nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2020‒12‒14
eighteen papers chosen by

  1. Comparing digital finance in the UK, US, India and Nigeria By Ozili, Peterson K
  2. Taxing Goods and Services in a Digital Era By David R. Agrawal; William F. Fox
  3. Internet & Jurisdiction and ECLAC Regional Status Report 2020 By -
  4. Institutional hostility to cash and COVID-19 By Beretta, Edoardo; Neuberger, Doris
  5. Capital incentives in the age of intangibles By Timothy DeStefano; Nick Johnstone; Richard Kneller; Jonathan Timmis
  6. Factsheet: The impact of the nationwide COVID-19 lockdown on adult New Zealanders' experiences of unwanted digital communications By Melhuish, Neil; Pacheco, Edgar
  7. Searching for Results: Optimal Platform Design in a Network Setting By Charlson, G.
  8. Advertising and Content Differentiation: Evidence from YouTube By Anna Kerkhof
  9. Transparency and Financial Inclusion : Experimental Evidence from Mobile Money (revision of CentER DP 2018-042) By Dalton, Patricio; Pamuk, H.; Ramrattan, R.; van Soest, Daan; Uras, Burak
  10. Innovation in the digital age : Competition, cooperation, and standardization By Fiedler, Clemens
  12. Artificial Intelligence Innovation in Financial Services By Margarete Biallas; Felicity O'Neill
  13. Protecting the Competitive Process, not a Competitive Structure - Reflections on the book by Nicolas Petit Big Tech and the Digital Economy By Frédéric Marty
  14. Emotions in Online Content Diffusion By Yifan Yu; Shan Huang; Yuchen Liu; Yong Tan
  15. Streaming Services and the Homogenization of Music Consumption By Knox, George; Datta, Hannes
  16. Lessons for Today from Past Periods of Rapid Technological Change By Aránzazu Guillán Montero; David Le Blanc
  17. Can a Digital Book Tracking System Help to Get Books into the Hands of Children? By Hadi Khan
  18. Liquidity Coverage Ratio in a Payments Network: Uncovering Contagion Paths By Berndsen, Ron

  1. By: Ozili, Peterson K
    Abstract: This paper examines digital finance usage in the UK, US, India and Nigeria. Using data from the global financial development indicators, the findings reveal that the UK and US have higher digital finance usage than India and Nigeria. The US has higher credit card usage compared to the UK while the UK has higher debit card usage compared to the US. Also, Nigeria has higher debit card usage than India. The findings also show that higher debit card usage is correlated with higher domestic credit to the private sector in the US and Nigeria. Higher credit card usage is correlated with lower domestic credit to the private sector, lower private credit by deposit money banks, and fewer remittances to the UK. The implication of the findings is that policy makers in developing countries should develop the digital finance and payment systems in their countries to close up the wide gap in digital finance adoption between developing and developed countries.
    Keywords: Fintech; Digital finance; Credit card; Debit card; Payment system; Digital financial services, financial technology, financial institutions.
    JEL: G21 O31 O33
    Date: 2020
  2. By: David R. Agrawal; William F. Fox
    Abstract: Taxing consumption in the digital economy poses unique challenges for fiscal authorities. Recent institutional reforms, such as states changing remittance rules for the sales and use tax following the Supreme Court decision in South Dakota v. Wayfair, were enacted in order to increase tax revenue collections and create a more neutral tax system. Although these reforms induced more remote vendors to remit taxes on a destination basis, the revenue gains were modest, consistent with most large online vendors remitting taxes prior to the reforms. Instead, following the recent large shock to online shopping from the Covid-19 pandemic, the shift to destination-based taxation has redistributed revenues between large and small local jurisdictions. Increased online shopping raises revenue growth in small jurisdictions while contracting revenues in large jurisdictions. But, Wayfair is not the end of the story: technological changes that induce new consumption patterns, promise new challenges for fiscal authorities. Critical challenges for the next decades include limiting administrative and compliance costs of enforcing taxes in a digital world, determining filing thresholds, dealing with online marketplaces and facilitators, and taxing the consumption of digital services from two-sided platforms. With respect to digital services, we discuss whether consumption taxes should be imposed on both monetized platforms and non-monetized platforms such as social media, and the mechanisms for doing so.
    Keywords: sales tax, e-commerce, online shopping, enforcement, compliance, South Dakota v. Wayfair, consumption tax, digital services, platforms
    JEL: H20 H70 K30 L80 R50
    Date: 2020
  3. By: -
    Abstract: The Internet & Jurisdiction and ECLAC Regional Status Report 2020 is Latin America and the Caribbean’s first comprehensive exercise in mapping the different policy trends relating to the cross-border nature of the Internet and the way this affects different stakeholders such as governments, companies and civil society. How might differing regional and national regulations create barriers to cross-border e-commerce and investment in digital markets? What economic and social benefits could be realized by harmonizing frameworks throughout the region? A better understanding of this situation is vital to efforts to foster investor confidence, promote innovation and economic diversification, create greater trust in e-commerce and boost a market of more than 600 million people, while opening up opportunities for businesses, most particularly small and medium-sized enterprises. Conversely, uncoordinated action by a wide range of actors and initiatives risks hampering the digitalization of economies, governments and societies. It is to help policymakers navigate the challenges ahead and to mutualize knowledge that the Internet & Jurisdiction Policy Network, in coordination with the Economic Commission for Latin America and the Caribbean (ECLAC), is presenting the Internet & Jurisdiction and ECLAC Regional Status Report 2020.
    Date: 2020–11–24
  4. By: Beretta, Edoardo; Neuberger, Doris
    Abstract: By "hostility to cash" we refer to the recent trend of incentivizing individuals towards a (privately managed) digital payment system driven by banking and financial sectors and supported by Governments. COVID-19 has on the one hand boosted this movement, with false messages about banknotes spreading the virus as a new instrument of convincement. On the other, the enduring flight to cash shows that this "relic" is even more essential in bad economic times. Restricting or eliminating cash is synonymous of welfare losses due to increased monopoly power of the financial and technology industry, reduced privacy, and threatened financial stability as a public good. As a consequence, financial exclusion and social discrimination would increase, adding to the impact of the COVID-19 crisis on inequality. By means of a logical-analytical approach combined with the newest statistical evidence and never-published comparative tables, the paper demonstrates why banknotes and coins are - all the more, in uncertain times due to SARS-CoV-2 - not otherwise substitutable, but rather a public good to be safeguarded.
    Keywords: banknotes and coins,COVID-19,digital payments,financial inclusion,money,payments system
    JEL: E42 E44 G21 G41
    Date: 2020
  5. By: Timothy DeStefano; Nick Johnstone; Richard Kneller; Jonathan Timmis
    Abstract: Cloud computing presents a significant change in the way firms access digital technology and enables data-driven business models. Now, firms can acquire their storage, processing and software needs as a cloud computing service rather than making upfront fixed cost investments in capital. Yet, policies that encourage digital diffusion are still targeted towards investment in physical IT capital. This paper exploits a UK tax incentive for capital investment to examine firm adoption of cloud computing and big data analytics. Using a quasi-natural experimental approach our empirical results show that the policy increased investment in IT capital and hardware as one would expect; but it reduced the adoption of cloud and big data analytics. The adverse effects of the policy on cloud and big data adoption are particularly pronounced for small firms.
    Keywords: ICT, cloud computing, big data analytics
    Date: 2020
  6. By: Melhuish, Neil; Pacheco, Edgar (Netsafe New Zealand)
    Abstract: In December 2019 an infectious coronavirus disease, commonly known as COVID-19, was identified in Wuhan, China. The disease spread rapidly and became a global pandemic. New Zealand’s first COVID-19 case was confirmed on 28 February 2020, after which the number of cases began to rise significantly, prompting the New Zealand Government to introduce a nationwide lockdown on 25 March 2020. This factsheet reports early findings from a quantitative study with adult New Zealanders. It explores how prevalent the experiences of unwanted digital communication were in the last 12 months, before, during, and just after the nationwide COVID 19 lockdown. This study found a higher prevalence of unwanted digital communications around the time of the nationwide lockdown. This study’s findings suggest that unexpected health and social events, such as the COVID-19 pandemic and compulsory lockdown, are factors that can trigger changes in people’s experiences of online risk from unwanted digital communications.
    Date: 2020–11–21
  7. By: Charlson, G.
    Abstract: Large online platforms, like Airbnb or Amazon Marketplace, increasingly direct users to internal search engines that limit the number of sellers consumers observe. We show that such behaviour is consistent with profit maximisation. To do so, we model buyer-seller interactions as a series bipartite graphs, which are each realised with a probability chosen by the platform owner. Prominent players disproportionately increase competition, which decreases prices. To maximise profit, the platform owner ensures that buyers only observe a consistent number of sellers in every state of the world realised with positive probability. When products are vertically differentiated, the platform owner biases observation towards high-quality products, but doing so reduces prices, and, as a result, the optimal number of sellers in the network. The extent to which platforms in different markets highlight high-quality products and the number of sellers their search processes show is a function of both quality dispersion and substitutability.
    Keywords: networks, platforms, industrial organisation, network design, games on networks
    JEL: D20 L20
    Date: 2020–12–02
  8. By: Anna Kerkhof
    Abstract: This paper studies the effect of advertising on content differentiation on YouTube, the second-most visited website in the world. I demonstrate that an exogenous increase in the feasible advertising quantity leads to a considerable decrease in the YouTubers’ probability to duplicate mainstream content, i.e., the type of content that attracts the largest number of views. The result is driven by an intuitive mechanism: Mainstream content is provided by many competing YouTubers; thus, viewers who perceive advertising as a nuisance – and therefore as an implicit price they have to pay – could easily switch to a competitor if a YouTuber increased her advertising quantity. Switching is less likely, however, if the YouTuber differentiates her content from the mainstream, gains market power in a niche, and thereby softens competition in the ad “price."
    Keywords: advertising, content differentiation, economics of digitization, horizontal product differentiation, long tail, media diversity, user-generated content, YouTube
    JEL: D22 L15 L82 L86
    Date: 2020
  9. By: Dalton, Patricio (Tilburg University, School of Economics and Management); Pamuk, H. (Tilburg University, School of Economics and Management); Ramrattan, R.; van Soest, Daan (Tilburg University, School of Economics and Management); Uras, Burak (Tilburg University, School of Economics and Management)
    Date: 2019
  10. By: Fiedler, Clemens (Tilburg University, School of Economics and Management)
    Date: 2020
  11. By: Jean-Charles Pillet (HEC Lausanne - Faculté des Hautes Etudes Commerciales (HEC Lausanne)); Kevin Carillo (TBS - Toulouse Business School); Claudio Vitari (AMU - Aix Marseille Université); Federico Pigni (GEM - Grenoble Ecole de Management)
    Abstract: The digital era is characterized by the widespread diffusion of information technologies (IT) offering great degrees of malleability in how their features may be interpreted and used. While there are immediate advantages to leveraging the malleability of IT, this could also prove a source of confusion for lay users who are faced with multiple interpretations of what IT can do. Despite growing evidence of this phenomenon, current research lacks the concepts and tools to adequately capture its impact on IT acceptance, adoption, and use. In this paper, we first deploy the "perceived functional ambiguity" (PFA) construct, describing its dimensionality and relationships with measures. Then, we develop and validate the corresponding multidimensional measurement instrument. Finally, we test the effect of the construct across three studies assessing how users perceive social media (N=419), smartphones (N=411) and smart speakers (N=346). Our results suggest that ambiguity has a double-edged sword effect on users' perception of IT: greater levels of ambiguity are associated with greater utilitarian and hedonic value, but they also entail substantial learning costs. This research contributes to advancing our theoretical understanding of IT use by introducing ambiguity as a factor underpinning contemporary IT use.
    Keywords: ambiguity,user perception,technology acceptance,multidimensional constructs,scale development
    Date: 2020–06–15
  12. By: Margarete Biallas; Felicity O'Neill
    Keywords: Finance and Financial Sector Development - Access to Finance Finance and Financial Sector Development - Financial Structures Finance and Financial Sector Development - International Financial Markets Information and Communication Technologies - ICT Applications International Economics and Trade - Trade Finance and Investment Private Sector Development - Emerging Markets
    Date: 2020–06
  13. By: Frédéric Marty (Université Côte d'Azur, France; GREDEG CNRS)
    Abstract: Nicolas Petit's Big Tech & the Digital Economy - The Molygopoly Scenario offers a most stimulating insight into the conditions of competition between digital ecosystems and emphasises its dynamic aspects by placing the question of innovation in a context of uncertainty at the centre of its subject matter. This review aims to present the analysis carried out by Nicolas Petit and his proposals in terms of controlling the strategies of the firms through competition rules. It puts Nicolas Petit's work into perspective by successively considering three dimensions: the comeback of structuralist analyses of competition, considering it from the perspective of an effective rivalry on the market, the understanding of competition both as competition in the market and competition for the market, and finally the analysis of the enforcement of competition rules in molygopolistic markets.
    Keywords: digital ecosystems, competition laws, innovation, dominance
    JEL: K10 K20 K30 L41 N42
    Date: 2020–10
  14. By: Yifan Yu; Shan Huang; Yuchen Liu; Yong Tan
    Abstract: Social media-transmitted online information, particularly content that is emotionally charged, shapes our thoughts and actions. In this study, we incorporate social network theories and analyses to investigate how emotions shape online content diffusion, using a computational approach. We rigorously quantify and characterize the structural properties of diffusion cascades, in which more than six million unique individuals transmitted 387,486 articles in a massive-scale online social network, WeChat. We detected the degree of eight discrete emotions (i.e., surprise, joy, anticipation, love, anxiety, sadness, anger, and disgust) embedded in these articles, using a newly generated domain-specific and up-to-date emotion lexicon. We found that articles with a higher degree of anxiety and love reached a larger number of individuals and diffused more deeply, broadly, and virally, whereas sadness had the opposite effect. Age and network degree of the individuals who transmitted an article and, in particular, the social ties between senders and receivers, significantly mediated how emotions affect article diffusion. These findings offer valuable insight into how emotions facilitate or hinder information spread through social networks and how people receive and transmit online content that induces various emotions.
    Date: 2020–11
  15. By: Knox, George (Tilburg University, School of Economics and Management); Datta, Hannes (Tilburg University, School of Economics and Management)
    Date: 2020
  16. By: Aránzazu Guillán Montero; David Le Blanc
    Abstract: We provide a history of past periods of rapid technological change starting from the Industrial Revolution continuing up to today. We find that it takes decades for technological breakthroughs to make a difference to the aggregate economy. The reason for this delay is that to realize the value of these breakthroughs requires complementary investments. Second, for good or for bad, government has played an important role in facilitating these transitions through both investments in physical infrastructure and legal reforms. We also emphasize that because technological breakthroughs are difficult to predict, the responses of governments are necessarily improvisational.
    Keywords: automation, technological anxiety, Industrial Revolution
    JEL: O33 N10
    Date: 2019–03
  17. By: Hadi Khan
    Keywords: Education - Access & Equity in Basic Education Education - Education Finance Education - Education For All Education - Educational Policy and Planning Education - Effective Schools and Teachers
    Date: 2020–07
  18. By: Berndsen, Ron (Tilburg University, School of Economics and Management)
    Date: 2020

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