by the newcomers, it recognises and looks at other spheres of integration— especially social and labour market—which heavily influences their financial choices. The other key focus of the research is to understand the behavioural factors and biases that influence their economic and financial choices.There is no doubt that newcomers in Germany are better off than those in many other developing host countries (due to welfare benefits, ability to work, training support). However, they still face significant barriers to achieve their economic goals and contribute successfully to the economic development of the host country. One of these is the access to tools to improve their long-term financial resilience. This is currently limited to receiving cash assistance digitally through a bank account, while most of the other transactions (savings, remittances, payments) are cash-driven and informal. This is due to a lack of understanding of the benefits of digital transactions, and more importantly the need to maintain privacy of their financial lives, as they fear to lose their welfare benefits. In addition, the uncertainty about their future and declining confidence in being able to make it into the German labour market is resulting in ineffective economic and financial behaviour. The paper further explores these challenges attempting to bring in the refugees’ perspectives and provides some initial recommendations to overcome the same.
    Keywords: Digitalisation, Financial inclusion, Refugees
    Date: 2018
  9. By: Nengeze, Munatswi
    Abstract: This paper explores administrative challenges that developing countries face in property tax administration. It is internationally acknowledged that local authorities play a vital role in enhancing a country’s economic growth and provision of public goods. Their activities rely on revenue collection. It is therefore in the public interest and the interest of all governments to support their activities. The author identified that the main source of revenue for the City of Harare is property tax. Property tax has the potential to perform better given the boom in urban population. Despite the potential of property tax, it has not been able to generate more revenue because local authorities lack capacity and face a number of challenges. This paper argues that, in addition to solutions intended to resolve the usual technical and political difficulties associated with property taxation, it is crucial for Harare to improve systems for property taxation. There is a need to invest in information technology, including the use of digital technology, electronic billing and payment systems.
    Keywords: Governance,
    Date: 2018
  10. By: Mishal Ahmed (School of Economics, Georgia Institute of Technology, 221 Bobby Dodd Way, Atlanta, GA 30313, USA); Erik Johnson (University of Alabama, Culverhouse College of Business, Department of Economics, Finance and Legal Studies, Tuscaloosa, AL 35487, USA); Byung-Cheol Kim (University of Alabama, Culverhouse College of Business, Department of Economics, Finance and Legal Studies, Tuscaloosa, AL 35487, USA)
    Abstract: Using detailed trip-level taxi and for-hire-vehicle data and new incident-level complaints data, we study how the entry of Uber and Lyft has affected the quality of taxi services in New York City. In a panel setting with 263 NYC taxi-zones over the time period from 2014 to 2017, we find that increased competition measured by the number of daily Uber/Lyft trips in a given taxi-zone has led to more complaints regarding a variety of service quality dimensions such as unsafe driving, rude behavior and fare refusal. Our results are robust to accounting for potential simultaneity in the determination of complaints and Uber and Lyft penetration.
    Keywords: ride-sharing applications; taxi; competition; service quality
    JEL: D01 L91 O18 R4
    Date: 2018–09
  11. By: Dieter Rebitzer; Mark Renz; Martin Tomasson
    Abstract: “Mycelium is the network that a fungi has underground. This network connects all the fruit hats of the fungi that is spread out through the forest”Our approach is based on the idea of the mycelium, the transformation from single office headquarters to a decentralized connected network of offices embedded in the future smart city while at the same time forming it. This approach is of today new for both investors and potential users why Mycelium offers a first mover advantage where the investor will be a pioneer in a completely new type of real estate investment. A major focus on real estate in the last years have been on smart buildings, the problem is that most conventional approaches views a smart building as a structure filled to the max with the latest technology. This presents a problem otherwise small in the real estate market, lifetime. The technology invested in a building today will be outdated within 5 - 10 years rendering the smart building unsmart. The focus on smart buildings therefore needs to shift, from an economic perspective, to something more sustainable throughout time by substituting most of classic office buildings. In our paper we calculated the estimated yield rates, the space and money savings and the agility advantage through a comparison of the traditional office and Mycelium. Furthermore we make an outlook on the implementation in the smart city.
    Keywords: Future; Office Buildings; Smart City; Smart office; Sustainability
    JEL: R3
    Date: 2018–01–01
  12. By: Erik Louw; Dennis Coster
    Abstract: In the scientific literature there are various studies about the prospects of online-shopping. Important topics are the impact of online-shopping on in-store shopping and on travel behaviour. Most of these studies are about possible future developments. There are hardly any studies which investigate empirically the effects of online-shopping. In this paper we will investigate the effect of online-shopping on the amount of retail space that is in use in Dutch municipalities. Our hypothesis is that due to the increase of online-shopping the amount of retail space in use by retailers, is decreasing.We use data from 2011 and 2016 which include data about retail floor space and survey data about shopping behaviour of consumers. Bivariate analysis show the an increase in expenditure on online-shopping (between 2011 and 2016) is significantly related with a decline in retail space in use. Also, in a regression model, were we correct for exogenous variables such as number of households and income levels, changes in online-shopping expenditures are significantly (negatively) related to changes in retail space in use by retailers. It seems however that this effect is not present in every municipality.
    Keywords: online shopping; Rretail floor space; Vacancy
    JEL: R3
    Date: 2018–01–01
  13. By: Krishna, R. Vijay (Florida State University); Leukhina, Oksana (Federal Reserve Bank of St. Louis)
    Abstract: Money allows agents to achieve allocations that are not possible without it. How- ever, currency in most economies is a uniform object, and there may be incentive compatible allocations that cannot be implemented with a uniform currency. We show that currency reform, ie, changing the monetary base by replacing one currency with another, is a powerful tool that can enable a planner to achieve his desired allocation. Our monetary mechanism with currency reform is anonymous and features nonlinear pricing of consumption goods and future assets, as observed in practice. Our result suggests that currency reform is rarely seen in practice precisely because it is such a powerful tool and none but the most benevolent planner can be trusted to use it wisely.
    Date: 2018–05–08
  14. By: Katrin Assenmacher; Signe Krogstrup
    Abstract: Monetary policy space remains constrained by the lower bound in many countries, limiting the policy options available to address future deflationary shocks. The existence of cash prevents central banks from cutting interest rates much below zero. In this paper, we consider the practical feasibility of recent proposals for decoupling cash from electronic money to achieve a negative yield on cash which would remove the lower bound constraint on monetary policy. We discuss how central banks could design and operate such a system, and raise some unanswered questions.
    Keywords: Central banks and their policies;Monetary policy;Negative interest rates;Currencies;Zero lower bound; Monetary policy framework, Dual local currency regime, Legal tender, Zero lower bound, Monetary policy framework, Monetary Policy (Targets, Instruments, and Effects)
    Date: 2018–08–27
  15. By: Fulvio Castellacci (TIK Centre, University of Oslo); Davide Consoli (TIK Centre and INGENIO, Valencia); Artur Santoalha (TIK Centre, University of Oslo)
    Abstract: This paper argues that e-skills, namely capabilities associated with the use and development of digital technologies, enhance regions’ ability to imitate existing knowledge and to create new industrial paths. The empirical analysis focuses on the relationship between e-skills and technological diversification for a panel of European regions for the period 2001-2012. We construct novel indices of regional e-skill endowment distinguishing between basic users, professional users and expert developers of ICTs. The econometric results show that e-skills foster technological diversification dynamics in European regions, and that this effect is particularly strong for less developed regions.
    Date: 2018–10
  16. By: Cords, Dario; Prettner, Klaus
    Abstract: Will low-skilled workers be replaced by automation? To answer this question, we set up a search and matching model that features two skill types of workers and includes automation capital as an additional production factor. Automation capital is a perfect substitute for low-skilled workers and an imperfect substitute for high-skilled workers. Using this type of model, we show that the accumulation of automation capital decreases the labor market tightness in the low-skilled labor market and increases the labor market tightness in the high-skilled labor market. This leads to a rising unemployment rate of low-skilled workers and a falling unemployment rate of high-skilled workers. In addition, automation leads to falling wages of low-skilled workers and rising wages of high-skilled workers.
    Keywords: unemployment,automation,search and matching model,technological progress,inequality,skill premium
    JEL: C78 J63 J64 O33
    Date: 2018
  17. By: Kavitha P (Indian Institute of Management Kozhikode); Pankaj Kumar Baag (Indian Institute of Management Kozhikode)
    Abstract: The crowdfunding phenomenon is viewed through the lens of institutional theory and the institutional work done for maintaining the crowdfunding institution. Institutional work by actors of crowdfunding was studied at macro level by analyzing the provision of crowdfunding regulations across 22 countries and at the micro level by analyzing the actions of Indeigogo, a US based crowdfunding platform. It was observed that at the macro level the regulatory bodies are focusing more on deterrence work rather than enabling or policing work. At Micro level crowdfunding platforms are doing valorizing and routinizing work for maintaining the institution. Since the number of scams happening in crowdfunding is rising, it is important to focus on the full institutionalization of this new form of institution. This study will help in guiding efforts of the actors to engage in the the right kind of institutional work that will help in sustenance of this institutional form by providing legitimacy
    Keywords: Alternative finance, Crowdfunding, entrepreneur, Institution, Institutional work, legitimacy, Startup
    Date: 2018–05
  18. By: Biais, Bruno; Green, Richard
    Abstract: Bonds are traded in opaque and fragmented over-the-counter markets. Is there some- thing special about bonds precluding transparent limit-order markets? Historical experience suggests this is not the case. Before WWII, there was an active market in corporate and municipal bonds on the NYSE. Activity dropped dramatically, in the late 1920s for munici- pals and in the mid 1940s for corporate, as trading migrated to the over-the-counter market. Average trading costs in municipal bonds on the NYSE were half as large in 1926-1927 as they are today over the counter. Trading costs in corporate bonds for small investors in the 1940s were as low or lower than they are now. The di¤erence in transactions costs likely re- ?ects the di¤erences in market structures, since underlying technological changes have likely reduced costs of matching buyers and sellers
    Date: 2018–10
  19. By: Vuillemey, Guillaume (HEC Paris - Finance Department)
    Abstract: I study the real effects a contracting innovation that suddenly made financial markets more complete: central clearing counterparties (CCPs) for derivatives. The first CCP to provide full insulation against counterparty risk was created in Le Havre (France) in 1882, in the coffee futures market. Using triple difference-in-differences estimation, I show that central clearing changed the geography of trade flows Europe-wide, to the benefit of Le Havre. Inspecting the mechanism using trader-level data, I show that the CCP was instrumental both to mitigate adverse selection issues and to solve a ``missing market'' problem. Increased risk-sharing possibilities enabled more gains from trade to be realized. The successful contractual innovation quickly spread to new exchanges.
    Keywords: financial markets; central clearing counterparties; risksharing
    JEL: D53 N23
    Date: 2018–09–11

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