nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2019‒03‒25
23 papers chosen by
Bernardo Bátiz-Lazo
Bangor University

  1. Money and Central Bank Digital Currency By Shirai, Sayuri
  2. Antecedents and Effects of App-user Satisfaction: Empirical Evidence from Greece By Niros, Meletios; Samanta, Irene; Pollalis, Yannis; Niros, Angelica
  3. Credence Goods Markets and the Informational Value of New Media: A Natural Field Experiment By Kerschbamer, Rudolf; Neururer, Daniel; Sutter, Matthias
  4. Digitalization for Energy Access in Sub-Saharan Africa : Challenges, Opportunities and Potential Business Models By Davide Mazzoni
  5. BBVA big data on online credit card transactions: The patterns of domestic and cross-border e-commerce By OECD
  6. Fintech and Financial Literacy in the Lao PDR By Morgan, Peter J.; Trinh, Long Q.
  7. Forecasting the capacity of mobile networks By Bastos, João A.
  8. Digitales Zentralbankgeld als neues Instrument der Geldpolitik By Andreas Hanl; Jochen Michaelis
  9. Bursting the Bitcoin Bubble: Assessing the Fundamental Value and Social Costs of Bitcoin By Podhorsky, Andrea
  10. Monthly Payment Targeting and the Demand for Maturity By Bronson Argyle; Taylor D. Nadauld; Christopher Palmer
  11. Latent Factor Models for Credit Scoring in P2P Systems By Ahelegbey, Daniel Felix; Giudici, Paolo; Hadji-Misheva, Branka
  12. Modelling the Demand for Euro Banknotes By António Rua
  13. Business dynamics and digitalisation By Flavio Calvino; Chiara Criscuolo
  14. Factorial Network Models To Improve P2P Credit Risk Management By Ahelegbey, Daniel Felix; Giudici, Paolo; Hadji-Misheva, Branka
  15. Digital platform innovation in European SMEs. An analysis of SME Instrument Business Proposals and Case Studies. By Chiara Eleonora De Marco; Alberto Di Minin; Cristina Marullo; Daniel Nepelski
  16. Mobile Money and Healthcare Use: Evidence from East Africa By Haseeb Ahmed; Benjamin W. Cowan
  17. Inmersión en los ecosistemas digitales, una forma de mejora de la educación en las áreas rurales en Colombia By Ramírez Chaparro, María Nathalia; Chacón Mejía, Catalina
  18. Unleashing the Power of Digital on Farms in Russia - and Seeking Opportunities for Small Farms By David Nielson; Yuan-Ting Meng; Anna Buyvolova; Artavazd Hakobyan
  19. The Market for Data Privacy By Ramadorai, Tarun; Uettwiller, Antoine; Walther, Ansgar
  20. Future developments in cyber risk assessment for the internet of things By Radanliev, Petar; De Roure, David; Nicolescu, Razvan; Huth, Michael; Mantilla Montalvo, Rafael; Cannady, Stacy; Burnap, Peter
  21. Definition of Internet of Things (IoT) Cyber Risk – Discussion on a Transformation Roadmap for Standardization of Regulations, Risk Maturity, Strategy Design and Impact Assessment By Radanliev, Petar; De Roure, David; R.C. Nurse, Jason; Burnap, Pete; Anthi, Eirini; Ani, Uchenna; Maddox, La’Treall; Santos, Omar; Mantilla Montalvo, Rafael
  22. Multilateral tools for the automatic exchange of information: the benefits and risks for Russia By Levashenko, Antonina (Левашенко, Антонина); Koval, Alexandra (Коваль, Александра)
  23. Market Structure and Indeterminacy of Stationary Equilibria in a Decentralized Monetary Economy By Kubota, So

  1. By: Shirai, Sayuri (Asian Development Bank Institute)
    Abstract: Money is a financial instrument that fulfills the basic functions as a medium of exchange, unit of account, store of value, and standard of deferred payment. The function as a medium of exchange allows efficient transactions of goods and services among people without forming an inconvenient barter system. The unit of account enables the value of all goods and services to be expressed in common criteria, thereby smoothening the comparison of goods and services and facilitating their transactions. The store of value refers to any asset whose value can also be used in the future because of the ability to maintain its value, thereby enabling people to save to finance their spending at a later date. In addition to these three basic functions, the function as a standard of deferred payment is regarded as an additional important function of money since it enables it to express the value of a debt so that people can purchase goods and services today by paying back debt in the future. To meet these four functions, money must be durable, portable, divisible, and difficult to counterfeit.
    Keywords: money; central bank digital currency; cash; digital coins; bank deposits
    JEL: E42 E44 E51
    Date: 2019–02–13
  2. By: Niros, Meletios; Samanta, Irene; Pollalis, Yannis; Niros, Angelica
    Abstract: The purpose of this research is to explore the antecedents and effects of mobile app satisfaction. A survey conducted using a “positivism” approach, in which 450 app users participated to answer the research instrument. Emotional Attachment and App design proved to be the most influential antecedents of app satisfaction, whereas Safety of personal data & user identification were important as well. However, app satisfaction has no effect on Intention to upgrade to premium service, showing that the basic revenue stream still derives from advertising and sponsorships. On the other hand, Word of Mouth communication is stimulated by app user satisfaction. This finding shows that satisfaction is the vehicle to spread the value of the app to other users cheaper and with more credibility. This research provides certain implications to digital marketing practitioners and academics in order to make decisions on building strong service brands using a mobile app as a distribution channel.
    Keywords: App Satisfaction, Digital Marketing, Consumer Behaviour, Electronic Commerce
    JEL: L81 M31
    Date: 2019–02–01
  3. By: Kerschbamer, Rudolf (University of Innsbruck); Neururer, Daniel (University of Innsbruck); Sutter, Matthias (Max Planck Institute for Research on Collective Goods)
    Abstract: Credence goods markets are characterized by pronounced informational asymmetries between consumers and expert sellers. As a consequence, consumers are often exploited and market efficiency is threatened. However, in the digital age, it has become easy and cheap for consumers to self-diagnose their needs using specialized webpages or to access other consumers' reviews on social media platforms in search for trustworthy sellers. We present a natural field experiment that examines the causal effect of information acquisition from new media on the level of sellers' price charges for computer repairs. We find that even a correct self-diagnosis of a consumer about the appropriate repair does not reduce prices, and that an incorrect diagnosis more than doubles them. Internet ratings of repair shops are a good predictor of prices. However, the predictive valued of reviews depends on whether they are judged as reliable or not. For reviews recommended by the platform Yelp we find that good ratings are associated with lower prices and bad ratings with higher prices, while non-recommended reviews have a clearly misleading effect, because non-recommended positive ratings increase the price.
    Keywords: credence goods, fraud, information acquisition, internet, field experiment
    JEL: C93 D82
    Date: 2019–02
  4. By: Davide Mazzoni (Fondazione Eni Enrico Mattei)
    Abstract: Innovative business models supported by digital technologies, together with the widening connectivity and data collection, are already giving a big contribution in fostering the access to electricity and clean cooking in Sub-Saharan Africa. This paper gives an overview on the actual state of energy access in Sub-Saharan Africa and the current technologies used to provide it, followed by a description of the key trends and drivers of the ongoing African digital transformation. A deep analysis of the Pay-as-you-go business model in the off-grid solar sector will shed light on how this transformation started some years ago and the way it is affecting society in many ways. Strengths and opportunities — as well as weaknesses and risks of the model — are provided through a screening of the most representative business experiences in East and West Africa, financial aspects and market analysis. The perspective of both companies and end-users have been considered here. The last section gives recommendations to policy-makers on how to ride the wave of digitalization to foster the access to clean and reliable energy, by acting on the electrification planning, regulations, business environment, distribution channels and mobile money environment.
    Keywords: Energy Access, Digitalization, PAYGO, Business Models, Africa, Digital Transformation
    JEL: O13 O33 O55 M13 Q40 Q48
    Date: 2019–03
  5. By: OECD
    Abstract: This report uses a standard gravity setup to analyse the determinants of e-commerce, using data on online credit card payments by private Spanish customers of the multinational bank BBVA. The results show that the gravity model applies well to credit card payments, explaining up to 95% of the variation in the data. The analysis finds potentially large border effects for trade between any two regions or countries, implying that individuals tend to purchase more from their home region or domestically than from other places. The estimates also suggest that the effect of distance might be slightly less important for e-commerce transactions than for offline trade, although the death of distance hypothesis is clearly rejected by the data.
    Date: 2019–03–08
  6. By: Morgan, Peter J. (Asian Development Bank Institute); Trinh, Long Q. (Asian Development Bank Institute)
    Abstract: A growing literature has examined the role of financial literacy in an individual’s income, saving behavior and the use of various financial products. However, so far, no one has examined the relationship between financial literacy and the awareness and adoption of financial technology (fintech) products, i.e., financial products provided via internet-based and mobile-based platforms. This paper examines this relationship in a developing country, the Lao People’s Democratic Republic (PDR). We use information collected in the Lao PDR using the standardized questionnaire developed by the Organization for Economic Cooperation and Development International Network on Financial Education (OECD/INFE) to calculate our financial literacy. We find that a higher level of financial literacy has strong and positive effects on an individual’s awareness of fintech products. This result still holds when we use a set of instrumental variables for the financial literacy variable. However, there is insufficient data to find a significant relationship between financial literacy and the use of fintech products.
    Keywords: financial literacy; financial behavior; fintech; awareness of fintech; household saving; Lao PDR
    JEL: D14 G11 J26
    Date: 2019–03–18
  7. By: Bastos, João A.
    Abstract: The optimization of mobile network capacity usage is an essential operation to promote positive returns on network investments, prevent capacity bottlenecks, and deliver good end user experience. This study examines the performance of several statistical models to predict voice and data traffic in a mobile network. While no method dominates the others across all time series and prediction horizons, exponential smoothing and ARIMA models are good alternatives to forecast both voice and data traffic. This analysis shows that network managers have at their disposal a set of statistical tools to plan future capacity upgrades with the most effective solution, while optimizing their investment and maintaining good network quality.
    Keywords: Mobile networks, Forecasting, ARIMA models, Exponential smoothing, Time series
    JEL: C53 O32
    Date: 2019–03–13
  8. By: Andreas Hanl (University of Kassel); Jochen Michaelis (University of Kassel)
    Abstract: Digitalization increasingly replaces the demand for cash and leads to a privatization of payment systems. A recently discussed central bank reaction is central bank digital currency. This article discusses the concept, design options, the implementation into the monetary policy framework, and the macroeconomic consequences of a central bank digital currency.
    Keywords: CBDC, Digitales Zentralbankgeld, Geldpolitik
    JEL: E42 E44 E52 E58
    Date: 2019
  9. By: Podhorsky, Andrea (Asian Development Bank Institute)
    Abstract: This paper develops a microeconomic model of bitcoin production to analyze the economic effects of the Bitcoin protocol. I view the bitcoin as a tradable commodity that is produced by miners and whose supply is managed by the protocol. The findings show that bitcoin’s volatile price path and inefficiency are related, and that both are a consequence of the protocol’s system of supply management. I characterize the fundamental value of a bitcoin and demonstrate that the return on bitcoin appreciates proportionally to the rate of increase in the level of difficulty. In the model, where the price of a bitcoin is based on marginal production costs, successive positive demand shocks result in a rapidly increasing price path that may be mistaken for a bubble. The generalized supremum augmented Dickey-Fuller (GSADF) test is used to demonstrate that the model is able to account for the explosive behavior in the bitcoin price path, providing strong evidence that bitcoin is not a bubble. I also show that the difficulty adjustment mechanism results in social welfare losses from 17 March 2014 to 13 January 2019 of $323.8 million, which is about 9.3% of the miners’ total electricity costs during this time period.
    Keywords: bitcoin; digital coins; Bitcoin protocol; cryptocurrency; bitcoin bubble
    JEL: F30 G00 G11
    Date: 2019–03–19
  10. By: Bronson Argyle; Taylor D. Nadauld; Christopher Palmer
    Abstract: In this paper, we provide evidence of the importance of monthly payments in the market for consumer installment debt. Auto debt in particular has grown rapidly since the Great Recession and has eclipsed credit cards in total debt outstanding. Auto-loan maturities have also increased such that most auto-loan originations now have a term of over 72 months. We document three phenomena we jointly refer to as monthly payment targeting. First, using data from 500,000 used auto loans and discontinuities in contract terms offered by hundreds of lenders, we show that demand is more sensitive to maturity than interest rate, consistent with consumers managing payment size when making debt decisions. Second, many consumers appear to employ segregated mental accounts, spending exogenous payment savings on larger loans. Third, consumers bunch at round-number monthly payment amounts, consistent with the use of budgeting heuristics. These patterns hold in subsamples of constrained and unconstrained borrowers, challenging liquidity constraints as a complete explanation. Our estimates suggest that borrower focus on payment size, combined with credit-supply shocks to maturity, could significantly affect aggregate outstanding debt.
    JEL: D14 D18 D91 E43 E51 G02 G21 H31 L62 M38
    Date: 2019–03
  11. By: Ahelegbey, Daniel Felix; Giudici, Paolo; Hadji-Misheva, Branka
    Abstract: Peer-to-Peer (P2P) fintech platforms allow cost reduction and service improvement in credit lending. However, these improvements may come at the price of a worse credit risk measurement, and this can hamper lenders and endanger the stability of a financial system. We approach the problem of credit risk for Peer-to-Peer (P2P) systems by presenting a latent factor-based classification technique to divide the population into major network communities in order to estimate a more efficient logistic model. Given a number of attributes that capture firm performances in a financial system, we adopt a latent position model which allow us to distinguish between communities of connected and not-connected firms based on the spatial position of the latent factors. We show through empirical illustration that incorporating the latent factor-based classification of firms is particularly suitable as it improves the predictive performance of P2P scoring models.
    Keywords: Credit Risk, Factor Models, Financial Technology, Peer-to-Peer, Scoring Models, Spatial Clustering
    JEL: C38 G10 G21
    Date: 2018–07–04
  12. By: António Rua
    Abstract: Liquidity management is a key mission of a central bank. In particular, the adequate provision of banknotes requires the understanding of what drives currency demand in a continuously changing environment. The challenge is even bigger in the case of the European monetary union where the euro continues to develop into a well-established currency outside borders. The focus is on modelling euro banknotes demand namely by considering its denominational breakdown. Such an analysis allows to unveil the heterogeneous role played by the several drivers while providing a more in depth modelling of currency demand. The econometric approach pursued allows to take on board the interconnections across denominations both in the long- and short-run dynamics.
    JEL: C32 E41 E50
    Date: 2019
  13. By: Flavio Calvino (OECD); Chiara Criscuolo (OECD)
    Abstract: This work analyses the role of the digital transformation for business dynamics across countries. The analysis combines unique harmonised data on business dynamics for 15 countries with a multi-dimensional measure of digital intensity that takes into account different facets of the digital transformation. Two key stylised facts emerge. First, digital intensive sectors – especially digital intensive services – are on average more dynamic than other sectors of the economy. Second, business dynamism has been declining in digital intensive sectors, and more so than in other sectors, especially after 2001. Despite an important role is played by technology, significant differences across countries still remain and are related to a number of institutional and policy factors.
    Keywords: business dynamics, digital transformation, entrepreneurship
    Date: 2019–03–01
  14. By: Ahelegbey, Daniel Felix; Giudici, Paolo; Hadji-Misheva, Branka
    Abstract: This paper investigates how to improve statistical-based credit scoring of SMEs involved in P2P lending. The methodology discussed in the paper is a factor network-based segmentation for credit score modeling. The approach first constructs a network of SMEs where links emerge from comovement of latent factors, which allows us to segment the heterogeneous population into clusters. We then build a credit score model for each cluster via lasso logistic regression. We compare our approach with the conventional logistic model by analyzing the credit score of over 15000 SMEs engaged in P2P lending services across Europe. The result reveals that credit risk modeling using our network-based segmentation achieves higher predictive performance than the conventional model.
    Keywords: Credit Risk, Factor models, Fintech, Peer-to-Peer lending, Credit Scoring, Lasso, Segmentation
    JEL: C38 G2
    Date: 2019–02–26
  15. By: Chiara Eleonora De Marco (Haas School of Business, Garwood Centre for Corporate Innovation, UC Berkeley, CA-US; Institute of Management, Scuola Superiore Sant’Anna, Pisa); Alberto Di Minin (Institute of Management, Scuola Superiore Sant’Anna, Pisa); Cristina Marullo (Institute of Management, Scuola Superiore Sant’Anna, Pisa); Daniel Nepelski (European Commission - JRC)
    Abstract: The study explores how European SMEs applying to the SME Instrument (SMEi) funding scheme under Horizon 2020 innovate use the digital platform business model. The study demonstrates a widespread awareness of the digital platform concept as a tool to be applied to gain momentum and growth, taking advantage of the digital affordances. The main challenges to scale-up include how to manage external communities and orchestrate them in order to build innovation ecosystems; how to find a profitable business model; and secure funding for growth. Firms located in peripheral regions face additional difficulties in finding complementary resources.
    Keywords: digital platform, innovation, SME, H2020, SME Instrument, Europe
    Date: 2019–03
  16. By: Haseeb Ahmed; Benjamin W. Cowan
    Abstract: This paper uses a difference-in-difference framework to estimate the effects of mobile money transfer technology (MMT) on healthcare usage in the face of negative health shocks. We use survey data from 2013-16 with quarterly observations on about 1,600 households of 10 villages in the Kisumu region of Western Kenya. We find evidence that MMT, likely through greater ease of informal borrowing, helps households increase utilization of formal healthcare services in terms of visits to a clinic, consultation and medication expenditures in comparison with the non-users of this technology.
    JEL: I13 I15 O55
    Date: 2019–03
  17. By: Ramírez Chaparro, María Nathalia; Chacón Mejía, Catalina
    Abstract: From the social, economic and educational gaps that prevail today in rural areas of Colombia, it is necessary to think of alternatives that seek to improve such situation. Thus, as technologies and the immersion of these in educational processes become a possible response, which would ensure an improvement in coverage and quality in education, however, this presents multiple challenges that will be taken into account in the development of work, in addition to the conceptualization of digital ecosystems and how they achieve an impact on education from the implementation of them in schools. Without leaving aside, the peasant economies and what they mean.
    Keywords: education, Information Technologies, digital ecosystems, rural areas
    JEL: N50 O3 O30
    Date: 2018
  18. By: David Nielson; Yuan-Ting Meng; Anna Buyvolova; Artavazd Hakobyan
    Keywords: Agriculture - Agribusiness Agriculture - Agricultural Knowledge & Information Systems Agriculture - Climate Change and Agriculture Agriculture - Crops & Crop Management Systems Information and Communication Technologies - ICT Applications Information and Communication Technologies - Rural Information & Communications Technologies Science and Technology Development - Technology Innovation
    Date: 2018
  19. By: Ramadorai, Tarun; Uettwiller, Antoine; Walther, Ansgar
    Abstract: We scrape a comprehensive set of US firms' privacy policies to facilitate research on the supply of data privacy. We analyze these data with the help of expert legal evaluations, and also acquire data on firms' web tracking activities. We find considerable and systematic variation in privacy policies along multiple dimensions including ease of access, length, readability, and quality, both within and between industries. Motivated by a simple theory of big data acquisition and usage, we analyze the relationship between firm size, knowledge capital intensity, and privacy supply. We find that large firms with intermediate data intensity have longer, legally watertight policies, but are more likely to share user data with third parties.
    Keywords: data markets; privacy; third-party sharing; web tracking
    JEL: D8 K2 L1
    Date: 2019–03
  20. By: Radanliev, Petar; De Roure, David; Nicolescu, Razvan; Huth, Michael; Mantilla Montalvo, Rafael; Cannady, Stacy; Burnap, Peter
    Abstract: This article is focused on the economic impact assessment of Internet of Things (IoT) and its associated cyber risks vectors and vertices – a reinterpretation of IoT verticals. We adapt to IoT both the Cyber Value at Risk model, a well-established model for measuring the maximum possible loss over a given time period, and the MicroMort model, a widely used model for predicting uncertainty through units of mortality risk. The resulting new IoT MicroMort for calculating IoT risk is tested and validated with real data from the BullGuard's IoT Scanner (over 310,000 scans) and the Garner report on IoT connected devices. Two calculations are developed, the current state of IoT cyber risk and the future forecasts of IoT cyber risk. Our work therefore advances the efforts of integrating cyber risk impact assessments and offer a better understanding of economic impact assessment for IoT cyber risk.
    Keywords: IoT cyber risk IoT risk analysis IoT cyber insurance IoT MicroMort Cyber value-at-risk
    JEL: C1 C10 C15 C18 O3 O30 O31 O32 O33 O38 O39
    Date: 2018–09
  21. By: Radanliev, Petar; De Roure, David; R.C. Nurse, Jason; Burnap, Pete; Anthi, Eirini; Ani, Uchenna; Maddox, La’Treall; Santos, Omar; Mantilla Montalvo, Rafael
    Abstract: Definition of Internet of Things (IoT) Cyber Risk – Discussion on a Transformation Roadmap for Standardization of Regulations, Risk Maturity, Strategy Design and Impact Assessment
    Keywords: Internet of Things; Micro Mart model; Goal-Oriented Approach; transformation roadmap; Cyber risk regulations; empirical analysis; cyber risk self-assessment; cyber risk target state
    JEL: L0 L5 L50 L52 L53 O2 O21 O3 O31 O32 O33 O38
    Date: 2019–03–05
  22. By: Levashenko, Antonina (Левашенко, Антонина) (The Russian Presidential Academy of National Economy and Public Administration); Koval, Alexandra (Коваль, Александра) (The Russian Presidential Academy of National Economy and Public Administration)
    Abstract: The paper analyzed new tools for the automatic exchange of tax information created at the OECD site. The authors analyzed the regulatory framework of Russia for the implementation of the requirements established in the Multilateral Agreement of Competent Authorities on the Automatic Exchange of Financial Accounting Information 2014 (CRS MCAA) and the Multilateral Agreement on the Exchange of Intercountry Reports 2016 (CbC MCAA). The work resulted in the formation of proposals for the use of tools for international automatic exchange of tax information created at the OECD site, as well as the development of recommendations for improving Russian legislation in the field of tax administration and tax exchange.
    Keywords: international tax exchange, OECD, General Reporting Standard CRS, MNC, automatic exchange.
    Date: 2019–03
  23. By: Kubota, So
    Abstract: This study investigates which market structure gives rise to indeterminacy of stationary equilibria in a decentralized economy with non-degenerate distributions of money holdings. I develop a price-posting model with divisible money and then, examine two alternative markets: a pairwise random matching market and a many-to-many exchange. Importantly, the former market balances the number of matched buyers and sellers by definition. As a result, indeterminacy arises under the pairwise matching while a unique equilibrium exists in the many-to-many market. This balancing assumption also leads to the indeterminacy in a Walrasian market.
    Keywords: search theory, money, indeterminacy
    JEL: D31 D51 D83 E41
    Date: 2019–03

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