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on Payment Systems and Financial Technology |
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Issue of 2021‒05‒10
fifteen papers chosen by |
| By: | Michael Junho Lee; Antoine Martin |
| Abstract: | Since the launch of Bitcoin and other first-generation cryptocurrencies, there has been extensive experimentation in the digital currency space. So far, however, digital currencies have yet to gain much ground as a means of payment. Is there a vacuum in the landscape of digital money and payments that central banks are naturally positioned to fill? In this post, Michael Lee and Antoine Martin, economists in the New York Fed’s Money and Payment Studies function, answer some questions regarding the concept of central bank digital currencies (CBDCs). |
| Keywords: | central bank digital currencies |
| JEL: | E58 |
| Date: | 2021–04–30 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednls:91222&r= |
| By: | Erik Dolson; Julapa Jagtiani |
| Abstract: | There has been a great deal of interest recently in understanding the potential role of fintech firms in expanding credit access to the underbanked and credit-constrained consumers. We explore the supply side of fintech credit, focusing on unsecured personal loans and mortgage loans. We investigate whether fintech firms are more likely than other lenders to reach out to “underserved consumers,” such as minorities; those with low income, low credit scores, or thin credit histories; or those who have a history of being denied for credit. Using a rich data set of credit offers from Mintel, in conjunction with credit information from TransUnion and other consumer credit data from the FRBNY/Equifax Consumer Credit Panel, we compare similar credit offers that were made by banks, fintech firms, and other nonbank lenders. Fintech firms are more likely than banks to offer mortgage credit to consumers with lower income, lower-credit scores, and those who have been denied credit in the recent past. Fintechs are also more likely than banks to offer personal loans to consumers who had filed for bankruptcy (thus also more likely to receive credit card offers overall) and those who had recently been denied credit. For both personal loans and mortgage loans, fintech firms are more likely than other lenders to reach out and offer credit to nonprime consumers. |
| Keywords: | fintech; P2P lending; consumer credit access; personal lending; credit cards; mortgage lending; online lending; credit offers |
| JEL: | G21 G23 G28 G51 |
| Date: | 2021–04–30 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:91246&r= |
| By: | Agnese, Pablo (UIC Barcelona); Thoss, Jonathan (Luxembourg Stock Exchange) |
| Abstract: | Bitcoin in particular and so-called cryptocurrencies in general have shaken up the financial world and seem to be claiming an increasing size of the market share. These new virtual assets present investors with significant opportunities, but also with significant risks. This paper analyzes the connection between one such crypto, bitcoin, and other traditional assets (e.g. metals) in times of financial turbulence. Our impulse-response function and variance decomposition analyses indicate that, as of late, bitcoin has become increasingly interdependent with gold, and seems just as suitable to hedge against market uncertainty—we believe this is a very timely conclusion given the pervasive uncertainty that dominates post-pandemic life. |
| Keywords: | bitcoin, gold, COVID-19, impulse response |
| JEL: | G15 G12 G11 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14323&r= |
| By: | Oskar Kowalewski (IESEG School of Management, Paris, France, LEM-CNRS 9221, Lille, France, Institute of Economics, Polish Academy of Sciences, Warsaw, Poland); Pawel Pisany (Institute of Economics, Polish Academy of Sciences, Warsaw, Poland); Emil Slazak (Warsaw School of Economics, Warsaw, Poland) |
| Abstract: | This study is an investigation of the determinants of the development of technology-driven alternative credit markets, that is, fintech and bigtech credit. Using a data sample from 94 countries from 2013–2019, we confirmed the relevance of the availability of credit data, both the traditional and alternative types, with the latter being known as the so-called “digital footprint.” Furthermore, we have provided evidence to confirm the positive role of strengthening Internet privacy protections in fostering the development of the fintech credit market, which may not necessarily be the case for the bigtech credit market. We have also shown that the growth of the fintech and bigtech credit market is preceded by a rising paytech services market. Furthermore, we have found that the development of fintech credit services is fostered by the strength of both principal institutions, like the rule of law, and credit-specific institutions, especially in terms of insolvency framework effectiveness, while, for the bigtech credit market, only the latter matters. Interestingly, we have also found that various national cultural profiles can boost the development of fintech and bigtech credit services. Lastly, we have shown that the fintech credit market develops faster in countries characterized by high levels of societal distrust toward banks and that the opposite seems to be the case with the bigtech credit market. |
| Keywords: | alternative credit, fintech, bigtech, innovation, culture, trust, data access |
| JEL: | G21 G23 L26 O30 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:ies:wpaper:f202102&r= |
| By: | John Goodell; Stéphane Goutte (VNU - Vietnam National University [Hanoï], Cemotev - Centre d'études sur la mondialisation, les conflits, les territoires et les vulnérabilités - UVSQ - Université de Versailles Saint-Quentin-en-Yvelines) |
| Abstract: | We highlight the considerable recent research that investigates how cryptocurrencies have been impacted by COVID-19. We highlight common threads of investigation and consider common findings and conclusions. We also provide suggestions for future research. Additionally, we provide an overview of a recent paper in which we report on a study that applies wavelet methods to daily data of COVID-19 world deaths and daily Bitcoin prices, |
| Keywords: | cryptocurrencies,Bitcoin,COVID-19,Market co-movement |
| Date: | 2021–04–29 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-03211702&r= |
| By: | Qiutong Guo; Shun Lei; Qing Ye; Zhiyang Fang |
| Abstract: | Bitcoin, one of the major cryptocurrencies, presents great opportunities and challenges with its tremendous potential returns accompanying high risks. The high volatility of Bitcoin and the complex factors affecting them make the study of effective price forecasting methods of great practical importance to financial investors and researchers worldwide. In this paper, we propose a novel approach called MRC-LSTM, which combines a Multi-scale Residual Convolutional neural network (MRC) and a Long Short-Term Memory (LSTM) to implement Bitcoin closing price prediction. Specifically, the Multi-scale residual module is based on one-dimensional convolution, which is not only capable of adaptive detecting features of different time scales in multivariate time series, but also enables the fusion of these features. LSTM has the ability to learn long-term dependencies in series, which is widely used in financial time series forecasting. By mixing these two methods, the model is able to obtain highly expressive features and efficiently learn trends and interactions of multivariate time series. In the study, the impact of external factors such as macroeconomic variables and investor attention on the Bitcoin price is considered in addition to the trading information of the Bitcoin market. We performed experiments to predict the daily closing price of Bitcoin (USD), and the experimental results show that MRC-LSTM significantly outperforms a variety of other network structures. Furthermore, we conduct additional experiments on two other cryptocurrencies, Ethereum and Litecoin, to further confirm the effectiveness of the MRC-LSTM in short-term forecasting for multivariate time series of cryptocurrencies. |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2105.00707&r= |
| By: | Bronnenberg, Bart; Huang, Yufeng |
| Abstract: | Why do consumers value shopping online? We decompose the value of e-commerce to individual consumers and highlight the role of convenience, i.e., the avoidance of transportation costs. We complement household purchase panel data with precise locations of consumers and stores, and show that travel distance is a strong driver of consumer store choice and the substitution to the online channel. Using a structural model of retailer and channel choice, we report that during 2016-2018 the total value from e-commerce to consumers is equivalent to a 23% discount on all prices. Of this value, a quarter comes from convenience in the form of lower transportation costs, a quarter from intensified price competition, and the remaining half from new online retailers and online channels of existing offline retailers. We further demonstrate that consumer gains are heterogeneous. Consumers far from offline stores or experienced in online shopping will benefit more from e-commerce, whereas consumers who likely do not shop online still benefit indirectly from price competition. Finally, our results show that, as consumers gain more online shopping experience, substantial additional gains from e-commerce are yet to materialize in the future. |
| Keywords: | convenience; E-commerce; online/offline; retail; Transportation Costs |
| JEL: | D12 L81 M31 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15707&r= |
| By: | Priscilla Boiardi; Esme Stout |
| Abstract: | Blockchain is mainstreaming, but the number of blockchain for development use-cases with proven success beyond the pilot stage remain relatively few. This paper outlines key blockchain concepts and implications in order to help policymakers reach realistic conclusions when considering its use. The paper surveys the broad landscape of blockchain for development to identify where the technology can optimise development impact and minimise harm. It subsequently critically examines four successful applications, including the World Food Programme’s Building Blocks, Oxfam’s UnBlocked Cash project, KfW’s TruBudget and Seso Global. As part of the on-going work co-ordinated by the OECD’s Blockchain Policy Centre, this paper asserts that post-COVID-19, Development Assistance Committee (DAC) donors and their development partners have a unique opportunity to shape blockchain’s implementation. |
| Keywords: | blockchain, innovation, technology for development |
| JEL: | O F35 O3 |
| Date: | 2021–05–07 |
| URL: | http://d.repec.org/n?u=RePEc:oec:dcdaaa:95-en&r= |
| By: | Ye Wang; Yan Chen; Shuiguang Deng; Roger Wattenhofer |
| Abstract: | In May 2020, Uniswap V2 was officially launched on Ethereum. Uniswap V2 allows users to create trading pools between any pair of cryptocurrencies, without the need for ETH as an intermediary currency. Uniswap V2 introduces new arbitrage opportunities: Traders are now able to trade cryptocurrencies cyclically: A trader can exchange currency A for B, then B for C, and finally C for A again through different trading pools. Almost surely, the three floating exchange rates are not perfectly in sync, which opens up arbitrage possibilities for cyclic trading. In this paper, we study cyclic arbitrages in Decentralized Exchanges (DEXes) of cryptocurrencies with transaction-level data on Uniswap V2, observing 285,127 cyclic arbitrages over eight months. We conduct a theoretical analysis and an empirical evaluation to understand cyclic arbitrages systematically. We study the market size (the revenue and the cost) of cyclic arbitrages, how cyclic arbitrages change market prices, how cyclic arbitrageurs influence other participants, and the implementations of cyclic arbitrages. Beyond the understanding of cyclic arbitrages, this paper suggests that with the smart contract technology and the replicated state machine setting of Ethereum, arbitrage strategies are easier implemented in DEXes than in Centralized Exchanges (CEXes). We find that deploying private smart contracts to implement cyclic arbitrages is more resilient to front-running attacks than applying cyclic arbitrages through public (open-source) smart contracts. |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2105.02784&r= |
| By: | Adejumo, Oluwabunmi; Efobi, Uchenna; Asongu, Simplice |
| Abstract: | Financing sustainable development in Africa requires financing options that is best for development in the region without further escalating other societal problems. This chapter takes stock of financing options previously advocated for financing development in the African region such as development assistance and foreign investment. By considering its implication on development outcomes like poverty, inequality, and aggregate human development, some drawbacks still exist. Therefore, the chapter identifies, reconfigures and reinvents other financial flows such as mutual support networks, agricultural cooperatives, crowd funding, fiscal responsibility, other forms of informal banking, and remittances, among others to African countries for efficient provision of structures that can aid in the sustenance of development. We conclude that these alternative means of financing development could be a viable policy option to bridge income and development gaps; thereby mainstreaming the process for financial inclusion and sustainability. |
| Keywords: | Finance; Sustainable Development |
| JEL: | G20 I00 O10 |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:107493&r= |
| By: | Asongu, Simplice; Amankwah‐Amoah, Joseph; Nting, Rexon; Afrifa, Godfred |
| Abstract: | This study investigates how ICT affects gender economic inclusion via gender parity education channels. We examine the issue using data from 49 countries in sub-Saharan Africa for the period 2004-2018 divided into: (i) 42 countries for the period 2004-2014; and (ii) 49 countries for the period 2008-2018. Given the overwhelming evidence of negative net effects in the first sample, an extended analysis is used to establish thresholds of ICT penetration that nullify the established net negative effects. We found that in order to enhance female labor force participation, the following ICT thresholds are worthwhile for the secondary education channel: 165 mobile phone penetration per 100 people, 21.471 internet penetration per 100 people and 3.475 fixed broadband subscriptions per 100 people. For the same outcome of inducing a positive effect on female labor force participation, a 31.966 internet penetration per 100 people threshold, is required for the mechanism of tertiary school education. These computed thresholds have economic meaning and policy relevance because they are within the established ICT policy ranges. In the second sample, a mobile phone penetration threshold of 122.20 per 100 people is needed for the tertiary education channel to positively affect female labor force participation. |
| Keywords: | Africa; ICT; Gender; Inclusive development |
| JEL: | G20 I10 I32 O40 O55 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:107543&r= |
| By: | Susan Athey; Markus Mobius; Jeno Pal |
| Abstract: | A policy debate centers around the question how news aggregators such as Google News affect traffic to online news sites. Many publishers view aggregators as substitutes for traditional news consumption while aggregators view themselves as complements because they make news discovery easier. We use Spain as a natural experiment because Google News shut down altogether in response to a copyright reform enacted in December 2014. We compare the news consumption of a large number of Google News users with a synthetic control group of similar non-Google News users. We find that the shutdown of Google News reduces overall news consumption by about 20% for treatment users, and reduces page views on publishers other than Google News by 10%. This decrease is concentrated around small publishers. We further find that users are able to replace some but not all of the types of news they previously read. Post-shutdown, they read less breaking news, hard news, and news that is not well covered on their favorite news publishers. These news categories explain most of the overall reduction in news consumption, and shed light on the mechanisms through which aggregators interact with traditional publishers. |
| JEL: | L63 L82 L86 L88 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28746&r= |
| By: | Willem Pieter De Groen |
| Abstract: | Debit and credit cards have gradually increased in importance as instruments for retail payments. This has prompted anti-trust authorities at both national and European levels to investigate and limit the interchange fee-based revenue model of four-party schemes. These moves were followed in 2015 by the introduction of the Interchange Fee Regulation (IFR), which introduced price rules to nurture a competitive, innovative and secure payments environment for all stakeholders. The IFR caps the interchange fees on consumer debit and credit cards and prohibits restrictions on co-badging and certain requirements to honour all cards for merchants. This paper assesses the impact of the IFR. Based on a literature review and data analysis, it concludes that the IFR has led to a drop in interchange fees – in some cases below the maximum defined in the legislation in all EU member states. The decrease in the interchange fee is largely reflected in lower charges for merchants, although the reduction is – at least partially – offset by higher scheme fees charged by international four-party card schemes and by higher fees for cardholders. The policy recommendations aim to increase transparency for a fuller understanding of the functioning of the market and to enhance competitiveness in both the market for card payments and other payment instruments. |
| Date: | 2020–02 |
| URL: | http://d.repec.org/n?u=RePEc:eps:ecriwp:26316&r= |
| By: | Wei Jiang; Yuehua Tang; Rachel (Jiqiu) Xiao; Vincent Yao |
| Abstract: | This paper studies how demand for labor reacts to financial technology (fintech) shocks based on comprehensive databases of fintech patents and firm job postings in the U.S. during the past decade. We first develop a measure of fintech exposure at the occupation level by intersecting the textual information in job task descriptions and fintech patents. We then document a significant decline of job postings in the most exposed occupations, and an increase in industry as well as geographical concentration of these occupations. Firms resort to an upskilling strategy in face of the fintech disruption, requiring “combo” (finance and software) skills, higher education attainments, and longer work experiences in the hiring of fintech-exposed jobs. Financial firms and those with high innovation outputs are able to offset the disruptive effect from the fintech shock. Among innovating firms, however, only inventors (but not acquisition-driven innovators) experience growth in hiring, sales, investment, and enjoy better returns on assets. |
| JEL: | G30 J23 O33 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28668&r= |
| By: | Chowdhury, Shyamal (University of Sydney); Satish, Varun (University of Chicago); Sulaiman, Munshi (BRAC Institute of Governance and Development); Sun, Yi (University of Sydney) |
| Abstract: | Using data from a randomised experiment in Kenya, we estimate the causal effect of social networks on technology adoption. In this experiment, farmers were invited to information sessions about the use of Tissue Culture Banana (TCB), an in vitro banana cultivation technology. We find that an additional social connection with a treated farmer causes an untreated farmer to be 2.25 pp more likely to adopt TCB 6-18 months post-intervention, but not in the longer term. We provide evidence that the adoption of TCB by those social connections is the mechanism driving the effect; therefore, treated connections are significant because treated farmers are more likely to adopt. We also find that indirect social network effects, proxied for by eigenvector centrality, influence adoption at both the village level and the farmer level. |
| Keywords: | networks, social connections, agricultural technology adoption, Kenya |
| JEL: | O12 P36 Z13 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14307&r= |