nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2020‒05‒18
twenty papers chosen by

  1. Is Central Bank Currency Fundamental to the Monetary System? By Hanna Armelius; Carl Andreas Claussen; Scott Hendry
  2. The Global Impact of COVID-19 on Fintech Adoption By Jonathan Fu; Mrinal Mishra
  3. How do online consumers review negatively? By Menghan Sun; Jichang Zhao
  4. Social Inequality in the Digital Transformation: Risks and Potentials of Mobile Health Technologies for Social Inequalities in Health By Tim Sawert; Julia Tuppat
  5. Binge-watching (Netflix) product placement: A content analysis on different product placements in Netflix originals vs. non-Netflix originals, and drama vs. comedy shows By Laban, Guy; Zeidler, Chamoetal; Brussee, Eline
  6. Expert Imitation in P2P Markets By Ge Gao; Mustafa Caglayan; Yuelei Li; Oleksandr Talavera
  7. Digitising Agrifood: Pathways and Challenges By Renda, Andrea; Reynolds, Nicole; Laurer, Moritz; Cohen, Gal
  8. Elaboration of proposals for the development of electronic trading platforms in the digital economy of Russia By Levashenko, Antonina (Левашенко, Антонина); Girich, Maria (Гирич, Мария)
  9. Making agricultural value chains more inclusive through technology and innovation By Reena das Nair; Namhla Landani
  10. Business models for streaming platforms: content acquisition, advertising and users By E. Carroni; D. Paolini
  11. Business or basic needs ?The impact of loan purpose on social crowdfunding platforms By Hadar Gafni; Marek Hudon; Anaïs Périlleux
  12. The individual monetary valuation of online hotel ratings By Evangelinos, Christos; Obermeyer, Andy; Bartel, Aaron
  13. Measuring the Occupational Impact of AI: Tasks, Cognitive Abilities and AI Benchmarks By Songul Tolan; Annarosa Pesole; Fernando Martinez-Plumed; Enrique Fernandez-Macias; José Hernandez-Orallo; Emilia Gomez
  14. Substituting Trust by Technology: A Comparative Study By Johanna Rath
  15. What Keeps Stablecoins Stable? By Richard K. Lyons; Ganesh Viswanath-Natraj
  16. Financial Distancing: How Venture Capital Follows the Economy Down and Curtails Innovation By Sabrina Howell; Josh Lerner; Ramana Nanda; Richard Townsend
  17. Chronicle of a Pandemic Foretold By Renda, Andrea; J. Castro, Rosa
  18. The Unprecedented Fall in U.S. Revolving Credit By Gajendran Raveendranathan; Georgios Stefanidis
  19. Social Connectedness in Europe By Bailey, Michael; Kuchler, Theresa; Russel, Dominic; State, Bogdan; Stroebel, Johannes
  20. COVID-19 Outbreak, Social Response, and Early Economic Effects: A Global VAR Analysis of Cross-Country Interdependencies By Fabio Milani

  1. By: Hanna Armelius; Carl Andreas Claussen; Scott Hendry
    Abstract: In this paper, we discuss whether the ability of individuals to convert commercial bank money (i.e., bank deposits) into central bank money is fundamentally important for the monetary system. This is a significant question since the use of cash—the only form of central bank money that the public currently has access to—is declining rapidly in many countries. The question is highly relevant to the discussion around whether central banks need to issue a retail central bank digital currency (CBDC). We conclude that depositors’ need for control could be a reason why cash or a CBDC is essential, even in countries with strong measures safeguarding commercial bank money.
    Keywords: Bank notes; Digital Currencies and Fintech; Financial services; Payment clearing and settlement systems
    JEL: E4 E41 E42 E5
    Date: 2020–05
  2. By: Jonathan Fu (Center for Sustainable Finance and Private Wealth; University of Zurich - Department of Banking and Finance); Mrinal Mishra (Swiss Finance Institute; University of Zurich - Department of Banking and Finance)
    Abstract: We draw on mobile application data from 74 countries to document the effects of the COVID-19 pandemic on the adoption of digital finance and fintech. We estimate that the spread of COVID-19 and related government lockdowns have led to between a 24 and 32 percent increase in the relative rate of daily downloads of finance mobile applications in the sample countries. In absolute terms, this equates to an average daily increase of roughly 5.2 to 6.3 million application downloads and an aggregate increase of about 316 million app downloads since the pandemic’s outbreak to the present, taking into account prior trends. Most regions across the world exhibit notable increases in absolute, relative, and per capita terms. Preliminary analysis of country-level characteristics suggest that market size and demographics, rather than level of economic development and ex-ante adoption rates, drive differential trends.
    Keywords: digital finance, fintech, financial inclusion, technological adoption, COVID-19, cross-country
    JEL: G23 G20
    Date: 2020–05
  3. By: Menghan Sun; Jichang Zhao
    Abstract: Negative reviews on e-commerce platforms, mainly in the form of texts, are posted by online consumers to express complaints about unsatisfactory experiences, providing a proxy of big data for sellers to consider improvements. However, the exact knowledge that lies beyond the negative reviewing still remains unknown. Aimed at a systemic understanding of how online consumers post negative reviews, using 1, 450, 000 negative reviews from, the largest B2C platform in China, the behavioral patterns from temporal, perceptional and emotional perspectives are comprehensively explored in the present study. Massive consumers behind these reviews across four sectors in the most recent 10 years are further split into five levels to reveal group discriminations at a fine resolution. Circadian rhythms of negative reviewing after making purchases were found, and the periodic intervals suggest stable habits in online consumption and that consumers tend to negatively review at the same hour of the purchase. Consumers from lower levels express more intensive negative feelings, especially on product pricing and seller attitudes, while those from upper levels demonstrate a stronger momentum of negative emotion. The value of negative reviews from higher-level consumers is thus unexpectedly highlighted because of less emotionalization and less biased narration, while the longer-lasting characteristic of these consumers' negative responses also stresses the need for more attention from sellers. Our results shed light on implementing distinguished proactive strategies in different buyer groups to help mitigate the negative impact due to negative reviews.
    Date: 2020–04
  4. By: Tim Sawert; Julia Tuppat
    Abstract: The paper addresses the impact of digital health technologies on social inequalities in health. We set focus on mobile health technologies (mHealth) and analyse whether (a) usage of such technologies differs by educational level and (b) whether their usage moderate social inequalities in health satisfaction. We first develop a theoretical model in order to establish potential associations between social inequality, mHealth usage and health satisfaction. Assuming that mHealth technologies might positively affect health behaviour, they might particularly benefit groups with low health literacy and thus, have the potential to decrease the social gap in health behaviours, that was consistently reported in previous research. On the other hand, drawing on theories in the field of the digital divide, mHealth technologies might in contrast even exacerbate existing inequalities, if groups with a higher socio-economic status use them more often (2nd level digital divide) and/or particularly benefit from using them (3rd level digital divide). Using data of the Innovation Sample of the Germany Socio-Economic Panel Study (N=5,075), we find evidence for a 2nd level digital divide in mHealth usage: Among smartphone users, higher educated respondents are more likely to use health/fitness apps. However, our results do not support the existence of a 3rd level divide: There is no difference in the benefit of usage on respondents’ subjective health satisfaction by educational level. Further research is needed in order to analyse the proposed associations more in depth.
    Keywords: mHealth; health inequality; digital divide; health behaviour; health literacy
    Date: 2020
  5. By: Laban, Guy (University of Glasgow); Zeidler, Chamoetal; Brussee, Eline
    Abstract: The popularity of digital streaming platforms, such as Netflix, is gradually growing. While digital streaming platforms share similar economic interests as traditional producing and broadcasting companies, the two differ in operation and nature of consumption. These platforms constructed new means of consuming content, offering licensed and original content. This study describes and examines how product placements, a popular advertising strategy that integrates commercials in media entertainment content, are applied in an up-to-date digital environment. A content analysis was conducted of product placements in comedy and drama shows within Netflix originals and non-Netflix originals shows. The study results indicate that Netflix original shows include more product placements than non-Netflix original shows. Moreover, drama shows include more product placements than comedy shows, and these are more explicit and visual. Finally, it was found that product placements categories can be predicted by the genre of the show, but not by the production type.
    Date: 2020–05–12
  6. By: Ge Gao (University of Birmingham); Mustafa Caglayan (Heriot-Watt University); Yuelei Li (Tianjin University); Oleksandr Talavera (University of Birmingham)
    Abstract: This paper investigates expert bidding imitation in peer-to-peer lending platforms. We employ data from, which contains information about 169,779 investors who placed 3,947,996 bids on 111,284 loan listings from 2010 to 2018. The experts are defined as investors who either have more central roles or who spend more time or money on the network. We find that an average investor mimics the bids of expert lenders. Inactive lenders learn top investors' lending behaviour through observational learning and then follow their actions, although they do not know the experts' identity. Finally, we show that experts rarely imitate other experts, yet they exhibit herding behaviour.
    Keywords: Peer-to-Peer Lending; Network Analysis; Expert Imitation; Big Data; Financial Technology
    JEL: G11 G21
    Date: 2020–05
  7. By: Renda, Andrea; Reynolds, Nicole; Laurer, Moritz; Cohen, Gal
    Abstract: As climate change increasingly poses an existential risk for the Earth, scientists and policymakers turn to agriculture and food as areas for urgent and bold action, which need to return within acceptable Planet Boundaries. The links between agriculture, biodiversity and climate change have become so evident that scientists propose a Great Food Transformation towards a healthy diet by 2050 as a major way to save the planet. Achieving these milestones, however, is not easy, both based on current indicators and on the gloomy state of global dialogue in this domain. This is why digital technologies such as wireless connectivity, the Internet of Things, Artificial Intelligence and blockchain can and should come to the rescue. This report looks at the many ways in which digital solutions can be implemented on the ground to help the agrifood chain transform itself to achieve more sustainability. Together with the solution, we identify obstacles, challenges, gaps and possible policy recommendations. Action items are addressed at the European Union both as an actor of change at home, and in global governance, and are spread across ten areas, from boosting connectivity and data governance to actions aimed at empowering small farmers and end users.
    Date: 2019–12
  8. By: Levashenko, Antonina (Левашенко, Антонина) (The Russian Presidential Academy of National Economy and Public Administration); Girich, Maria (Гирич, Мария) (The Russian Presidential Academy of National Economy and Public Administration)
    Abstract: In the framework of this work, aspects of the legal regulation of electronic trading platforms were analyzed, in particular, regulatory standards within the framework of international organizations, including the OECD, WTO, UNCITRAL, WIPO, the Council of Europe, as well as standards in countries with the largest volume of electronic commerce, including the USA, China , India, EU countries (France, Germany), Australia. The result of the work was the formation of proposals for regulating the operation of electronic trading floors in Russia, including registration and reporting, defining the boundaries of responsibility of electronic trading floors, taxation, protecting consumers' rights, protecting personal data, currency control, customs regulation, regulating advertising and spam, protecting intellectual property, antitrust regulation, financial and information support measures, currency regulation, etc.
    Keywords: e-commerce, electronic trading platforms, OECD, consumer protection, personal data protection, taxation, advertising and spam, competition
    Date: 2020–03
  9. By: Reena das Nair; Namhla Landani
    Abstract: Some entry barriers in agricultural and agro-processing value chains, particularly for smallholder farmers and small/medium-sized processors, can be overcome with innovation and technology adoption. Technologies and innovation in these sectors have been both radical and incremental, ranging widely through biotechnology; production technologies; automation in sorting, grading, and packaging; and digital platforms and data-connected devices for market access.
    Keywords: Innovation, Technology, agricultural technology, upgrading, Value chains, Agriculture, Agro-processing, inclusive, Capabilities
    Date: 2020
  10. By: E. Carroni; D. Paolini
    Abstract: A streaming platform obtains contents from artists and offers commercial spaces to advertisers. Users value contents' variety and quality of the service and are heterogeneously bothered by ads. Two solutions can be proposed to users. If they pay a positive price, they subscribe to a commercial-free service with an upgrade of quality (Premium). Otherwise, they have free access to a service of a basic quality. We find that a wider audience gives incentives to the platform to increase both the advertising intensity and the quality upgrade in the Premium. As a consequence, some people move to the Premium. At the limit, the platform opts for a purely subscription-based business model as the audience reaches a certain level. The parsimonious model we propose is able to give a rationale to the emergence of different business models in the streaming market as well as to the (end of the) disputes between artists and the Spotify model.
    Keywords: Media;Advertising;Multi-Sided Markets;Platform;Second-degree price discrimination
    Date: 2020
  11. By: Hadar Gafni; Marek Hudon; Anaïs Périlleux
    Abstract: Crowdfunding has created new opportunities for poor microentrepreneurs. One crucial question is the impact that the purpose of a loan—either business investment or basic necessities—may have on the success of a campaign. Investigating a prosocial crowdfunding platform, we find that loans taken out to meet basic needs are funded faster than business-related loans, especially for small amounts, which can be explained by the prosocial motivation of microlenders. Moreover, female microborrowers are funded faster than men, especially for basic needs loans. Our results therefore suggest an ethical blind spot, since prosocially motivated crowdlenders may unintentionally end up producing adverse effects, replicating gender role by supporting women to a lesser extent when they apply for business loans. This finding expands prosocial motivational theory in ethical finance.
    Keywords: crowdfunding; business loans; basic necessities; ethical finance; microfinance; microlending; gender preference
    JEL: F35 G21 G28 L31 M14
    Date: 2020–05–08
  12. By: Evangelinos, Christos; Obermeyer, Andy; Bartel, Aaron
    Abstract: We test the impact of online hotel ratings on the customers' hotel choice using a binary choice experiment where the online rating score is one of the hotels' attributes. Results show that online rating scores have a positive and significant impact on hotel choice. We also calculate the individual willingness to pay for higher rating scores and report the corresponding income and age elasticities.
    Keywords: Hotel rating,online review,discrete choice model,logit model,monetary valuation,eWOM
    JEL: C25 L8 D12 Z31
    Date: 2020
  13. By: Songul Tolan (European Commission – JRC); Annarosa Pesole (European Commission - JRC); Fernando Martinez-Plumed (European Commission - JRC); Enrique Fernandez-Macias (European Commission - JRC); José Hernandez-Orallo (Universitat Politècnica de València); Emilia Gomez (European Commission - JRC)
    Abstract: In this paper we develop a framework for analysing the impact of AI on occupations. Leaving aside the debates on robotisation, digitalisation and online platforms as well as workplace automation, we focus on the occupational impact of AI that is driven by rapid progress in machine learning. In our framework we map 59 generic tasks from several worker surveys and databases to 14 cognitive abilities (that we extract from the cognitive science literature) and these to a comprehensive list of 328 AI benchmarks used to evaluate progress in AI techniques. The use of these cognitive abilities as an intermediate mapping, instead of mapping task characteristics to AI tasks, allows for an analysis of AI’s occupational impact that goes beyond automation. An application of our framework to occupational databases gives insights into the abilities through which AI is most likely to affect jobs and allows for a ranking of occupation with respect to AI impact. Moreover, we find that some jobs that were traditionally less affected by previous waves of automation may now be subject to relatively higher AI impact.
    Keywords: artificial intelligence, occupations, tasks
    Date: 2020–04
  14. By: Johanna Rath (Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria)
    Abstract: This study contrasts different effects of applying blockchain technology on a social norm of trust and individual behaviour. The advanced technological features of blockchain could either complete contractual information and prevent coordination failures by substituting the need for trust or allow for some degree of incompleteness in information and favour a reciprocal mechanism of trust to solve for inefficiencies arising out of it. Either way, incomplete information is a necessary condition for the emergence of social norms of trust and reciprocity; hence a change in the completion of contractual information influences the institutional setting that market mechanisms are embedded in. One evolutionary process drives both, the degree of information available and behavioural traits within the society. Technology is neutral, but the way it is applied has different consequences on the institutional setting and thus favours different individual behavioural traits. Blockchain technology might either substitute or complement the need for trust.
    Keywords: trust, incomplete contracts, social norms, coordination failure
    Date: 2020–03
  15. By: Richard K. Lyons; Ganesh Viswanath-Natraj
    Abstract: We take this question to be isomorphic to, "What Keeps Fixed Exchange Rates Fixed?" and address it with analysis familiar in exchange-rate economics. Stablecoins solve the volatility problem by pegging to a national currency, typically the US dollar, and are used as vehicles for exchanging national currencies into non-stable cryptocurrencies, with some stablecoins having a ratio of trading volume to outstanding supply exceeding one daily. Using a rich dataset of signed trades and order books on multiple exchanges, we examine how peg-sustaining arbitrage stabilizes the price of the largest stablecoin, Tether. We find that stablecoin issuance, the closest analogue to central-bank intervention, plays only a limited role in stabilization, pointing instead to stabilizing forces on the demand side. Following Tether's introduction to the Ethereum blockchain in 2019, we find increased investor access to arbitrage trades, and a decline in arbitrage spreads from 70 to 30 basis points. We also pin down which fundamentals drive the two-sided distribution of peg-price deviations: Premiums are due to stablecoins' role as a safe haven, exhibiting, for example, premiums greater than 100 basis points during the COVID-19 crisis of March 2020; discounts derive from liquidity effects and collateral concerns.
    JEL: E02 E4 E5 F3 F4 G12 G14 G15 G2 O16 O33
    Date: 2020–05
  16. By: Sabrina Howell (New York University); Josh Lerner (Harvard Business School, Entrepreneurial Management Unit); Ramana Nanda (Harvard Business School, Entrepreneurial Management Unit); Richard Townsend (University of California, San Diego)
    Abstract: Although late-stage venture capital (VC) activity did not change dramatically in the first two months after the COVID-19 pandemic reached the U.S., early-stage VC activity declined by 38%. The particular sensitivity of early-stage VC investment to market conditions- which we show to be common across recessions spanning four decades from 1976 to 2017- raises questions about the pro-cyclicality of VC and its implications for innovation, especially in light of the common narrative that VC is relatively insulated from public markets. We find that the implications for innovation are not benign: innovation conducted by VC-backed firms in recessions is less highly cited, less original, less general, and less closely related to fundamental science. These effects are more pronounced for startups financed by early-stage venture funds. Given the important role that VC plays in financing breakthrough innovations in the economy, our findings have implications for the broader discussion on the nature of innovation across business cycles.
    Keywords: Venture Capital, Innovation, Patents, Business Cycles, Recessions
    JEL: G24 O31
    Date: 2020–05
  17. By: Renda, Andrea; J. Castro, Rosa
    Abstract: In just a few weeks, COVID-19 appeared in China and quickly spread to the rest of the world, including Europe and the United States. Many have rushed to describe the outbreak as a ‘black swan’ – an unpredictable event with extremely severe consequences. However, COVID-19 was not only predictable ex post: it was amply predicted ex ante. This allows us to draw some preliminary lessons: First, economic policy will need to shift from its current focus on efficiency, towards a greater emphasis on resilience and sustainability. Second, a more centralised governance to address health emergencies is needed. Third, Europe should create a centre for the prevention of large-scale risks. Fourth, digital technologies, if handled with care, can be an important part of both a mitigation and a response strategy. Fifth, Europe should improve its science advice and communication functions. Finally, there are many ways to pursue enhanced resilience and responsiveness, but not all of them are compatible with sustainability and democratic values. The challenge is to find an adequate policy mix, which safeguards individual rights and liberties, protects the economy, and at the same time strengthens government preparedness for cases of epidemics and pandemics.
    Date: 2020–03
  18. By: Gajendran Raveendranathan; Georgios Stefanidis
    Abstract: Revolving credit in the U.S. declined drastically in the last decade after several years of upward trending growth. We show that the Ability to Pay provision of the Credit CARD Act of 2009, which places restrictions on credit card limits, accounts for this decline. Extending a model of revolving credit to analyze this policy, we account for changes in credit statistics by income and age. Although the goal was consumer protection, the policy has led to welfare losses. Even consumers with time inconsistent preferences who could benefit from tighter credit constraints are worse off. An alternative policy considered by policymakers - an interest rate cap - improves welfare.
    Keywords: revolving credit; credit limits; Ability to Pay; Credit CARD Act
    JEL: E21 E44 E65 G28
    Date: 2020–05
  19. By: Bailey, Michael; Kuchler, Theresa; Russel, Dominic; State, Bogdan; Stroebel, Johannes
    Abstract: We use aggregated data from Facebook to study the structure of social networks across European regions. Social connectedness declines strongly in geographic distance and at country borders. Historical borders and unions — such as the Austro-Hungarian Empire, Czechoslovakia, and East/West Germany — shape present-day social connectedness over and above today’s political boundaries. All else equal, social connectedness is stronger between regions with residents of similar ages and education levels, as well as between those that share a language and religion. In contrast, region-pairs with dissimilar incomes tend to be more connected, likely due to increased migration from poorer to richer regions. We find more socially connected region-pairs to have more passenger train trips between them, even after controlling for distance and travel time. We also find that regions with a higher share of connections to other countries have higher rates of trust in the E.U. and lower rates of voting for anti-E.U. political parties.
    Date: 2020–04–28
  20. By: Fabio Milani (Department of Economics, University of California-Irvine)
    Abstract: The COVID-19 pandemic underscored the importance of countries' interconnections in understanding and reacting to the spread of the virus. This paper uses a global model with a sample of 41 countries to study the interdependencies between COVID-19 health shocks, populations' risk perceptions about the disease, and their social distancing responses; it also provides some early evidence about potential economic effects. Social networks are a central component in understanding the international transmission. We exploit a dataset on existing social connections across country borders, made available by Facebook, and show that social networks help explain not only the spread of the disease, but also cross-country spillovers in risk perceptions and in social behavior. Social distancing responses across countries are measured based on aggregated mobility tracking indicators, obtained from Google Mobility Reports. We estimate a Global VAR (GVAR) model, which allows for endogeneity of each health, social, and economic, domestic variable, and for a dependence of domestic variables on country-specific foreign aggregates, which depend in turn on the matrix of social connections. Our empirical results highlight the importance of cross-country interdependencies and social networks. Risk perceptions and social responses are affected by experiences abroad, with Italy and the U.S. playing large roles in our sample. The social distancing responses to domestic health shocks are heterogeneous across countries, but they share some similarities: they adjust only gradually and with delay, hence displaying adaptive behavior. Early indicators are suggestive of unemployment consequences that vary widely across countries, depending on their labor market characteristics. Unemployment is particularly responsive to health shocks in the U.S. and Spain, while the fluctuations are attenuated almost everywhere else.
    Keywords: Heterogeneous COVID-19 Pandemic; Health Shocks; Global VAR; Social Networks; Social Distancing; Cross-Country Spillovers; Unemployment Indicators; Google Trends
    JEL: C32 F69 I12 I18 L86 Z13
    Date: 2020–04

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