nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2019‒02‒11
fourteen papers chosen by
Bernardo Bátiz-Lazo
Bangor University

  1. Blockchain, FinTechs and their relevance for international financial institutions By Davradakis, Emmanouil; Santos, Ricardo
  2. China’s Digital Economy: Opportunities and Risks By Longmei Zhang; Sally Chen
  3. Market Manipulation of Bitcoin: Evidence from Mining the Mt. Gox Transaction Network By Weili Chen; Jun Wu; Zibin Zheng; Chuan Chen; Yuren Zhou
  4. The impact of e-wallet on informal farm entrepreneurship development in rural Nigeria By Uduji, Joseph; Okolo-Obasi, Elda; Asongu, Simplice
  5. Broadband Internet and Social Capital By Andrea Geraci; Mattia Nardotto; Tommaso Reggiani; Fabio Sabatini
  6. Digital Dividend: Policies to Harness the Productivity Potential of Digital Technologies By Stéphane Sorbe; Peter Gal; Giuseppe Nicoletti; Christina Timiliotis
  7. It is not only size that matters: How unique is the Estonian e-governance success story? By Stephany, Fabian
  8. Hotel rankings of online travel agents, channel pricing, and consumer protection By Hunold, Matthias; Kesler, Reinhold; Laitenberger, Ulrich
  9. Governance and social media in African countries: an empirical investigation By Asongu, Simplice; Odhiambo, Nicholas
  10. Trends in the Diffusion of Misinformation on Social Media By Hunt Allcott; Matthew Gentzkow; Chuan Yu
  11. Technology and persistence in global software piracy By Asongu, Simplice; Meniago, Christelle
  12. Digitalisation and productivity: In search of the holy grail – Firm-level empirical evidence from EU countries By Peter Gal; Giuseppe Nicoletti; Theodore Renault; Stéphane Sorbe; Christina Timiliotis
  13. The Welfare Effects of Social Media By Hunt Allcott; Luca Braghieri; Sarah Eichmeyer; Matthew Gentzkow
  14. Tarifpolitischer Bericht 2. Halbjahr 2018: Vielfach stockende Verhandlungen By Lesch, Hagen; Kestermann, Christian

  1. By: Davradakis, Emmanouil; Santos, Ricardo
    Abstract: The purpose of this working paper is to provide a primer on financial technology and on Blockchain, while shading light on the impact they may have on the financial industry. FinTechs, the financial technology and innovation that competes with traditional financial methods in the delivery of financial services, has the potential to improve the reach of financial services to the broader public and facilitate the creation of a credit record, especially in the developing world. Some Blockchain applications like cryptocurrencies, could be problematic as cryptocurrencies cannot substitute traditional money due to the high risk of debasement, luck of trust and high inefficiencies relating to the high cost in electricity and human effort required to clear cryptocurrency transactions. Cryptocurrencies' high volatility renders it a poor means of payment and store of value, while resembling a fraudulent investment operation. Yet, other Blockchain applications, like Blockchain securities, could facilitate the functioning of an International Financial Institutions (IFI) due to the volume of securities they issue as Blockchain securities enable an almost instantaneous trade confirmation, affirmation, allocation and settlement and reconciliations are superfluous releasing collateral to be used for other purposes in the market. IFIs could promote awareness and understanding about Blockchain technology among different IFI services and launch Blockchain labs in order to pilot projects that can improve governance and social outcomes in the developing world. Financial inclusion, at the core of IFI's mandate, could be enhanced by investing into FinTechs who facilitate access to payment systems. IFIs could also ponder the development of Blockchain software aimed at improving transparency and efficiency in public resources that finance development projects. IFIs could promote Blockchain applications in several sectors like agricultural lending where Blockchain technology is used in the supply chain in order to improve transparency and efficiency in agricultural and commodity production. Other sectors include transport and logistics and even energy distribution. IFIs could benefit by utilizing FinTechs' knowhow in the analysis of big data in order to understand better the investment gaps and the financing needs of prospective clients. Finally, FinTechs' knowhow could be used by IFIs in order to streamline their internal processes concerning credit underwriting and risk management.
    Date: 2019
  2. By: Longmei Zhang; Sally Chen
    Abstract: China’s digital economy has expanded rapidly in recent years. While average digitalization of the economy remains lower than in advanced economies, digitalization is already high in certain regions and sectors, in particular e-commerce and fintech, and costal regions. Such transformation has boosted productivity growth, with varying impact on employment across sectors. Going forward, digitalization will continue to reshape the Chinese economy by improving efficiency, softening though not reversing, the downward trend of potential growth as the economy matures. The government should play a vital role in maximizing the benefits of digitalization while minimizing related risks, such as potential labor disruption, privacy infringement, emerging oligopolies, and financial risks.
    Date: 2019–01–17
  3. By: Weili Chen; Jun Wu; Zibin Zheng; Chuan Chen; Yuren Zhou
    Abstract: The cryptocurrency market is a very huge market without effective supervision. It is of great importance for investors and regulators to recognize whether there are market manipulation and its manipulation patterns. This paper proposes an approach to mine the transaction networks of exchanges for answering this question.By taking the leaked transaction history of Mt. Gox Bitcoin exchange as a sample,we first divide the accounts into three categories according to its characteristic and then construct the transaction history into three graphs. Many observations and findings are obtained via analyzing the constructed graphs. To evaluate the influence of the accounts' transaction behavior on the Bitcoin exchange price,the graphs are reconstructed into series and reshaped as matrices. By using singular value decomposition (SVD) on the matrices, we identify many base networks which have a great correlation with the price fluctuation. When further analyzing the most important accounts in the base networks, plenty of market manipulation patterns are found. According to these findings, we conclude that there was serious market manipulation in Mt. Gox exchange and the cryptocurrency market must strengthen the supervision.
    Date: 2019–01
  4. By: Uduji, Joseph; Okolo-Obasi, Elda; Asongu, Simplice
    Abstract: Transforming agriculture from a largely subsistence enterprise to a profitable commercial venture is both a prerequisite and a driving force for accelerated development and sustainable growth in sub-Saharan Africa. The objective of this investigation is to assess the impact of the Federal Government of Nigeria (FGN) e-wallet programme on informal farm entrepreneurship development in rural Nigeria. Informal sector farmers are those that are not legally registered at the national level though could be connected to a registered association. The research is motivated by the absence of literature focusing on the problem statement or objective of study. One thousand, one hundred and fifty-two rural farmers were sampled across the six geo-political zones of Nigeria. Results from the use of a bivariate probit model indicate that the mobile phone-based technology via the e-wallet programme is a critical factor that has enhanced farm entrepreneurship in rural Nigeria. However, results also show that the impact of mobile phones (as a channel to accessing and using modern agricultural inputs) is contingent on how mobile networks are able to link farmers who live in rural areas and work mainly in farming. The results suggest that increasing mobile phone services in rural Nigeria enhances farmers’ knowledge, information and adoption of improved farm inputs and by extension, spurs rural informal sector economic activities in sub-Saharan Africa. Implications for practice, policy and research are discussed.
    Keywords: Informal sector’s adoption, electronic wallet technologies, rural farmers’ entrepreneurship, Nigeria, developing countries
    JEL: L96 O40 O55 Q10 Q14
    Date: 2018–01
  5. By: Andrea Geraci (European Commission JRC); Mattia Nardotto (KU Leuven); Tommaso Reggiani (Masaryk University); Fabio Sabatini (Sapienza University of Rome)
    Abstract: We study how the diffusion of broadband Internet affects social capital using two data sets from the UK. Our empirical strategy exploits the fact that broadband access has long depended on customers’ position in the voice telecommunication infrastructure that was designed in the 1930s. The actual speed of an Internet connection, in fact, rapidly decays with the distance of the dwelling from the specific node of the network serving its area. Merging unique information about the topology of the voice network with geocoded longitudinal data about individual social capital, we show that access to broadband Internet caused a significant decline in forms of offline interaction and civic engagement. Overall, our results suggest that broadband penetration substantially crowded out several aspects of social capital.
    Keywords: ICT, broadband infrastructure, networks, Internet, social capital, civic capital
    JEL: C91 D9 D91 Z1
    Date: 2018–12
  6. By: Stéphane Sorbe; Peter Gal; Giuseppe Nicoletti; Christina Timiliotis
    Abstract: This paper presents a range of policies to enhance adoption of digital technologies and firm productivity. It quantifies illustratively the effect of policy changes by combining the results of two recent OECD analyses on the drivers of adoption and their productivity benefits. Increasing access to high-speed internet, upgrading technical and managerial skills and implementing product and labour market reforms to facilitate the reallocation of resources in the economy are found to be the main factors supporting the efficient adoption of a selection of digital technologies. The most productive firms have benefitted relatively more from digitalisation in the past, contributing to a widening productivity gap with less productive firms. Policies should create the conditions for efficient adoption by less productive firms, which would help them to catch up, achieving a double dividend in terms of growth and inclusiveness. Enhancing skills has a key role to play in this area since less productive firms suffer relatively more from skill shortages.
    Keywords: competition, digitalisation, dispersion, ICT, productivity, regulation, skills
    JEL: D24 J24 O33
    Date: 2019–02–12
  7. By: Stephany, Fabian
    Abstract: User data fuel the digital economy, while individual privacy is at stake. Governments react differently to this challenge. Estonia, a small Baltic state, has become a role model for the renewal of the social contract in times of big data. The Estonian example suggests that online governance is most successful in a small state, with a young population, trustworthy institutions and the need of technological renewal. This work examines the development of e-governance usage during the last decade in Europe from a comprehensive cross-country perspective: Size, age and trust are relevant for the development of digital governance in Europe. However, the quality of past communication infrastructure is not related to e-governance popularity.
    Keywords: E-Governance,Europe,Estonia,Random Model,Trust
    Date: 2018
  8. By: Hunold, Matthias; Kesler, Reinhold; Laitenberger, Ulrich
    Abstract: We investigate whether online travel agents (OTAs) assign hotels worse positions in their search results if these set lower hotel prices at other OTAs or on their own websites. We formally characterize how an OTA can use such a strategy to reduce price differentiation across distribution channels. Our empirical analysis shows that the position of a hotel in the search results of OTAs is better when the prices charged by the hotel on other channels are higher. This is consistent with the hypothesis that OTAs alter their search results to discipline hotels for aggressive prices on competing channels, thereby reducing the search quality for consumers.
    Keywords: consumer protection,free-riding,hotel booking,online travel agents,ranking,search bias
    JEL: D40 L42 L81
    Date: 2018
  9. By: Asongu, Simplice; Odhiambo, Nicholas
    Abstract: This study assesses linkages between social media and governance dynamics in 49 African countries for the year 2012. The empirical evidence is based on ordinary least squares and quantile regressions. Ten bundled and unbundled governance dynamics are used, notably: (i) political governance (entailing “voice & accountability” and political stability/no violence); (ii) economic governance (involving regulation quality and government effectiveness); (iii) institutional governance (comprising the rule of law and corruption-control) and (iv) general governance (entailing political, economic and institutional governance). Social media is measured with Facebook penetration. The findings show that Facebook penetration is positively associated with governance dynamics and these positive nexuses differ in terms of significance and magnitude of significance throughout the conditional distribution of the governance dynamics.
    Keywords: Governance; Social media; Africa
    JEL: G20 O38 O40 O55 P37
    Date: 2018–01
  10. By: Hunt Allcott; Matthew Gentzkow; Chuan Yu
    Abstract: In recent years, there has been widespread concern that misinformation on social media is damaging societies and democratic institutions. In response, social media platforms have announced actions to limit the spread of false content. We measure trends in the diffusion of content from 569 fake news websites and 9,540 fake news stories on Facebook and Twitter between January 2015 and July 2018. User interactions with false content rose steadily on both Facebook and Twitter through the end of 2016. Since then, however, interactions with false content have fallen sharply on Facebook while continuing to rise on Twitter, with the ratio of Facebook engagements to Twitter shares decreasing by 60 percent. In comparison, interactions with other news, business, or culture sites have followed similar trends on both platforms. Our results suggest that the relative magnitude of the misinformation problem on Facebook has declined since its peak.
    JEL: L0 L82 P16
    Date: 2019–01
  11. By: Asongu, Simplice; Meniago, Christelle
    Abstract: This study examines the persistence of software piracy with internet penetration vis-à-vis of PC users, conditional on Intellectual Property Rights (IPRs) institutions. The empirical evidence is based on a panel of 99 countries for the period 1994-2010 and the Generalised Method of Moments. The main finding is that, compared to internet penetration, PC usage is more responsible for the persistence of global software piracy. Knowing how technology affects the persistence of piracy is important because it enables more targeted policy initiatives. We show that the sensitivity of software piracy to IPRs mechanisms is contingent on the specific technology channels through which the pirated software is consumed.
    Keywords: Piracy; Business Software; Software piracy; Intellectual Property Rights
    JEL: F42 K42 O34 O38 O57
    Date: 2018–01
  12. By: Peter Gal; Giuseppe Nicoletti; Theodore Renault; Stéphane Sorbe; Christina Timiliotis
    Abstract: This paper assesses how the adoption of a range of digital technologies affects firm productivity. It combines cross-country firm-level data on productivity and industry-level data on digital technology adoption in an empirical framework that accounts for firm heterogeneity. The results provide robust evidence that digital adoption in an industry is associated to productivity gains at the firm level. Effects are relatively stronger in manufacturing and routine-intensive activities. They also tend to be stronger for more productive firms and weaker in presence of skill shortages, which may relate to the complementarities between digital technologies and other forms of capital (e.g. skills, organisation, or intangibles). As a result, digital technologies may have contributed to the growing dispersion in productivity performance across firms. Hence, policies to support digital adoption should go hand in hand with creating the conditions to enable the catch-up of lagging firms, notably by easing access to skills.
    Keywords: cloud computing, digitalisation, high-speed internet, ICT, productivity, skills
    JEL: D24 J24 O33
    Date: 2019–02–12
  13. By: Hunt Allcott; Luca Braghieri; Sarah Eichmeyer; Matthew Gentzkow
    Abstract: The rise of social media has provoked both optimism about potential societal benefits and concern about harms such as addiction, depression, and political polarization. We present a randomized evaluation of the welfare effects of Facebook, focusing on US users in the run-up to the 2018 midterm election. We measured the willingness-to-accept of 2,844 Facebook users to deactivate their Facebook accounts for four weeks, then randomly assigned a subset to actually do so in a way that we verified. Using a suite of outcomes from both surveys and direct measurement, we show that Facebook deactivation (i) reduced online activity, including other social media, while increasing offline activities such as watching TV alone and socializing with family and friends; (ii) reduced both factual news knowledge and political polarization; (iii) increased subjective well-being; and (iv) caused a large persistent reduction in Facebook use after the experiment. We use participants' pre-experiment and post-experiment Facebook valuations to quantify the extent to which factors such as projection bias might cause people to overvalue Facebook, finding that the magnitude of any such biases is likely minor relative to the large consumer surplus that Facebook generates.
    JEL: D12 D90 I31 L86 O33
    Date: 2019–01
  14. By: Lesch, Hagen; Kestermann, Christian
    Abstract: Der vorliegende Report berichtet über die Tarifverhandlungen im 2. Halbjahr 2018. Im 1. Halbjahr hatte es bereits Tarifverhandlungen in wichtigen Branchen gegeben, beispielsweise in der Metall- und Elektro-Industrie, im Öffentlichen Dienst (Bund und Kommunen) und im Bauhauptgewerbe. Im 2. Halbjahr 2018 stand vor allem der Verkehrssektor im Fokus der Tarifauseinandersetzungen. Dabei gab es bei der Deutschen Bahn und in der Luftfahrt eine Reihe von Warnstreiks, die erhebliche Auswirkungen auf Drittbetroffene hatten. In der Luftfahrt schwelten verschiedene Tarifkonflikte bei der irischen Fluggesellschaft Ryanair, die sich nach der Insolvenz von AirBerlin zu einem zentralen Akteur im deutschen Flugverkehr entwickelt hat. Die Verhandlungen mit den Piloten eskalierten dabei ebenso wie die Verhandlungen mit dem Kabinenpersonal. Es gab mehrfach Warn- oder Tagesstreiks. Im November 2018 konnten für beide Berufsgruppen Eckpunkte vereinbart werden, auf deren Basis nun erstmals für das Unternehmen Tarifverträge für das in Deutschland stationierte Personal entwickelt werden. Auch bei Eurowings kam es im Streit um einen neuen Manteltarifvertrag für das Kabinenpersonal zu Warnstreiks. Dieser Konflikt wurde noch nicht beigelegt. Bei der Deutschen Bahn kam es ebenfalls zu einem Warnstreik, der bundesweit fast den gesamten Zugverkehr zum Erliegen brachte. Zum Ausstand hatte nicht die Gewerkschaft Deutscher Lokführer (GDL), sondern die konkurrierende Eisenbahn- und Verkehrsgewerkschaft (EVG) aufgerufen. Nach diesem Warnstreik einigten sich EVG und Deutsche Bahn auf einen neuen Tarifabschluss, der auch half, die zwischenzeitlich abgebrochenen Verhandlungen zwischen Bahn und GDL wieder aufzunehmen und zum Abschluss zu bringen. Auch in anderen Wirtschaftszweigen verliefen die Verhandlungen eher stockend. In der Druckindustrie schwelt ein Grundsatzkonflikt. Dort hatten die Arbeitgeber den Manteltarifvertrag gekündigt. Die Vereinte Dienstleistungsgewerkschaft (ver.di) lehnt aber jedwede Verschlechterung von Arbeitsbedingungen ab. Für die Gebäudereinigung fordert die IG Bauen-Agrar-Umwelt (IG BAU) ein 13. Monatsgehalt. Dies lehnen wiederum die Arbeitgeber strikt ab. In keiner der beiden Branchen deutet sich trotz monatelanger Verhandlungen derzeit eine Kompromisslinie an. Schwierig waren auch die Verhandlungen bei T-Systems, einer Tochter der Deutschen Telekom. Hier wurden die Verhandlungen dadurch belastet, dass das Management angekündigt hatte, massiv Stellen abbauen zu wollen. Im Durchschnitt von insgesamt 22 analysierten Tarifverhandlungen, die entweder im Jahr 2018 beendet wurden oder 2018 begannen, lag die Konfliktintensität bei 10,5 Punkten. Die Auseinandersetzung zwischen Ryanair und den Piloten führte zu 53 Konfliktpunkten, der Tarifkonflikt in der Metall- und Elektro-Industrie zu 35 Punkten und der in der Druckindustrie zu 31 Punkten. Harmonisch ging es hingegen in der Chemischen Industrie zu. Dort einigten sich die Sozialpartner konfliktfrei. Aufgrund der guten Arbeitsmarktlage könnte auch das Jahr 2019 konfliktreich werden. Nach wie vor liegen die Forderungen der Gewerkschaften bei 5,5 bis 6 Prozent, obwohl sich die Konjunktur abgekühlt hat. Allerdings wird 2019 eher ein kleines Tarifjahr. In vielen Branchen wird es Entgeltsteigerungen geben, die bereits 2018 ausgehandelt wurden.
    JEL: J50 J52
    Date: 2019

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