nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2022‒06‒20
eighteen papers chosen by

  1. Mobile Technology Supply Factors and Mobile Money Innovation: Thresholds for Complementary Policies By Simplice A. Asongu; Nicholas M. Odhiambo
  2. SoK: Blockchain Decentralization By Luyao Zhang; Xinshi Ma; Yulin Liu
  3. The new crypto niche: NFTs, play-to-earn, and metaverse tokens By Vidal-Tomás, David
  4. Is online retail killing coffee shops? Estimating the winners and losers of online retail using customer transaction microdata By Lindsay E. Relihan
  5. Going Cashless: Government’s Point Reward Program vs. COVID-19 By Toshitaka Sekine; Toshiaki Shoji; Tsutomu Watanabe
  6. Unstable Coins: The Early History of Central Bank Analog Currencies By William Roberds
  7. Expanding access to finance to boost growth and reduce inequalities in Mexico By Alessandro Maravalle; Alberto González Pandiella
  8. Trading volume and liquidity provision in cryptocurrency markets By Bianchi, Daniele; Babiak, Mykola; Dickerson, Alexander
  9. The sustainable practices of multinational banks as drivers of financial inclusion in developing countries By Úbeda, Fernando; Mendez, Alvaro; Forcadell, Francisco Javier
  10. The diffusion of disruptive technologies By Nicholas Bloom; Tarek Alexander Hassan; Aakash Kalyani; Josh Lerner; Ahmed Tahoun
  11. Remittances and Income Inequality in Africa: Financial Development Thresholds for Economic Policy By Ofori, Isaac K.; Gbolonyo, Emmanuel; Dossou, Marcel A. T.; Nkrumah, Richard K.
  12. Automated Chat Application Surveys Using Whatsapp: Evidence from Panel Surveys and a Mode Experiment By Fei, Jennifer; Wolff, Jessica Sadye; Hotard, Michael; Ingham, Hannah; Khanna, Saurabh; Lawrence, Duncan; Tesfaye, Beza; Weinstein, Jeremy; Yasenov, Vasil; Hainmueller, Jens
  13. The application of the regulations on contracts for the supply of digital content and services to video games: The Cyberpunk 2077 case By Geoffray Brunaux
  14. Online Political Debates By Leonardo D'Amico; Guido Tabellini
  15. Steering behavior. The potential of (digital) nudging for corporate communications By Clausen, Sünje; Stieglitz, Stefan; Wloka, Michelle
  16. Environmental-Social-Governance Preferences and the Holding of Crypto-Assets By Pavel Ciaian; Andrej Cupak; Pirmin Fessler; d'Artis Kancs
  17. Do nudges reduce borrowing and consumer confusion in the credit card market? By Adams, Paul; Guttman-Kenney, Benedict; Hayes, Lucy; Hunt, Stefan; Laibson, David; Stewart, Neil
  18. Information Technology and Sustainability in Developing Countries: An Introduction By Simplice A. Asongu; Nicholas M. Odhiambo

  1. By: Simplice A. Asongu; Nicholas M. Odhiambo
    Abstract: This study complements the extant literature by assessing how enhancing supply factors of mobile technologies affect mobile money innovations for financial inclusion in developing countries. The mobile money innovation outcome variables are: mobile money accounts, the mobile phone used to send money and the mobile phone used to receive money. The mobile technology supply factors are: unique mobile subscription rate, mobile connectivity performance, mobile connectivity coverage and telecommunications (telecom) sector regulation. The empirical evidence is based on quadratic Tobit regressions and the following findings are established. There are Kuznets or inverted shaped nexuses between three of the four supply factors and mobile money innovations from which thresholds for complementary policies are provided as follows: (i) Unique adults’ mobile subscription rates of 128.500%, 121.500% and 77.750% for mobile money accounts, the mobile used to send money and the mobile used to receive money, respectively; (ii) the average share of the population covered by 2G, 3G and 4G mobile data networks of 61.250% and 51.833% for the mobile used to send money and the mobile used to receive money, respectively; and (iii) a telecom sector regulation index of 0.409, 0.283 and 0.283 for mobile money accounts, the mobile phone used to send money and the mobile phone used to receive money, respectively. Some complementary policies are discussed, because at the attendant thresholds, the engaged supply factors of mobile money technologies become necessary, but not sufficient conditions of mobile money innovations for financial inclusion.
  2. By: Luyao Zhang; Xinshi Ma; Yulin Liu
    Abstract: Blockchain empowers a decentralized economy by enabling distributed trust in a peer-to-peer network. However, surprisingly, a widely accepted definition or measurement of decentralization is still lacking. We explore a systematization of knowledge (SoK) on blockchain decentralization by reviewing existing studies on various aspects of blockchain decentralization. First, we establish a taxonomy for analyzing blockchain decentralization in the five facets of consensus, network, governance, wealth, and transaction. We find a lack of research on the transaction aspects that closely characterize user behavior. Second, we apply Shannon entropy in information theory to propose a decentralization index for blockchain transactions. We show that our index intuitively measures levels of decentralization in peer-to-peer transactions by simulating blockchain token transfers. Third, we apply our index to empirically analyze the dynamics of DeFi token transfers. Intertemporally, we observe that levels of decentralization converge regardless of the initial levels of decentralization. Comparison of DeFi applications shows that exchange and lending are more decentralized than payment and derivatives. We also discover that a greater return of ether, the native coin of the Ethereum blockchain, predicts a greater decentralization level in stablecoin transfer that includes ether as collateral. Finally, we develop future research directions to explore the interactions between different facets of blockchain decentralization, the design of blockchain mechanisms that achieve sustainable decentralization, and the interplay of decentralization levels and economic factors.
    Date: 2022–05
  3. By: Vidal-Tomás, David
    Abstract: The combination of blockchain technologies and the gaming industry has given rise to metaverses and play-to-earn games, which incorporate their own economy, commerce, and currencies, namely, metaverse and play-to-earn tokens. In this study, we analysed the performance and dynamics of 174 tokens, showing that this new crypto niche is characterised by (i) a positive performance in the long run, (ii) the absence of high co-movements with the cryptocurrency market, (iii) the emergence of bubbles, (iv) and the absence of high correlations with NFT features, such as number of transactions, sales and Google searches.
    Keywords: Metaverse , Play-to-earn , NFT , Cryptocurrency , Gaming industry , Diversification
    JEL: G10
    Date: 2022–02–15
  4. By: Lindsay E. Relihan
    Abstract: Is online retail a complement or substitute to local offline economies? This paper provides the first evidence that consumers use time saved from online retail to increase their trips for time-intensive services like coffee shops. I use new, detailed data on the daily transactions of millions of anonymized customers. I then estimate a discrete choice model of consumer trip choice, which embeds time use mechanisms and accounts for correlations in trip utility shocks. I show that the model matches key features of observed behaviour that are missed by more standard models, such as the disproportionate increase in trips to nearby coffee shops when consumers switch to online groceries. Model counterfactuals are used to forecast changes in future trip demand and outline strategies, which offline retailers can use to compete against online retail. For consumers, I find that the welfare gains from online grocery platforms go disproportionately to high-income consumers.
    Keywords: online, retail, time use, tips
    Date: 2022–12
  5. By: Toshitaka Sekine (Hitotsubashi University); Toshiaki Shoji (Seikei University); Tsutomu Watanabe (University of Tokyo)
    Abstract: Using credit card transaction data, we examine the impacts of two successive events that promoted cashless payments in Japan: the government’s program and the COVID19 pandemic. We find that the number of card users was 9-12 percent higher in restaurants that participated in the program than those that did not. We present a simple framework accounting for the spread of cashless payments. Our model predicts that the impact of the policy intervention diminished as the use of cashless payments increased, which accords well with Japan’s COVID-19 experience. The estimated impact of COVID-19 was around two-thirds of that of the program.
    Keywords: Cash and cashless payments, technology adoption, promotion program, COVID-19
    JEL: E42 O33 O38
    Date: 2022–06
  6. By: William Roberds
    Abstract: Recently, there has been much discussion as to whether central bank digital currencies (CBDCs) should be introduced, and if so, how they should be designed. This article offers a historical perspective on this discussion, with a survey of early public bank (proto-central bank) "analog currencies"—circulating banknotes. Public banknotes were an experimental product when they were first issued in sixteenth-century Naples, but by the late nineteenth century, such notes could be found in most European countries. In between came all sorts of implementation difficulties: egregious insider fraud, a real estate finance bubble, hyperinflation, rampant counterfeiting, and complete institutional collapse. Despite these many misfires, central bank–issued notes eventually became the default form of payment in virtually every country worldwide.
    Keywords: central bank digital currency; banknotes
    JEL: E58 N13
    Date: 2022–03–03
  7. By: Alessandro Maravalle; Alberto González Pandiella
    Abstract: The access to formal financial services in Mexico is particularly low. Access is also significantly unequal across income levels, gender, between rural and urban areas and across regions. SMEs access to bank credit is low, hampering firms’ ability to grow and innovate. The use of cash and informal credit is still widespread, especially in rural areas, where financial infrastructure is underdeveloped. The diffusion of digital financial services is slowly advancing but remains low, hindered by a relatively low level of financial literacy and a digital divide. Expanding access to finance would enable Mexican households to invest in education and health, and better manage income shocks and smooth consumption. It would also enable Mexican firms to invest more, increase productivity and create formal jobs. Low-income households, small firms and more disadvantaged regions would particularly benefit, as it would unlock new economic opportunities for them. Boosting competition in the banking sector would facilitate SMEs access to credit by lowering interest rate margins. Upgrading the regulatory framework of the financial system would help increase competition and quality of financial services. The potential of the fintech sector is yet to be materialised, which would further increase competition and bring financial services to wider segments of the population. Strengthening financial education and digital literacy would facilitate a larger and better use of traditional and digital financial services.
    Keywords: competition, credit, digital, financial education, financial inclusion, FinTech, SMEs
    JEL: D18 G2 G41 G51 G52 G53 O32
    Date: 2022–06–03
  8. By: Bianchi, Daniele (Queen Mary University of London); Babiak, Mykola (Lancaster University Management School); Dickerson, Alexander (Warwick Business School, University of Warwick)
    Abstract: We provide empirical evidence within the context of cryptocurrency markets that the returns from liq uidity provision, proxied by the returns of a short-term reversal strategy, are primarily concentrated in trading pairs with lower levels of market activity. Empirically, we focus on a moderately large cross section of cryptocurrency pairs traded against the U.S. Dollar from March 1, 2017 to March 1, 2022 on multiple centralised exchanges. Our findings suggest that expected returns from liquidity provision are amplified in smaller, more volatile, and less liquid cryptocurrency pairs where fear of adverse selection might be higher. A panel regression analysis confirms that the interaction between lagged returns and trading volume contains significant predictive information for the dynamics of cryptocurrency returns. This is consistent with theories that highlight the role of inventory risk and adverse selection for liquidity provision.
    Keywords: Liquidity provision; short-term reversal; trading volume; empirical asset pricing; adverse selection.
    JEL: C58 E44 G12 G17
    Date: 2022–05–01
  9. By: Úbeda, Fernando; Mendez, Alvaro; Forcadell, Francisco Javier
    Abstract: Lack of access to banking is a major problem that contributes to inequality in the developing world. For this reason, financial inclusion is a crucial objective of the Sustainable Development Goals (SDGs). In this study, we investigate the impact of the sustainable practices of multinational banks (MNBs) on financial inclusion. Drawing from a sample of 24 developing countries and 28,089 individuals, we obtain robust evidence about the positive effect of sustainable practices on financial inclusion. We find that MNBs increase the use of mobile bank accounts in the developing world. We also find that when these MNBs follow sustainable practices, the use of mobile bank accounts positively intensifies. These findings are consequential because mobile banking is one of the most powerful means to achieve financial inclusion in the developing world.
    Keywords: sustainable banking; finance inclusion; mobile banking accounts; sustainable development goals
    JEL: G00 G20 G21 Q01 Q56 D63
    Date: 2022
  10. By: Nicholas Bloom; Tarek Alexander Hassan; Aakash Kalyani; Josh Lerner; Ahmed Tahoun
    Abstract: We identify novel technologies using textual analysis of patents, job postings, and earnings calls. Our approach enables us to identify and document the diffusion of 29 disruptive technologies across firms and labor markets in the U.S. Five stylized facts emerge from our data. First, the locations where technologies are developed that later disrupt businesses are geographically highly concentrated, even more so than overall patenting. Second, as the technologies mature and the number of new jobs related to them grows, they gradually spread across space. While initial hiring is concentrated in high-skilled jobs, over time the mean skill level in new positions associated with the technologies declines, broadening the types of jobs that adopt a given technology. At the same time, the geographic diffusion of low-skilled positions is significantly faster than higher-skilled ones, so that the locations where initial discoveries were made retain their leading positions among high-paying positions for decades. Finally, these technology hubs are more likely to arise in areas with universities and high skilled labor pools.
    Keywords: disruptive technologies, technological change, firms, labor markets ,
    Date: 2021–09–10
  11. By: Ofori, Isaac K.; Gbolonyo, Emmanuel; Dossou, Marcel A. T.; Nkrumah, Richard K.
    Abstract: The study employs macrodata on 42 African countries to examine whether remittances and financial development (including the sub-components of access, depth and efficiency) contribute to the equalisation of incomes across the continent. Robust evidence from the dynamic GMM estimator shows that: (i) remittances heighten income inequality in Africa, (ii) Africa’s financial system is not potent enough for repacking remittances towards the equalisation of incomes, and (iii) vis-à-vis financial access and depth, inefficiencies characterising Africa’s financial institution is the main reason remittances contribute to the widening of the income disparity gap. Nonetheless, the optimism which we provide by way of threshold analysis shows that channelling efforts into the development of Africa’s financial sector could yield shared income distribution dividends. In particular, efforts should be made to achieve a minimum of 23.05 per cent of financial access, and 3.02 per cent for that of efficiency of financial institutions if Africa’s financial sector is to repackage external finance towards the equalisation of incomes. A few policy recommendations are provided in the end.
    Keywords: Africa; Financial Development; Financial Sector Efficiency; Income Inequality; Remittances.
    JEL: F4 F6 G2 O15 O55
    Date: 2022
  12. By: Fei, Jennifer (Stanford University); Wolff, Jessica Sadye (Stanford University); Hotard, Michael (Stanford University); Ingham, Hannah (Emergant, LLC); Khanna, Saurabh (Stanford University); Lawrence, Duncan (Stanford University); Tesfaye, Beza (Mercy Corps Nepal); Weinstein, Jeremy (Stanford University); Yasenov, Vasil (Stanford University); Hainmueller, Jens (Stanford University)
    Abstract: We present a method to conduct automated surveys over WhatsApp, a globally popular messaging service. WhatsApp surveys offer potential advantages since they incur relatively low costs to respondents and researchers, are easy to use for respondents who are already familiar with WhatsApp chat features, and facilitate continued engagement with mobile populations as users can retain their WhatsApp number even if they change SIM cards and phone numbers. Yet, there is limited knowledge on how well WhatsApp surveys perform empirically. We test the WhatsApp method using two original panel surveys of refugees in Colombia and the U.S. and find satisfactory response rates and retention over a nine-month follow-up period in these mobile populations. We also conduct a mode experiment in Colombia comparing WhatsApp to short message service (SMS) and interactive voice response (IVR) surveys. We find that WhatsApp had a 12 and 27 percentage points higher response rate than IVR and SMS, respectively, resulting from higher initial engagement and lower break-off. We conclude by discussing advantages and limitations of the WhatsApp method and offer documentation and a public code repository to support researchers and practitioners in applying the method in other contexts.
    Keywords: survey methods, panel data, mobile populations, mode experiment
    JEL: F22 J15 K42
    Date: 2022–04
  13. By: Geoffray Brunaux (URCA - Université de Reims Champagne-Ardenne)
    Abstract: This study includes an analysis of the very recent European regulation relating to contracts for the supply of digital contents and services. This aims to strike a balance between the interests of consumers and that of professionals, which is particularly evident in the video game industry. This balance is sought through the need to provide and maintain a service that meets consumers' expectations, requiring professionals to implement appropriate solutions in the event of a lack of conformity. Maintening digital contents or services leads correlatively to the admission of corrective updates by users, thus integrating their accountability.
    Abstract: Cette étude comporte une analyse de la très récente réglementation européenne relative aux contrats de fourniture de contenus et services numériques. Celle-ci tend à établir un équilibre entre l'intérêt des consommateurs et celui des professionnels, ce qui se manifeste notamment dans le secteur des jeux vidéo. Cet équilibre est recherché à travers la nécessité de fournir et de maintenir un contenu ou un service numérique conforme aux attentes des consommateurs, appelant la mise en oeuvre par les professionnels de solutions adaptées en cas de défaut de conformité. Le maintien du contenu ou du service numérique conduit corrélativement à l'admission de mises à jour correctives par les utilisateurs, intégrant ainsi une certaine responsabilisation de ces derniers.
    Keywords: Numérique,Jeu vidéo,Conformité,Mise à jour,Consommateur
    Date: 2021–09–01
  14. By: Leonardo D'Amico; Guido Tabellini
    Abstract: We study how individuals comment on political news posted on Reddit’s main political forum during the 2016 US Presidential Election. We present two main findings. First, opposite partisan users comment on the same news sources, but on different news. Second, partisan users behave very differently from independents if the news is bad for a candidate. Compared to independents, partisan comments on bad news are less frequent on the own candidate, and more frequent on the opponent. The content of the comments also suggests that partisan users are less likely to accept bad news on their candidate, and more likely on the opponent. This behavior is consistent with motivated reasoning, and with the predictions of a model of rational inattention where the cost of attention depends on whether the news is pleasant or unpleasant.
    Date: 2022
  15. By: Clausen, Sünje; Stieglitz, Stefan; Wloka, Michelle
    Abstract: How can you guide individual decision-making without manipulating it? Digital Nudging could be an answer to this question. But what does this mean for corporate communications? A research team of the Duisburg-Essen University examined the following issues on digital nudging: - How do people make decisions and how do design elements influence these decisions? - What are possible use cases of digital nudging for corporate communications? - What needs to be considered when implementing digital nudging?
    Date: 2022
  16. By: Pavel Ciaian; Andrej Cupak; Pirmin Fessler; d'Artis Kancs
    Abstract: Individuals invest in ESG-assets not only because of higher expected returns but also for ethical and social considerations. Controversies surrounding the ESG footprint of crypto-assets – mainly on grounds of the energy-intensive crypto mining and their use for illegal activities – offer an interesting object of inquiry. Leveraging a unique representative survey for the Austrian population, we examine whether investors’ ESG preferences can explain cross-sectional differences in individual portfolio exposure to crypto-assets. While we find no statistically significant relationship between ESG concerns of investors and the probability of holding bonds or shares, in contrast, we find a strong association between investors’ ESG preferences and crypto-investment exposure.
    Keywords: Crypto-assets; financial behaviour; environmental-social-governance preferences.
    JEL: D14 G11 G41
    Date: 2022–03–07
  17. By: Adams, Paul; Guttman-Kenney, Benedict; Hayes, Lucy; Hunt, Stefan; Laibson, David; Stewart, Neil
    Abstract: We study nudges that turn out to have precise null effects in reducing long-run credit card debt. We test nudges across two field experiments covering 183,441 UK cardholders. Our first experiment studies nudges added to monthly credit card statements. Our second experiment studies letters and email nudges (separate from monthly statements) sent to cardholders who signed up to automatically pay the minimum required payment.In a follow-up survey to our second experiment, we find that 96% of respondents underestimate the time it would take to fully repay a debt if the cardholder made only the minimum required payment. The nudges reduce this confusion, but underestimation remains overwhelmingly common.
    Keywords: ES/K002201/1; ES/V004867/1; ES/P008976/1; ES/N018192/1; RP2012-V-022
    JEL: F3 G3 N0 J1
    Date: 2022–05–03
  18. By: Simplice A. Asongu (Yaounde, Cameroon); Nicholas M. Odhiambo (Pretoria, South Africa)
    Abstract: The purpose of this special issue is to contribute to the growing body of literature on the externalities of information technology within the specific remit of the relationship between information technology and sustainability outcomes in developing countries, not least because of the sparse scholarship on the subject focusing on developing countries. Each of the seven selected contributions to knowledge solidly stands on its own merits, as summarized in three main strands, notably: (i) information technology usage; (ii) the nexus between ICT and growth outcomes at the urban and national levels and (iii) leveraging on ICT for poverty reduction.
    Keywords: Information technology; sustainability; developing countries
    JEL: D10 D14 D31 D60 O30
    Date: 2022–01

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