nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2023‒02‒27
nineteen papers chosen by

  1. Central Bank Digital Currencies and Banking: Literature Review and New Questions By James Chapman; Jonathan Chiu; Mohammad Davoodalhosseini; Janet Hua Jiang; Francisco Rivadeneyra; Yu Zhu
  2. A Framework of Transaction Packaging in High-throughput Blockchains By Yuxuan Lu; Qian Qi; Xi Chen
  3. Digital Divide: Empirical Study of CIUS 2020 By Joann Jasiak; Peter MacKenzie; Purevdorj Tuvaandorj
  4. Digital Economy and Its Components: A Brief Overview and Recommendations By Nguyen, Oliver
  5. Digitalization and Social Protection: Macro and Micro Lessons for Vietnam By Amr Hosny; Alexandre Sollaci
  6. Elastic Cash By Anup Rao
  7. "Exploring Factors Affecting the Mobile Commerce Adoption Among University Students in Malaysia " By Nurul Labanihuda Abdull Rahman
  8. The long-term effects of self pledging in reward crowdfunding By Tobias Regner; Paolo Crosetto
  9. A tool to nowcast tourist overnight stays with payment data and complementary indicators By Marta Crispino; Vincenzo Mariani
  10. Auctions with tokens By Andrea Canidio
  11. Value for Money and Selection: How Pricing Affects Airbnb Ratings By Christoph Carnehl; Maximilian Schaefer; André Stenzel; Kevin Ducbao Tran
  12. Remittances in times of crisis: evidence from Italian corridors By Alessio Ciarlone
  13. Can You Spot a Scam? Measuring and Improving Scam Identification Ability By Elif Kubilayⓡ; Eva Raiberⓡ; Lisa Spantigⓡ; Jana Cahlíkováⓡ; Lucy Kaariaⓡ; Lisa Spantig
  14. Disengaging from Reality: Online Behavior and Unpleasant Political News By Leonardo D’Amico; Guido Tabellini
  15. Does money strengthen our social ties? Longitudinal evidence of lottery winners By Costa-Font, Joan; Powdthavee, Nattavudh
  16. Taking the biscuit: how Safari privacy policies affect online advertising By Mateusz Mysliwski; Lars Nesheim; Simeon Duckworth
  17. Online Shopping Can Redistribute Local Tax Revenue from Urban to Rural America By David R. Agrawal; Iuliia Shybalkina
  18. On the marginal utility of fiat money: insurmountable circularity or not? By Reiss, Michael
  19. DeFi: data-driven characterisation of Uniswap v3 ecosystem & an ideal crypto law for liquidity pools By Deborah Miori; Mihai Cucuringu

  1. By: James Chapman; Jonathan Chiu; Mohammad Davoodalhosseini; Janet Hua Jiang; Francisco Rivadeneyra; Yu Zhu
    Abstract: We review the nascent but fast-growing literature on central bank digital currencies (CBDCs), focusing on their potential impacts on private banks. We evaluate these impacts in three areas of traditional banking: payments, lending and liquidity and maturity transformation. For each area, we discuss the lessons learned and identify gaps in the research yet to be fully explored. We also take a broader look at CBDCs and highlight two promising directions for future research. One is to study CBDCs through the lens of industrial organization, exploring issues such as platform competition and business models. The second is the crypto space and its new developments such as stablecoins and decentralized finance.
    Keywords: Central bank research; Digital currencies and fintech; Financial institutions; Financial stability
    JEL: E50 E58 G00 L00
    Date: 2023–02
  2. By: Yuxuan Lu; Qian Qi; Xi Chen
    Abstract: We develop a model of coordination and allocation of decentralized multi-sided markets, in which our theoretical analysis is promisingly optimizing the decentralized transaction packaging process at high-throughput blockchains or Web 3.0 platforms. In contrast to the stylized centralized platform, the decentralized platform is powered by blockchain technology, which allows for secure and transparent Peer-to-Peer transactions among users. Traditional single-chain-based blockchains suffer from the well-known blockchain trilemma. Beyond the single-chain-based scheme, decentralized high-throughput blockchains adopt parallel protocols to reconcile the blockchain trilemma, implementing any tasking and desired allocation. However, unneglectable network latency may induce partial observability, resulting in incoordination and misallocation issues for the decentralized transaction packaging process at the current high-throughput blockchain protocols. To address this problem, we consider a strategic coordination mechanism for the decentralized transaction packaging process by using a game-theoretic approach. Under a tractable two-period model, we find a Bayesian Nash equilibrium of the miner's strategic transaction packaging under partial observability. Along with novel algorithms for computing equilibrium payoffs, we show that the decentralized platform can achieve an efficient and stable market outcome. The model also highlights that the proposed mechanism can endogenously offer a base fee per gas without any restructuration of the initial blockchain transaction fee mechanism. The theoretical results that underlie the algorithms also imply bounds on the computational complexity of equilibrium payoffs.
    Date: 2023–01
  3. By: Joann Jasiak; Peter MacKenzie; Purevdorj Tuvaandorj
    Abstract: As Canada and other major countries investigate implementing ``digital money'' or Central Bank Digital Currencies (CBDC), important questions need to be answered relating to the effect of demographic and geographic factors on the population's digital literacy. This paper uses the Canadian Internet Use Survey (CIUS) 2020 and survey versions of Lasso inference methods to assess the digital divide in Canada and determine the relevant factors that influence it. We find that a significant divide in the use of digital technologies, e.g., online banking and virtual wallet, continues to exist across different demographic and geographic categories. We also create a digital divide score that measures the survey respondents' digital literacy and provide multiple correspondence analyses that further corroborate these findings.
    Date: 2023–01
  4. By: Nguyen, Oliver
    Abstract: The term "digital economy" refers to the use of information technology to create, adapt, market and consume goods and services that are based on the use of information technology, in order to make money. A number of digital research areas have been explored in the past few years, including digital banking, e-commerce, virtual education, smartphone apps, and collaboration platforms. During the past few decades, there has been no doubt that the world we live in has been changing steadily in many ways. Among the key factors that have driven these changes has been the Digital Revolution, which is one of the key drivers of these changes. It would be more accurate to say that the purpose of digital transformation is not to search for unicorns on the Internet, but rather to use the newest technology to do what you do already in a more efficient and effective manner. As a result of digital technologies, many countries are in a position to enhance their competitiveness and promote economic growth by increasing their use of these technologies. As a definition, the digital economy refers to the economic activity that results from billions of online connections that occur every day between people, businesses, devices, data, and processes. A key component of the digital economy is hyper connectivity, which is the increasing interconnection of people, organisations, and machines that is a result of the Internet, mobile technology, and the internet of things (IoT). There is no doubt that the digital economy is taking shape and upending conventional notions about how businesses are structured; how they interact; and how they provide services, information, and goods to consumers.
    Keywords: Digital economic development, digitisation and economic impact, digitisation for competitiveness, Economy and digital journey
    JEL: L2 O1 O14 O3 O32 O33
    Date: 2023–01–07
  5. By: Amr Hosny; Alexandre Sollaci
    Abstract: The COVID-19 shock has underscored the importance of digital tools for enhancing the effectiveness and efficiency of social protection systems. Cross-country evidence suggests that digital IDs linked with bank and/or mobile money accounts can improve the delivery of social protection programs and better reach eligible beneficiaries. Using data from the Vietnam Household Living Standard Survey, we present micro simulations on the welfare gains of digital social protection during the pandemic. While digitalization offers opportunities, potential risks would need to be carefully managed. Vietnam is advancing on individual pieces of the digitalization puzzle, including full digital IDs and mobile money, and the next step is to put these pieces together.
    Keywords: digitalization; social protection; Covid-19; welfare gain; digitalization puzzle; micro lesson; government transfer; procurement payment; Mobile banking; Digital financial services; Informal employment; Income; Global
    Date: 2022–09–16
  6. By: Anup Rao
    Abstract: Elastic Cash is a new decentralized mechanism for regulating the money supply. The mechanism operates by modifying the supply so that an interest rate determined by a public market is kept approximately fixed. It can be incorporated into the conventional monetary system to improve the elasticity of the US Dollar, and it can be used to design new elastic cryptocurrencies that remain decentralized.
    Date: 2023–01
  7. By: Nurul Labanihuda Abdull Rahman (Universiti Teknologi MARA, Malaysia Author-2-Name: Farah Lina Azizan Author-2-Workplace-Name: Universiti Teknologi MARA, Malaysia Author-3-Name: Shahizan Hassan Author-3-Workplace-Name: School of Business Management, Universiti Utara, Malaysia 06010 Sintok, Kedah, Malaysia Author-4-Name: Dahlia Ibrahim Author-4-Workplace-Name: Faculty of Business and Management, Universiti Teknologi MARA, Cawangan Kedah, Kampus Merbok, 08400 Merbok, Kedah, Malaysia Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)
    Abstract: "Objective - The purpose of this study is to present a conceptual framework for implementing mobile commerce utilising the TAM model and the application of Individual-Collectivism at the Individual Level (ICAIL) as a moderating variable in the context of mobile commerce in Malaysia. Methodology - The data for this study were collected from 550 randomly selected students from four Malaysian institutions using a self-administered questionnaire. Findings - The study found that images significantly correlate with the perceived usefulness variable. In contrast, the relationships between subjective norm, output quality, and outcome demonstrability are not significant, and anxiety has a weak relationship with perceived ease of use, playfulness, perception of external control, and self-efficacy indicates significant relationships. Novelty - Subjective norm is related to the image in a substantial way, whereas perceived utility does not affect behaviour. Furthermore, no significant link was found between the moderating variable, ICAIL, and perceived utility, perceived ease of use, subjective norm, or behavioural intention. This study investigated mobile commerce and the use of the ICAIL, which provides information progress for mobile commerce enterprises, service providers, financial institutions, and governments. Type of Paper - Empirical"
    Keywords: M-commerce; Technology Acceptance Model; Individual-Collectivism at Individual level; Perceived Ease of Use; Perceived Usefulness
    JEL: F1 F10 F19
    Date: 2022–12–31
  8. By: Tobias Regner (Friedrich-Schiller-Universität = Friedrich Schiller University Jena [Jena, Germany]); Paolo Crosetto (GAEL - Laboratoire d'Economie Appliquée de Grenoble - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - UGA - Université Grenoble Alpes - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes)
    Abstract: Crowdfunding recently emerged as an alternative funding channel for start-ups, creative artists and social endeavors. While it succeeded in establishing itself as a major player in entrepreneurial finance, its rather informal setup sparked concerns about its resilience to exploitative behavior by project creators. In this paper we explore one form of such opportunistic behavior: self pledging and its potential effect on the post-campaign development of crowdfunded projects. If project creators use own funds to reach the funding target in order to collect the crowd's funds, they end up with less fresh capital than needed, and might hence face problems in delivering on the promises made. Most reward crowdfunding platforms explicitly prohibit self pledges. Startnext, the biggest German platform, allows them. We exploit Startnext data to shed light on effects of self funding on post-campaign performance. We single out 140 substantially self-funded projects, and, by propensity score matching, a corresponding sample of 140 projects that did not receive any self pledges. For each of these projects we collect information about the project development three or more years after their campaigns ended. Projects may have failed to deliver, have run into severe delays, have delivered but then disappeared, or might have given rise to recurring events or led to the founding of a company/organization. Results indicate no structural long-term impact of substantial self funding.
    Keywords: Crowdfunding, Entrepreneurial finance, Self funding, Survival, Long-term viability
    Date: 2021–04
  9. By: Marta Crispino (Bank of Italy); Vincenzo Mariani (Bank of Italy)
    Abstract: This paper proposes a strategy for nowcasting tourist overnight stays in Italy by exploiting payment card data and Google Search indices. The strategy is applied to national and regional overnight stays at a time of a significant and unanticipated shock to tourism flows and payment habits (the COVID-19 pandemic). Our results show that indicators based on payment data are very informative for predicting tourist volumes, both at the national and at the regional level. Instead, the predictive power of Google Search data is more limited.
    Keywords: tourism, time series, payment cards data, Google Trends, nowcasting
    JEL: L83 C53 C55 F47
    Date: 2023–02
  10. By: Andrea Canidio
    Abstract: I study mechanism design with blockchain-based tokens, that is, tokens that can be used within a mechanism but can also be saved and traded outside of the mechanism. I do so by considering a repeated, private-value auction, in which the auctioneer accepts payments in a blockchain-based token he creates and initially owns. I show that the present-discounted value of the expected revenues is the same as in a standard auction with dollars, but these revenues accrue earlier and are less variable. I then introduce non-contractible effort and the possibility of misappropriating revenues. I compare the auction with tokens to an auction with dollars in which the auctioneer can also issue financial securities. An auction with tokens is preferred when there are sufficiently severe contracting frictions, while the opposite is true when contracting frictions are low.
    Date: 2023–01
  11. By: Christoph Carnehl; Maximilian Schaefer; André Stenzel; Kevin Ducbao Tran
    Abstract: We investigate the impact of prices on ratings using Airbnb data. We theoretically illustrate two opposing channels: higher prices reduce the value for money, worsening ratings, but they increase the taste-based valuation of the average traveler, improving ratings. Results from panel regressions and a regression discontinuity design suggest a dominant value-for-money effect. In line with our model, hosts strategically complement lower prices with higher effort more when ratings are relatively low. Finally, we provide evidence that, upon entry, strategic hosts exploit the dominant value-for-money effect. The median entry discount of seven percent improves medium-run monthly revenues by three percent.
    Date: 2022
  12. By: Alessio Ciarlone (Banca d'Italia)
    Abstract: Defying expectations, remittance flows to low- and middle-income countries withstood the shock related to the outbreak of the COVID-19 pandemic. Relying on detailed data for a large panel of remittance-receiving economies, this paper explores the key drivers of remittance outflows from Italy and finds empirical support to plausible explanations for their resilience during the pandemic. The impulse response functions obtained via a local projection approach confirm the paramount role of remittances as automatic stabilizers. Notwithstanding a reduction in their personal incomes due to the recession in Italy, migrant workers stepped up their financial support to their families back home to cushion the impact of the pandemic. In this regard, a shift from informal to formal remittance channels played a significant role. More specifically, the acceleration in the digitalization of financial services during, and because of, the pandemic had important spillover effects on migrants’ remittances, thus overcoming the hurdles created by the COVID-related restrictions adopted in both the sending and the receiving countries.
    Keywords: Remittances, COVID-19, local projections, digitalisation, mobile money, informality
    JEL: F24 I10 O11
    Date: 2023–02
  13. By: Elif Kubilayⓡ; Eva Raiberⓡ; Lisa Spantigⓡ; Jana Cahlíkováⓡ; Lucy Kaariaⓡ; Lisa Spantig
    Abstract: The recent expansion of digital financial products leads to severe consumer protection issues such as fraud and scams. As these potentially decrease trust in digital services, especially in developing countries, avoiding victimization has become an important policy objective. In an online experiment, we first investigate how well individuals in Kenya identify phone scams using a novel measure of scam identification ability. We then test the effectiveness of scam education, a commonly used approach by banks and institutions for fraud and scam prevention. We find that common tips on how to spot scams do not significantly improve individuals’ scam identification ability, i.e., the distinction of scams from genuine messages. This null effect is driven by an increase in correctly identified scams and a decrease in correctly identified genuine messages. We interpret this as an increase in caution. In addition, we find suggestive evidence that genuine messages which contain scam-like features are more likely to be misclassified, highlighting the importance of a careful design of official communication.
    Keywords: consumer protection, consumer fraud, digital financial services, scam susceptibility, scam education, Kenya
    JEL: D14 D18 G53 O12
    Date: 2023
  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 show that partisan users behave very differently from independents if the news is bad for a candidate. They avoid commenting unfavorable polls and scandals on their favorite candidate, but seek such news on its opponent. When they do comment bad news on their favorite candidate, they try to rationalize it, display a more negative sentiment, and are more likely to cite scandals of the opponent. This behavior is consistent with motivated reasoning, and with the predictions of a model of costly attention, where the cost of attention depends on whether the news is pleasant or unpleasant.
    Date: 2023
  15. By: Costa-Font, Joan; Powdthavee, Nattavudh
    Abstract: We study the effect of lottery wins on social ties and support network in the United Kingdom. On average, we find that winning more in the lottery increases the probability of meeting friends on most days, which is consistent with the complementary effect of income on social ties. The opposite is true with regards to social ties held for more instrumental reasons such as talking to neighbours. Winning more in the lottery also lessens an individual support network consistently with a substitution for instrumental social ties. However, further robustness checks reveal that the average lottery effects are driven by the few outliers of very large wins in the sample, thus suggesting that small to medium-sized wins (below £10k) may not be enough to change people’s social ties and support network in a substantial way.
    Keywords: income; lottery; socialization effect; unearned income; friendships; neighbourhood; social ties
    JEL: Z10
    Date: 2023–02–03
  16. By: Mateusz Mysliwski; Lars Nesheim; Simeon Duckworth
    Abstract: Many controversies that beset the digital economy turn on the role of advertising and its use of personal data. We examine the trade-off between privacy and ad targeting accuracy from the advertisers’ perspective. By exploiting Apple’s gradual restriction, and ultimately the abolition of ad tracking in its Safari browser called Intelligent Tracking Prevention (ITP), we analyse how much advertisers are willing to pay for third-party cookies and how tightening privacy policies affect market outcomes. Our empirical strategy treats Apple’s policy change as an exogenous shock to the supply of tracking opportunities and uses a series of event study models to estimate its causal impact. Our novel dataset on billions of online ads spans multiple countries, advertisers, and websites, allowing for a thorough heterogeneity analysis. We find that the estimated treatment effects around the ITP introduction dates are small in magnitude, differ across countries and vary by campaign and type of marketplace. This finding contrasts with anecdotal industry evidence that ads in Safari are sold at a significant markdown relative to other browsers. Moreover, our result suggests that the market failed to adjust immediately to a new, more privacy-sensitive equilibrium.
    Date: 2023–02–09
  17. By: David R. Agrawal; Iuliia Shybalkina
    Abstract: What is the effect of e-commerce on the geographic distribution of local sales tax revenues? Using COVID-19 as a shock to online shopping and hand-collected high-frequency data on local sales tax revenue, we document an important shift in the state and local public finance landscape. As e-commerce increases, a destination basis for remote sales taxes results in higher growth in local sales tax collections in smaller, generally more rural jurisdictions. This increase comes at the expense of larger urban retail centers, which previously enjoyed an origin basis for sales tax collections. As households replace in-person commerce with online shopping, sales taxes no longer accrue to urban centers with large concentrations of retail establishments and instead expand the tax base of smaller jurisdictions. State-level reforms that enforce sales compliance generally mitigate the revenue falls in larger jurisdictions and amplify the increases in smaller jurisdictions.
    Keywords: sales tax, online shopping, e-commerce, COVID-19, tax revenue
    JEL: H25 H71 L81 R51
    Date: 2023
  18. By: Reiss, Michael
    Abstract: The question of how a pure fiat currency is enforced and comes to have a non-zero value has been much debated (Selgin, 1994). What is less often addressed is, in the case where the enforcement is taken for granted and we ask what value (in terms of goods and services) the currency will end up taking. Establishing a decentralised mechanism for price formation has proven a challenge for economists: "Since no decentralized out-of-equilibrium adjustment mechanism has been discovered, we currently have no acceptable dynamical model of the Walrasian system." (Gintis, 2006) In his paper, Gintis put forward a model for price discovery based on the evolution of the model's agents, i.e. \poorly performing agents dying and being replaced by copies of the well performing agents." It seems improbable that this mechanism is the driving force behind price discovery in the real world. This paper proposes a more realistic mechanism and presents results from a corresponding agent based model.
    Keywords: Price discovery, Walrasian system, Agent based model
    JEL: E37 E47
    Date: 2023
  19. By: Deborah Miori; Mihai Cucuringu
    Abstract: Uniswap is a Constant Product Market Maker built around liquidity pools, where pairs of tokens are exchanged subject to a fee that is proportional to the size of transactions. At the time of writing, there exist more than 6, 000 pools associated with Uniswap v3, implying that empirical investigations on the full ecosystem can easily become computationally expensive. Thus, we propose a systematic workflow to extract and analyse a meaningful but computationally tractable sub-universe of liquidity pools. Leveraging on the 34 pools found relevant for the six-months time window January-June 2022, we then investigate the related liquidity consumption behaviour of market participants. We propose to represent each liquidity taker by a suitably constructed transaction graph, which is a fully connected network where nodes are the liquidity taker's executed transactions, and edges contain weights encoding the time elapsed between any two transactions. We extend the NLP-inspired graph2vec algorithm to the weighted undirected setting, and employ it to obtain an embedding of the set of graphs. This embedding allows us to extract seven clusters of liquidity takers, with equivalent behavioural patters and interpretable trading preferences. We conclude our work by testing for relationships between the characteristic mechanisms of each pool, i.e. liquidity provision, consumption, and price variation. We introduce a related ideal crypto law, inspired from the ideal gas law of thermodynamics, and demonstrate that pools adhering to this law are healthier trading venues in terms of sensitivity of liquidity and agents' activity. Regulators and practitioners could benefit from our model by developing related pool health monitoring tools.
    Date: 2022–12

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