nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2022‒01‒10
twenty papers chosen by

  1. Smart Banknotes and Cryptobanknotes: Hybrid Banknotes for Central Bank Digital Currencies and Cryptocurrency Payments By Noll, Franklin; Lipkin, Andrei
  2. Investigation of Dogecoin Price Movements: A GSADF Analysis By Oncu, Erdem
  3. A Model To Think About Crypto-Assets and Central Bank Digital Currency By Hernán D. Seoane
  4. Distributed Ledgers and the Governance of Money By Raphael A. Auer; Cyril Monnet; Hyun Song Shin
  5. Platform Competition with Free Entry of Sellers By Federico Etro
  6. Mobile Payments and Interoperability: Insights from the Academic Literature By Bianchi, Milo; Bouvard, Matthieu; Gomes, Renato; Rhodes, Andrew; Shreeti, Vatsala
  7. Designing a Framework for Digital KYC Processes Built on Blockchain-Based Self-Sovereign Identity By Vincent Schlatt; Johannes Sedlmeir; Simon Feulner; Nils Urbach
  8. Financial inclusion and Fintech during COVID-19 crisis: Policy solutions By Ozili, Peterson K
  9. Is Bitcoin really a currency? A viewpoint of a stochastic volatility model By Noriyuki Kunimoto; Kazuhiko Kakamu
  10. Enhancing ICT for Female Economic Participation in Sub-Saharan Africa By Simplice A. Asongu; Nicholas M. Odhiambo
  11. Does online fundraising increase charitable giving? A nationwide field experiment on Facebook By Adena, Maja; Hager, Anselm
  12. Bank Branches and COVID-19: Where are Banks Closing Branches during the Pandemic? By Kimberly Kreiss
  13. Why Did Credit Card Balances Decline so Much during the COVID-19 Pandemic? By Robert M. Adams; Vitaly M. Bord; Bradley Katcher
  14. How Do E-Government Services Go Wrong? An Analysis of Four Online Services Using a Typology of Service Provision and Use By Hun Myoung Park
  15. Customers and Retail Growth By Liran Einav; Peter J. Klenow; Jonathan D. Levin; Raviv Murciano-Goroff
  16. Patients' experience sharing in online social media communities: A base-of-the-pyramid perspective By Husain S. Akareem
  17. Choice Determinants of a Smart Contract vs. Ambiguous Expert-Based Insurance: An Experiment By Giuseppe Attanasi; Marta Ballatore; Michela Chessa; Agnès Festré; Chris Ouangraoua
  18. Language, internet and platform competition By Doh-Shin Jeon; Bruno Jullien; Mikhail Klimenko
  19. Privacy Laws and Value of Personal Data By Mehmet Canayaz; Ilja Kantorovitch; Roxana Mihet
  20. Private or Public Equity? The Evolving Entrepreneurial Finance Landscape By Michael Ewens; Joan Farre-Mensa

  1. By: Noll, Franklin; Lipkin, Andrei
    Abstract: We are heading for a cashless world. At some point, we will say goodbye to all those pieces of paper and polymer and switch to an electronic alternative. The only problem with these statements is that people have been saying them since the late 1960s. Banknotes have a robust technology and will be around for quite some years to come. What is needed is a transitional device that will ease the transition from nineteenth-century cash to twenty-first-century digital currency. The answer is a hybrid banknote. Basically, a hybrid banknote is a physical banknote on a paper or polymer substrate that can transfer value over an electronic network. It is denominated and has all the physical properties of a traditional banknote, allowing it to pass hand to hand. However, when the need arises, the user can access an electronic network and transfer the denominated value off the hybrid banknote. In this paper, we look at the past and present of hybrid banknotes, identifying their two basic forms—smart banknotes and cryptobanknotes—and how they differ. We also offer three hybrid banknote models that can be used to address pressing needs in payments technology.
    Keywords: hybrid banknotes, smart banknotes, cryptobanknotes, central bank digital currency
    JEL: E4 E5
    Date: 2021–09–16
  2. By: Oncu, Erdem
    Abstract: Today, people provide information through different channels. The information channels used can affect the decision-making mechanism due to asymmetric information or different tendencies. Especially in recent years, people use social media to reach information quickly. Therefore, notifications made on social media reveal economic results. Cryptocurrencies are digital currencies intended to be used as currency. Unlike their traditional financial rivals, cryptocurrencies are not backed by a central bank or authority. The success of cryptocurrencies depends on its infrastructure, the block chain. Especially in recent years, the popularity of cryptocurrencies has increased. After the popularization of cryptocurrencies, digital currencies are discussed more especially in the media. In addition to the positive features, negative features are also included in the media. There are concerns about the misuse of cryptocurrencies. It is mentioned that cryptocurrencies provide financing for criminal organizations and are used in money laundering. In addition to these, it is reported that cryptocurrencies are used for tax evasion. The lack of intrinsic value of cryptocurrencies puts investors in trouble in terms of investment and price determination. Cryptocurrencies, which are digital currencies, have many digital price determinants such as social media. Two different objectives were determined in this study. The first is the detection of the presence of bubbles in Dodgecoin prices. The second is the examination of the relationship between bubbles and tweeter notifications. In the study, Dodgecoin prices between May 2020 and May 2021 are examined with the GSADF test. From May 2020 until May 2021, 10 different price bubbles are observed. Some bubbles can be associated with tweets by Elon Musk. However, the biggest bubble observed, the April 2021 price bubble, is due to a different reason.
    Keywords: Dodgecoin, Tweets, GSADF
    JEL: G0
    Date: 2021
  3. By: Hernán D. Seoane
    Abstract: This paper introduces digital assets, crypto assets in general, and Central Bank Dig- ital Currency in particular, into an otherwise standard New-Keynesian closed economy model with Financial Frictions. We use this setting to study the impact of a change in preferences towards the use of digital assets and to address whether the emergence of this type of instruments affect the transmission of monetary policy shocks. In this context we study the introduction of Central Bank Digital Currencies. The model is stylized but it could be a baseline for the design of models for quantitative analysis.
    Date: 2021
  4. By: Raphael A. Auer; Cyril Monnet; Hyun Song Shin
    Abstract: Blockchain technology breathes new life into the classical analysis of money as a substitute for a ledger of all past transactions. While it involves updating the ledger through a decentralized consensus on the unique truth, the robustness of the equilibrium that supports this consensus depends on who has access to the ledger and how it can be updated. To find the optimal solution, Buterin’s “scalability trilemma” needs to be addressed, so that a workable balance can be found between decentralization, security (i.e. a robust consensus), and scale (the efficient volume of transactions). Using a global game analysis of an exchange economy with credit, we solve for the optimal ledger design that balances the three objectives of this trilemma. We characterize the optimal number of validators, supermajority threshold, fees and transaction size. When intertemporal incentives are strong, a centralized ledger is always optimal. Otherwise, decentralization may be optimal, and validators need to be selected from the set of users of the system.
    Keywords: market design, money distributed ledger technology, DLT, blockchain, decentralized finance, global game, consensus
    JEL: C72 C73 D40 E42 G20 L86
    Date: 2021
  5. By: Federico Etro
    Abstract: We study platforms setting access prices and commissions on revenues of sellers engaged in monopolistic competition with free entry, as the app providers on the app stores of Apple and Android devices. Competition to attract buyers and sellers induces the platforms to redistribute all the revenues through lower access prices and set the optimal commission rates from the point of view of consumers, taking into account the pass-through on the prices of sellers, the elasticities of demand and surplus for their services and the elasticity of entry with respect to profitability. We discuss the role of heterogeneous sellers, substitutability between sellers's products and the introduction of platforms's products, as well as some limitations of the basic alignment of interest of platforms and consumers due to direct channels for sellers and consumer myopia.
    Keywords: Digital platforms, Third-party Sellers, Commissions, Entry.
    JEL: L1 L4
    Date: 2021
  6. By: Bianchi, Milo; Bouvard, Matthieu; Gomes, Renato; Rhodes, Andrew; Shreeti, Vatsala
    Abstract: We connect various streams of academic literature to shed light on how the degree of interoperability in mobile payments affects market outcomes and welfare. We organize our discussion around four dimensions of interoperability. First, we consider mobile network interoperability (whether clients of one telecom can access another telecom’s payment services) in connection with the IO literature on tying. Second, we discuss platform level interoperability (the ability to send money offnetwork) in light of the literature on compatibility. We also build on the behavioral IO literature to suggest how the effects of interoperability may be very heterogeneous across various types of firms and consumers, or even backfire. Third, we consider interoperability in the cash-in-cash-out agent network, in light of the literature on co-investment in network industries, and of more specific studies on ATMs’ interoperability. Fourth, we discuss how the literature in banking and on data ownership can be used to understand interoperability of data. We conclude with some broader remarks on policy implications and on possible directions for future research.
    Keywords: Mobile Payments, Interoperability, Financial Inclusion, Competition; Policy.
    JEL: L51 L96 G23 G28 O16
    Date: 2021–12–21
  7. By: Vincent Schlatt; Johannes Sedlmeir; Simon Feulner; Nils Urbach
    Abstract: Know your customer (KYC) processes place a great burden on banks, because they are costly, inefficient, and inconvenient for customers. While blockchain technology is often mentioned as a potential solution, it is not clear how to use the technology's advantages without violating data protection regulations and customer privacy. We demonstrate how blockchain-based self-sovereign identity (SSI) can solve the challenges of KYC. We follow a rigorous design science research approach to create a framework that utilizes SSI in the KYC process, deriving nascent design principles that theorize on blockchain's role for SSI.
    Date: 2021–11
  8. By: Ozili, Peterson K
    Abstract: This article offers a number of policy solutions to improve financial inclusion during the COVID19 crisis. COVID-19 is a global health crisisto which some of the usual global solutionslike greater financial inclusion can help. Financial inclusion remains a powerful development tool to improve access to finance and to support vulnerable individuals and households during the coronavirus or COVID-19 crisis. The documented policy solutions for financial inclusion can help mitigate the effect of the COVID-19 crisis through the combined use of Fintech and short-term policies
    Keywords: digital finance, Fintech, financial inclusion, access to finance, regulation, financial services, COVID-19, Coronavirus, SARS-CoV-2, lockdown, social distancing, pandemic, recession, financial crisis, policy.
    JEL: G00 G21 I31 I32 I38 I39
    Date: 2020
  9. By: Noriyuki Kunimoto; Kazuhiko Kakamu
    Abstract: Using the asymmetric stochastic volatility model, this study investigates the day-of-the-week and holiday effects on the returns and volatility of Bitcoin from January 1, 2013 to August 31, 2019; in this context, we also discuss the characteristics of Bitcoin as a financial asset. The results of the estimation are threefold. First, the finding shows a small day-of-the week effect in volatility on Saturday and Sunday than in the rest of the week. Second, although the holiday effects are examined in active trading countries, namely Japan, China, Germany, and the United States, the positive post-holiday effect on the returns and weak positive pre-holiday effect on the volatility are only observed in the United States. Finally, the asymmetry effect is not observed. A comparison of Bitcoin to several assets such as stock, currency, and gold shows Bitcoin's positioning between stock, currency, and gold in relation to the week and holiday effects, its reaction to federal funds and medium of exchange characteristics, and the lack of asymmetry effect.
    Date: 2021–11
  10. By: Simplice A. Asongu (Yaounde, Cameroon); Nicholas M. Odhiambo (Pretoria, South Africa)
    Abstract: This study investigates how enhancing information and communication technology (ICT) affects female economic participation in sub-Saharan African nations. Three female economic participation indicators are used, namely female labor force participation, female unemployment and female employment rates. The engaged ICT variables are: fixed broadband subscriptions, mobile phone penetration and internet penetration. The Generalized Method of Moments is used for the empirical analysis. The following main findings are established: First, there is a (i) negative net effect in the relevance of fixed broadband subscriptions in female labour force participation and female unemployment and; (ii) positive net effects from the importance of fixed broadband subscriptions on the female employment rate. Secondly, an extended analysis is used to establish thresholds at which the undesirable net negative effect on female labour force participation can be avoided. From the corresponding findings, a fixed broadband subscription rate of 9.187 per 100 people is necessary to completely dampen the established net negative effect. Hence, the established threshold is the critical mass necessary for the enhancement of fixed broadband subscriptions to induce an overall positive net effect on the female labour force participation rate.
    Keywords: Africa; Gender; ICT; Inclusive development; Technology
    JEL: G20 I10 I32 O40 O55
    Date: 2022–01
  11. By: Adena, Maja; Hager, Anselm
    Abstract: Does online fundraising increase charitable giving? Using the Facebook advertising tool, we implemented a natural field experiment across Germany, randomly assigning almost 8,000 postal codes to Save the Children fundraising videos or to a pure control. We studied changes in the volume and frequency of donations to Save the Children and other charities by postal code. Our design circumvents many shortcomings inherent in studies based on click-through data, especially substitution and measurement issues. We found that (i) video fundraising increased donation frequency and value to Save the Children during the campaign and in the subsequent five weeks; (ii) the campaign was profitable for the fundraiser; and (iii) the effects were similar independent of video content and impression assignment strategy. However, we also found non-negligible crowding out of donations to other similar charities or projects. Finally, we demonstrated that click data are an inappropriate proxy for donations and recommend that managers use careful experimental designs that can plausibly evaluate the effects of advertising on relevant outcomes.
    Keywords: Charitable giving,field experiments,fundraising,social media,competition
    JEL: C93 D64 D12
    Date: 2022
  12. By: Kimberly Kreiss
    Abstract: In the decade prior to the COVID-19 pandemic, bank branches were closing at a steady rate. Additionally, households with a bank account increasingly adopted mobile or online banking for at least a portion of their banking needs. As COVID-19 dramatically changes the desire and willingness for consumers to have in-person interactions, it may accelerate both of these trends and lead to a permanent shift in how people access financial services.
    Date: 2021–12–17
  13. By: Robert M. Adams; Vitaly M. Bord; Bradley Katcher
    Abstract: Consumer credit card balances in the United States experienced unprecedented declines during the COVID-19 pandemic. According to the G.19 Consumer Credit statistical release, revolving consumer credit fell more than $120 billion (11 percent) in 2020, the largest decline in both nominal and percentage terms in the history of the series.
    Date: 2021–12–03
  14. By: Hun Myoung Park (IUJ Research Institutey, International University of University)
    Abstract: This study develops a typology of online service provision and use to examine why e-government services fail. Service provision measures the quality of an online service that encompasses task-technology fit and perceived usefulness, while service use denotes the extent that target clients use the online service. Quadrant I represents a set of satisfying online services whose service provision and use are high. Quadrant II-IV respectively represent irritating, useless, and lavish services, which are not successfully developed and/or used. An analysis of four online services illustrates how e-government services are not used properly and how their statuses change over time. The results highlight the importance of reflecting client demands and preferences in system analysis and design and continuously updating online services to respond to changing needs and technological advancements.
    Keywords: E-government, IT failure, modes of IT use, technology acceptance model.
    Date: 2021–12
  15. By: Liran Einav; Peter J. Klenow; Jonathan D. Levin; Raviv Murciano-Goroff
    Abstract: Using Visa debit and credit card transactions in the U.S. from 2016 to 2019, we document the importance of customers in accounting for sales variation across merchants, across stores within retail chains, and over time for individual merchants and stores. Customers, as opposed to transactions per customer or dollar sales per transaction, consistently account for about 80% of sales variation. The top 1% of growing and shrinking merchants account for about 70% of customer and sales reallocation in a given year. In order to illustrate some of the potential implications, we write down an endogenous growth model with and without the customer margin. In the context of this model, we find that the customer margin dramatically increases the size and growth contribution of the largest firms, but lowers the aggregate growth rate by diverting resources from research to customer acquisition activities.
    JEL: E21 L81 O4
    Date: 2021–12
  16. By: Husain S. Akareem (IUJ Research Institutey, International University of University)
    Abstract: Purpose, This study focuses on access to healthcare for a highly impoverished population and aims to provide an understanding of how online healthcare communities (OHCs), as transformative service mediators, can be the platforms for patient with chronic and non-chronic health conditions, to share experience in the base-of-the-pyramid (BOP) context. Design/methodology/approach, A large-scale survey among 658 respondents was conducted in a very low-income country. SEM was used to test the hypotheses. Findings, A model of patients' experience sharing (PES), motivations, and consequences in healthcare services are introduced and tested. The result supports the PES model for patients with chronic health conditions, showing that utilitarian, hedonic and social value dimensions directly influence PES and indirectly influence their continuance intention with online healthcare communities and patient efforts. However, a mediating effect of PES was found only between the value dimensions and patients' efforts. A negative moderation effect of medical mistrust was found in the relationship between utilitarian value and PES for both chronic and nonchronic patient groups. Originality, This study is a pioneering attempt to develop and test the PES model in the BOP market.Classification-JEL: I32, O15, O18
    Keywords: Patients' experience sharing, base-of-the-pyramid, healthcare services, online health communities, healthcare consumers.
    Date: 2021–10
  17. By: Giuseppe Attanasi (Université Côte d'Azur, France; GREDEG CNRS); Marta Ballatore (GREDEG CNRS; Université Côte d'Azur, France); Michela Chessa (Université Côte d'Azur, France; GREDEG CNRS); Agnès Festré (GREDEG CNRS; Université Côte d'Azur, France; The Arctic University of Norway, Tromsø, Norway); Chris Ouangraoua (GREDEG CNRS; Université Côte d'Azur, France)
    Abstract: This study proposes an analysis of behavioral factors (attitudes toward risk, ambiguity and reduction of compound lotteries) as choice determinants of a blockchain-based car insurance smart contract (henceforth, BCT-based SC) vs. an ambiguous expert-based one. In a laboratory experiment, we develop a toy model representing such a choice and complement it with a questionnaire in order to collect data concerning participants’ demographics, personality traits, and car use experience. Our results can inform policies aimed at improving the understanding of BCT-based SC in the case of car insurance services. In particular, they advocate for designing ad hoc policies depending on user’s experience with cars.
    Keywords: Laboratory experiments, Blockchain, Smart contracts, Technology adoption, Risk, Ambiguity, Compound lottery
    JEL: C81 C83 C91 D81 D91
    Date: 2021–12
  18. By: Doh-Shin Jeon; Bruno Jullien (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Mikhail Klimenko
    Date: 2021–07
  19. By: Mehmet Canayaz (Pennsylvania State University - Smeal College of Business(HEC Lausanne); Swiss Finance Institute); Ilja Kantorovitch (EPFL CFI SFI.LL); Roxana Mihet (Swiss Finance Institute - HEC Lausanne)
    Abstract: We analyze how the adoption of the California Consumer Protection Act (CCPA), which limits buying or selling consumer data, heterogeneously affects firms with and without previously gathered data on consumers. Exploiting a novel and hand-collected data set of 11,436 conversational-AI firms with rich personal data on identifiable U.S. consumers, we find that the CCPA gives a strong protection and advantage to firms with in-house data on consumers. First, products of these firms experience significant appreciations in customer ratings and are able to collect more customer data relative to their competitors after the adoption of the CCPA. Second, publicly traded firms with in-house data exhibit higher valuations, profitability, asset utilization, and they invest more after the adoption of the CCPA. Third, earnings of such firms can be more accurately predicted by analysts. To rationalize these empirical findings, we build a general equilibrium model where firms produce final goods using labor and data in the form of intangible capital, which can be traded with other firms subject to an iceberg transportation cost. When the introduction of the CCPA increases the transportation cost, firms without in-house data suffer the most because they cannot adequately substitute the previously externally purchased data, while firms with in-house data expand their market share.
    Keywords: Privacy, Voice Data, In-House Data, Big Data, Intangible Capital
    JEL: D80 G30 G31 G38 L20 O30
    Date: 2021–12
  20. By: Michael Ewens; Joan Farre-Mensa
    Abstract: The U.S. entrepreneurial finance market has changed dramatically over the last two decades. Entrepreneurs raising their first round of venture capital retain 30% more equity in their firm and are more likely to control their board of directors. Late-stage startups are raising larger amounts of capital in the private markets from a growing pool of traditional and new investors. These private market changes have coincided with a sharp decline in the number of firms going public—and when firms do go public, they are older and have raised more private capital. To understand these facts, we provide a systematic description of the differences between private and public firms. Next, we review several regulatory, technological, and competitive changes affecting both startups and investors that help explain how the trade-offs between going public and staying private have changed. We conclude by listing several open research questions.
    JEL: G23 G24 G28 G34 G38
    Date: 2021–12

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.