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on Payment Systems and Financial Technology |
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Issue of 2021‒04‒19
twenty-two papers chosen by |
| By: | Carlos León |
| Abstract: | Mobile wallets replicate physical wallets on a mobile device, in which users can store different payment instruments (e.g., cards, transfers) to make mobile payments. As the mobile wallet is adopted, a mobile payment scheme emerges, with its users as elements in a network of transfers. In this article, I study the mobile payment scheme of Movii— the first fintech firm in Colombia operating under a financial non-banking license for electronic deposits and payments. Based on a unique dataset of bilateral transfers between Movii’s mobile wallet users, I build, visualize and analyze Movii’s network, daily from November 18, 2017, to November 25, 2020. Besides the anticipated increase in the number of users and the value of transfers, the visual and quantitative complexity of the network of transfers increases over time. This increase in complexity is likely to be linked to the adoption of Movii’s mobile wallet, which results in users finding new ways to use mobile payments beyond person-to-person transfers, including person-to-business and business-to-business. Also, results suggest the Covid-19 pandemic accelerated the evolution of Movii’s mobile payments scheme. **** RESUMEN: Las billeteras móviles replican a las billeteras físicas en un dispositivo móvil, con las que los usuarios pueden utilizar diferentes instrumentos de pago (e.g., tarjetas, transferencias) para realizar pagos móviles. Con la adopción de la billetera móvil surge un esquema de pagos móviles, en el que sus usuarios son elementos de una red de transferencias. En este artículo se estudia el esquema de pagos móviles de Movii—la primera fintech en Colombia que opera bajo una licencia financiera (no bancaria) de depósitos y pagos electrónicos. Con base en una base de datos de transferencias bilaterales entre usuarios de la billetera móvil de Movii, se construye, visualiza y analiza la red de Movii, diaria, desde noviembre 18 de 2017 hasta noviembre 25 de 2020. Además del esperado incremento en el número de usuarios y el valor de las transferencias, se encuentra que la complejidad visual y cuantitativa de la red de transferencias se incrementa a través del tiempo. Este aumento en la complejidad tiene que ver con la adopción de la billetera móvil de Movii, lo cual resulta en que los usuarios encuentran nuevas maneras de utilizar los pagos móviles más allá de transferencias persona a persona, incluyendo pagos de persona a negocio y de negocio a negocio. Así mismo, es evidente que la pandemia por Covid-19 aceleró la evolución del esquema de pagos móviles de Movii. |
| Keywords: | Payments, mobile, networks, fintech, paytech, complexity, pagos, móvil, redes, fintech, paytech, complejidad |
| JEL: | L14 D85 E42 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:bdr:borrec:1157&r=all |
| By: | Alejandro García; Bena Lands; Dennis Yanchus |
| Abstract: | We outline a three-step framework to investigate stablecoin arrangements and quantitatively assess their risk. The first step is to classify the stablecoin arrangement into three parts—coin structure, transfer system(s) and financial service(s)—and categorize the attributes of each part. The second step is to identify specific risk scenarios. The third is to quantify the range of probable loss and range of possible frequency associated with the identified risk scenarios. Our proposed framework allows authorities to understand the defining characteristics of stablecoin arrangements, to be specific about any concerns they may have, and to be objective in their treatment from issuer to issuer. Additionally, the process we are proposing ensures that authorities and the stablecoin issuer can come to a quantitatively based understanding about the potential risks. The main contributions we make are to separate stablecoins arrangements into three activity-based components and to apply an operational risk management approach to quantifying risks of stablecoins. |
| Keywords: | Digital currencies and fintech; Financial institutions; Financial markets; Financial system regulation and policies; Payment clearing and settlement systems |
| JEL: | D81 G18 O38 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocadp:21-6&r=all |
| By: | Sam M. Werner; Daniel Perez; Lewis Gudgeon; Ariah Klages-Mundt; Dominik Harz; William J. Knottenbelt |
| Abstract: | Decentralized Finance (DeFi), a blockchain powered peer-to-peer financial system, is mushrooming. One year ago the total value locked in DeFi systems was approximately 600m USD, now, as of January 2021, it stands at around 25bn USD. The frenetic evolution of the ecosystem makes it challenging for newcomers to gain an understanding of its basic features. In this Systematization of Knowledge (SoK), we delineate the DeFi ecosystem along its principal axes. First, we provide an overview of the DeFi primitives. Second, we classify DeFi protocols according to the type of operation they provide. We then go on to consider in detail the technical and economic security of DeFi protocols, drawing particular attention to the issues that emerge specifically in the DeFi setting. Finally, we outline the open research challenges in the ecosystem. |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2101.08778&r=all |
| By: | Pradhana, Made Bagoes |
| Abstract: | Currently the world has entered the industrial era 4.0 which is based on new technology and is able to change the entire chain and management in every branch of industry, including the financial industry known as financial technology and digital banking. Infrastructure financial services are growing rapidly in Indonesian services, computation with startup companies, such as payment and money transfer systems, savings and loans, insurance, financial information service providers, capital markets, crowdfunding, and wealth management. |
| Date: | 2021–03–30 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:qmsnj&r=all |
| By: | Jaller, Miguel; Pahwa, Anmol |
| Abstract: | In the last decade, e-commerce has grown substantially and transformed individual shopping behaviors. Most shopping activities—at least part of the search, if not the purchase itself—now involve an online component. This has consequently changed commodity flow and urban goods distribution. E-commerce has the potential to reduce the negative impacts of shopping on the environment by substituting individual shopping trips to stores using personal cars with optimized truck deliveries. However, shopping behavior is often more complex than this one-to-one substitution. Additionally, e-retailers entice consumers with free shipping, free returns, same-day, one-hour or two-hour expedited deliveries, and more in a quest for increased market share. These enhanced services result in additional distances driven, emissions, and operational costs for the e-retailer. The increasing customer expectations around lead time, delivery time, and return policy present a need for more sustainable delivery options, particularly for the “last mile” between the distribution center and the customer. Last-mile operators are considering alternatives to traditional diesel truck-based, door-to-door delivery such as use of alternative fuel (e.g., electric) vehicles, delivery from micro-hubs using cargo bikes, customer pickup at collection points, and crowdsourced deliveries. Researchers at the University of California, Davis developed models for e-commerce demand, last-mile delivery operations, and cost and sustainability assessment, then applied this modeling framework to a case study in Southern California to evaluate the potential impact of these strategies under different delivery scenarios. This policy brief summarizes findings from that research, along with policy implications. View the NCST Project Webpage |
| Keywords: | Business, Engineering, Alternate fuels, Approximation (Mathematics), Delivery service, Delivery vehicles, Electronic commerce, Logistics, Mathematical models, Residential areas, Urban goods movement, Urban transportation |
| Date: | 2021–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:itsdav:qt83m7s3kg&r=all |
| By: | Tommaso M. Valletti; André Veiga |
| Abstract: | We conduct an experiment where subjects read online news articles and are shown ads for brands next to those articles. Using eye-tracking technology, we measure the attention that each individual devotes to each article and ad. Then, respondents choose between cash or vouchers for the brands advertised. Attention to ads is a predictor both of willingness-to-pay for brands, and brand recall. The main predictors of attention include the type of news and the match between individual political preferences and the media outlet. |
| Keywords: | online-advertising, experiments, attention, e-commerce, targeting |
| JEL: | M37 C91 L86 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8991&r=all |
| By: | Adeabah, David; Asongu, Simplice; Andoh, Charles |
| Abstract: | This study examines the impact of remittances and information and communication technology (ICT) on pension at the country level. Our empirical evidence, based on data from 96 countries, indicate a significant non-linearity between remittances, ICT and pension income coverage. First, we find a convex relation between remittances and pension income coverage, indicating that increases in remittance, initially decreases pension income coverage, but as remittance increases beyond a certain point, so too does pension income coverage. This inflection point, where the effect of remittances turns from negative to positive, is estimated to be around 3.09% of GDP. Second, we document a concave relationship between ICT (i.e. mobile subscription and internet penetration) and pension income coverage. An increase in ICT results in increased pension income coverage. However, when ICT reaches a certain point, any further increase is associated with lower pension income coverage. The estimated optimal point is found to be around 140.14 subscriptions (per 100 people) for mobile phone and 27.93 (per 100 people) for internet penetration, respectively. Other implications are discussed. |
| Keywords: | Pension income coverage; Remittances; Mobile subscription; Internet penetration; ICT |
| JEL: | C5 L96 O1 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:107139&r=all |
| By: | Yixin Cao; Chuanwei Zou; Xianfeng Cheng |
| Abstract: | Flash Loan attack can grab millions of dollars from decentralized vaults in one single transaction, drawing increasing attention from the Decentralized Finance (DeFi) players. It has also demonstrated an exciting opportunity that a huge wealth could be created by composing DeFi's building blocks and exploring the arbitrage change. However, a fundamental framework to study the field of DeFi has not yet reached a consensus and there's a lack of standard tools or languages to help better describe, design and improve the running processes of the infant DeFi systems, which naturally makes it harder to understand the basic principles behind the complexity of Flash Loan attacks. In this paper, we are the first to propose Flashot, a prototype that is able to transparently illustrate the precise asset flows intertwined with smart contracts in a standardized diagram for each Flash Loan event. Some use cases are shown and specifically, based on Flashot, we study a typical Pump and Arbitrage case and present in-depth economic explanations to the attacker's behaviors. Finally, we conclude the development trends of Flash Loan attacks and discuss the great impact on DeFi ecosystem brought by Flash Loan. We envision a brand new quantitative financial industry powered by highly efficient automatic risk and profit detection systems based on the blockchain. |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2102.00626&r=all |
| By: | ITO Takatoshi; KOIBUCHI Satoshi; SATO Kiyotaka; SHIMIZU Junko; YOSHIMI Taiyo |
| Abstract: | The purpose of this study is to analyze the factors that promote the usage of local currencies in Japanese trade in Asia by utilizing a large-scale firm-level questionnaire survey in 2018 on Japanese overseas subsidiaries in Asia and to discover why the usage of Asian currencies has increased recently. The major findings are as follows: first, with respect to the choice of invoicing currency, subsidiaries with large sales tended to choose the U.S. dollar while those with small sales tended to choose the yen or local currency; second, subsidiaries established for sales to the local market tended to choose the local currency; third, overseas subsidiaries tended to unify the transaction currency on both the import and export sides, a practice called the natural hedge; fourth, subsidiaries with large local currency borrowing, a high share of local procurement, and a joint venture with local firms who try to maximize their profits measured using local currency, tend to adopt local currency invoicing. These results suggest that the role of the U.S. dollar as the main invoice currency is in decline, as Japanese exporting firms move away from using Asian subsidiaries as a platform to export to the United States and increasingly use Asian subsidiaries as a local sales base in Asian countries and an export platform to China and back to Japan. |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:21016&r=all |
| By: | Daniel Boller; Michael Lechner; Gabriel Okasa |
| Abstract: | Online dating emerged as a key platform for human mating. Previous research focused on socio-demographic characteristics to explain human mating in online dating environments, neglecting the commonly recognized relevance of sport. This research investigates the effect of sport activity on human mating by exploiting a unique data set from an online dating platform. Thereby, we leverage recent advances in the causal machine learning literature to estimate the causal effect of sport frequency on the contact chances. We find that for male users, doing sport on a weekly basis increases the probability to receive a first message from a woman by 50%, relatively to not doing sport at all. For female users, we do not find evidence for such an effect. In addition, for male users the effect increases with higher income. |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2104.04601&r=all |
| By: | Donato Masciandaro; Davide Romelli; Gaia Rubera |
| Abstract: | How does central bank communication affect financial markets? This paper shows that the monetary policy announcements of three major central banks, i.e. the European Central Bank, the Federal Reserve and the Bank of England, trigger significant discussions on monetary policy on Twitter. Using machine learning techniques we identify Twitter messages related to monetary policy around the release of monetary policy decisions and we build a metric of the similarity between the policy announcement and Twitter traffic before and after the announcement. We interpret large changes in the similarity of tweets and announcements as a proxy for monetary policy surprise and show that market volatility spikes after the announcement whenever changes in similarity are high. These findings suggest that social media discussions on central bank communication are aligned with bond and stock market reactions. |
| Keywords: | monetary policy, central bank communication, financial markets, social media, Twitter, Federal Reserve, European Central Bank, Bank of England |
| JEL: | E44 E52 E58 G14 G15 G41 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:baf:cbafwp:cbafwp20160&r=all |
| By: | Lindgren, Charlie (Dalarna University, Falun, Sweden); Daunfeldt, Sven-Olov (Institute of Retail Economics (Handelns Forskningsinstitut)); Rudholm, Niklas (Institute of Retail Economics (Handelns Forskningsinstitut)) |
| Abstract: | Price comparison websites, where consumers can compare prices at a search cost that is close to zero, have become increasingly common around the world. Using daily information on prices, click-throughs, and the number of retailers for a sample of consumer electronics and durable goods over a period of 62 months, we investigate the effects of the increased use of the Swedish price comparison website PriceSpy on prices and price dispersion. We find that increased use by consumers created potential savings of 290 million SEK in 2016, while increased use by retailers created potential savings of approximately 2.9 billion SEK. Reduced prices due to increased use of the price comparison website thus resulted in total potential consumer savings of nearly 3.2 billion SEK (289 million EUR) for the year 2016 alone. Price comparison websites thus place downward pressure on prices, thereby increasing economic efficiency. We also find that the increased use of the price comparison website by retailers resulted in increased price dispersion, while the effect of more consumers using the website was mixed. |
| Keywords: | Consumer search; price dispersion; information; e-tailing; e-commerce |
| JEL: | D21 D22 D83 L11 L81 |
| Date: | 2021–03–31 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:hfiwps:0018&r=all |
| By: | Gabriel Suarez; Juan Raful; Maria A. Luque; Carlos F. Valencia; Alejandro Correa-Bahnsen |
| Abstract: | This paper presents the advantages of alternative data from Super-Apps to enhance user' s income estimation models. It compares the performance of these alternative data sources with the performance of industry-accepted bureau income estimators that takes into account only financial system information; successfully showing that the alternative data manage to capture information that bureau income estimators do not. By implementing the TreeSHAP method for Stochastic Gradient Boosting Interpretation, this paper highlights which of the customer' s behavioral and transactional patterns within a Super-App have a stronger predictive power when estimating user' s income. Ultimately, this paper shows the incentive for financial institutions to seek to incorporate alternative data into constructing their risk profiles. |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2104.05831&r=all |
| By: | Charles Saliba; Mary Ann Muscat (Central Bank of Malta) |
| Abstract: | This paper presents an extensive analysis on the means of payment that consumers in Malta use to purchase different goods and services. The aim of this study is to shed light on consumers’ payment behaviour and in particular to improve the understanding of the considerations that shape consumers’ payment choices, based on a survey of 500 households in Malta. Thus, it delivers essential information that should help the Central Bank of Malta and relevant payment systems stakeholders enhance their policies and strategic decisions with a view to improve the efficiency of the cash cycle and the payment systems more generally. Where possible, data are compared with the results of a 2013s survey on the same subject and also with statistics on the use of cash by households in the euro area. |
| JEL: | E41 E58 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:mlt:wpaper:0120&r=all |
| By: | Boeing, Philipp; Wang, Yihan |
| Abstract: | During the COVID-19 pandemic, comprehensive, accurate, and timely digital contact tracing serves as a decisive measure in curbing viral transmission. Such a strategy integrates corporate innovation, government decision-making, citizen participation, and community coordination with big data analytics. This article explores how key stakeholders in an open innovation ecosystem interact within the digital context to overcome challenges to public health and socio-economic welfare imposed by the pandemic. To enhance the digital contact tracing effectiveness, communities are deployed to moderate the interactions between government, enterprises and citizens. As an example, we study the community-based digital contact tracing in Wuhan, a representative case of China's 'virus exceptionalism' in COVID-19 mitigation. We discuss the effectiveness of this strategy and raise critical ethical concerns regarding decision-making in R&D management. |
| Keywords: | COVID-19,digital contact tracing,open innovation ecosystem,community,big data |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:21028&r=all |
| By: | Plantin, Jean-Christophe |
| Abstract: | This article investigates how discourses on open networking technologies provide a social imaginary that industry and government actors mobilize in an attempt to expand their control over mobile telecommunications networks. The case of recent initiatives aiming to “open up” radio access network (or RAN, a key component of telecommunications infrastructure) with an “open RAN” model reveals how the US Government came to promote this nascent technology to create an opposition between its own “open” telecommunications networks versus proprietary and presumed “untrustworthy” networks based on foreign equipment, namely Huawei. While a closer look casts doubts on the benefits of open RAN to increase network security or to open up the equipment market, this case reveals how openness is an ambiguous notion that can be used by governments to exclude foreign trade enemies while advocating for trust in telecommunications networks. |
| Keywords: | imaginary; infrastructure; openness; RAN; telecommunication networks |
| JEL: | R14 J01 |
| Date: | 2021–02–04 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:109858&r=all |
| By: | ITO Hiroyuki; KAWAI Masahiro |
| Abstract: | When the new corona virus (COVID-19) pandemic triggered the global economic crisis in March 2020, the US dollar appreciated while the prices of many other financial assets plunged. The US dollar also appreciated in the immediate aftermath of the Global Financial Crisis (GFC) in 2008. These two episodes signify the important role the US dollar plays as an international currency and the dominant role of the US dollar and the limited use of the local currencies for international transactions, especially in Asia. Using a wide variety of data on the use of currencies for international transactions, we find that the US dollar is the predominantly important currency in the Asian region for cross-border trade, investment, finance, international reserve holding and exchange rate management. In many aspects of international transactions, the use of local currencies in the ASEAN+3 countries is underdeveloped. Recently, the Chinese renminbi is on its way to becoming one of the major international currencies. However, it is still a long way for the renminbi to become a major currency even in the Asian region. |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:21019&r=all |
| By: | Reuben Ellul |
| Abstract: | New technologies have affected many traditional industries, with disintermediation and innovation changing the manner in which individuals travel, commute or even purchase day-to-day items like food. While popular, many of the international technological plat forms in popular use are hardly regulated. The short-term rental market for tourists has been fundamentally changed by platforms likes Airbnb. This study uses a novel dataset of properties available for rent in Malta during May 2019, and attempts to determine the composition, ownership, utilisation and possible revenue generation potential of these listings. This study finds the number of listings to be similar to other mid-sized population centres in the Mediterranean. It discusses the distribution of the housing stock devoted to short-term rentals and looks at some metrics for pricing, including the pricing of characteristics, and considers the existence of spatially interdependent pricing decisions. |
| JEL: | Z3 Z31 R31 L83 |
| URL: | http://d.repec.org/n?u=RePEc:mlt:ppaper:0819&r=all |
| By: | Yuta Kittaka; Noriaki Matsushima; Fuyuki Saruta |
| Abstract: | We investigate a model in which a monopoly supplier distributes two types of its product through a traditional retailer with a wholesale price contract and an online retailer with an agency contract. Because such an agency contract eliminates the double marginalization problem, the online retailer has a cost advantage over the traditional retailer. Given the advantage of the online retailer, we also consider a possible request by the traditional retailer: the retail price of the online retailer is not smaller than the wholesale price for the traditional retailer. We obtain the following results. An increase in the online retailer's bargaining power over the supplier benefits the two retailers but harms the supplier. Under the request to protect the traditional retailer, the wholesale price is strictly higher than that in the baseline model. The retailers' equilibrium prices are also strictly higher than those in the baseline model. The request benefits the supplier and the online retailer, but harms the traditional retailer. |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:dpr:wpaper:1123&r=all |
| By: | Verdin, Rachel; O'Reilly, Jacqueline |
| Abstract: | This article provides an exploration of the literature concerning the impacts of digitization and the fourth industrial revolution on the world of work, informed by the experiences of Covid-19 and focusing on the gendered implications. Key threats and opportunities are identified in projections for declining and emerging occupations, considering how women will fare in the workplaces of the future. These trends are discussed in terms of emerging skill gaps and women's positioning to exploit key areas of growth. Alternative forms of employment and atypical workers are creating regulatory gaps, challenging existing social protection systems, with the pandemic again demonstrating the need for interventions. The pandemic has highlighted the need for a specific gender agenda to ensure past progress is not eroded and the opportunities described are taken up. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:wsistu:24&r=all |
| By: | Lindgren, Charlie (School of Technology and Business Studies, Dalarna University, Falun, Sweden) |
| Abstract: | This paper examines price elasticities on a price comparison website and if there is a discontinuity in demand for retailers having the lowest price, or products having the highest consumer rating. Previous research is extended upon, with a larger, more recent, and more varied dataset, with retailers and products followed over a longer period. It is found that there is a statistically significant positive discontinuity in demand for retailers offering the lowest price. However, the results also show that the magnitude of the effect can vary substantially between product categories. The increase in demand ranges from 58% to 154%, with an average effect of 92%. The results pertaining to consumer ratings are found to be inconclusive. The importance for retailers of maintaining the lowest price therefore remains strong, while consumer ratings seem to have less of an impact on consumer demand. |
| Keywords: | Online retailing; e-commerce; price comparison websites; product ratings; lowest price |
| JEL: | D22 D83 L11 L86 |
| Date: | 2021–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:hfiwps:0019&r=all |
| By: | Zakaria Babutsidze; Nobuyuki Hanaki; Adam Zylbersztejn |
| Abstract: | We experimentally study the effect of the mode of digital communication on the emergence of trust in a principal-agent relationship. We consider three modes of communication that differ in the capacity to transmit nonverbal content: plain text, audio, and video. Communication is pre-play, one-way, and unrestricted, but its verbal content is homogenized across treatments. Overall, both audio and video messages have a positive (and similar) effect on trust as compared to plain text; however, the magnitude of these effects depends on the verbal content of agent's message (promise to act trustworthily vs. no such promise). In all conditions, we observe a positive effect of the agent's promise on the principal's trust. We also report that trust in female principals is sensitive to the availability of nonverbal cues about their partners. |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:dpr:wpaper:1128&r=all |