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on Payment Systems and Financial Technology |
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Issue of 2023‒07‒31
nineteen papers chosen by |
| By: | Ozili, Peterson K |
| Abstract: | This paper presents some theories that support central bank digital currency development and its usefulness. The theories provide useful explanations for the development and use of central bank digital currency in the economy. Some theories show that information about central bank digital currency, as well as the perceived usefulness and ease of use of central bank digital currency, are crucial for its success. Other theories show that central bank digital currency can facilitate the flow of funds to economic agents, and enhance the functioning of the economic system, thereby contributing to economic growth. These theories are useful to economists, policymakers and researchers who are interested in how central bank digital currency affects economic activities. |
| Keywords: | CBDC, central bank digital currency, theories. |
| JEL: | E51 E52 E58 E59 O31 O32 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:117806&r=pay |
| By: | Abha Naik; Esra Yeniaras; Gerhard Hellstern; Grishma Prasad; Sanjay Kumar Lalta Prasad Vishwakarma |
| Abstract: | In this paper, we provide an overview of the recent work in the quantum finance realm from various perspectives. The applications in consideration are Portfolio Optimization, Fraud Detection, and Monte Carlo methods for derivative pricing and risk calculation. Furthermore, we give a comprehensive overview of the applications of quantum computing in the field of blockchain technology which is a main concept in fintech. In that sense, we first introduce the general overview of blockchain with its main cryptographic primitives such as digital signature algorithms, hash functions, and random number generators as well as the security vulnerabilities of blockchain technologies after the merge of quantum computers considering Shor's quantum factoring and Grover's quantum search algorithms. We then discuss the privacy preserving quantum-resistant blockchain systems via threshold signatures, ring signatures, and zero-knowledge proof systems i.e. ZK-SNARKs in quantum resistant blockchains. After emphasizing the difference between the quantum-resistant blockchain and quantum-safe blockchain we mention the security countermeasures to take against the possible quantumized attacks aiming these systems. We finalize our discussion with quantum blockchain, efficient quantum mining and necessary infrastructures for constructing such systems based on quantum computing. This review has the intention to be a bridge to fill the gap between quantum computing and one of its most prominent application realms: Finance. We provide the state-of-the-art results in the intersection of finance and quantum technology for both industrial practitioners and academicians. |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2307.01155&r=pay |
| By: | BAGDE, RAKSHIT MADAN (Late. Mansaramji Padole Arts College, Ganeshpur, Bhandara) |
| Abstract: | Recently, digital currency has shown the potential and tendency to completely change the way society thinks about money. Today we see the emergence of Bitcoin (BTC), Ethereum (ETH) and thousands of other cryptocurrencies. These currencies exist only in electronic form today, prompting global central banks to research how national digital currencies could work. A digital currency is a currency that is available only in electronic form. Electronic versions of currency already dominate the financial systems of most countries. The difference between digital currency and electronic currency already in bank accounts is that digital currency can never take physical form. In June 2019, Facebook-led plans for Libra, their digital currency, were announced and attracted a great deal of world attention. This study will discuss whether digital currency will affect traditional currency, benefits of digital currency and whether this currency will be accepted in the future. |
| Date: | 2022–02–27 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:3yvxw&r=pay |
| By: | Marcin W\k{a}torek; Maria Skupie\'n; Jaros{\l}aw Kwapie\'n; Stanis{\l}aw Dro\.zd\.z |
| Abstract: | This paper investigates the temporal patterns of activity in the cryptocurrency market with a focus on bitcoin, ether, dogecoin, and winklink from January 2020 to December 2022. Market activity measures - logarithmic returns, volume, and transaction number, sampled every 10 seconds, were divided into intraday and intraweek periods and then further decomposed into recurring and noise components via correlation matrix formalism. The key findings include the distinctive market behavior from traditional stock markets due to the nonexistence of trade opening and closing. This was manifest in three enhanced-activity phases aligning with Asian, European, and US trading sessions. An intriguing pattern of activity surge in 15-minute intervals, particularly at full hours, was also noticed, implying the potential role of algorithmic trading. Most notably, recurring bursts of activity in bitcoin and ether were identified to coincide with the release times of significant US macroeconomic reports such as Nonfarm payrolls, Consumer Price Index data, and Federal Reserve statements. The most correlated daily patterns of activity occurred in 2022, possibly reflecting the documented correlations with US stock indices in the same period. Factors that are external to the inner market dynamics are found to be responsible for the repeatable components of the market dynamics, while the internal factors appear to be substantially random, which manifests itself in a good agreement between the empirical eigenvalue distributions in their bulk and the random matrix theory predictions expressed by the Marchenko-Pastur distribution. The findings reported support the growing integration of cryptocurrencies into the global financial markets. |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2306.17095&r=pay |
| By: | Mingxiao Song; Yunsong Liu; Agam Shah; Sudheer Chava |
| Abstract: | The Non-Fungible-Token (NFT) market has experienced explosive growth in recent years. According to DappRadar, the total transaction volume on OpenSea, the largest NFT marketplace, reached 34.7 billion dollars in February 2023. However, the NFT market is mostly unregulated and there are significant concerns about money laundering, fraud and wash trading. Amateur traders and retail investors comprise a significant fraction of the NFT market. Hence it is important that researchers highlight the relevant risks involved in NFT trading. In this paper, we attempt to uncover common fraudulent behaviors such as wash trading that could mislead other traders. Using market data, we design quantitative features from the network, monetary, and temporal perspectives that are fed into K-means clustering unsupervised learning algorithm to sort traders into groups. Lastly, we discuss the clustering results' significance and how regulations can reduce undesired behaviors. Our work can potentially help regulators narrow down their search space for bad actors in the market as well as provide insights for amateur traders to protect themselves from unforeseen frauds. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2306.04643&r=pay |
| By: | Simplice A. Asongu (Yaounde, Cameroon); Yolande E. Ngoungou (Yaoundé, Cameroon); Joseph Nnanna (The Development Bank of Nigeria, Abuja, Nigeria) |
| Abstract: | This study assesses nexuses between mobile money innovations and health performance in terms of total life expectancy in 43 countries in Sub-Saharan Africa employing data for the period 2004-2018. Four mobile money innovation dynamics are proxied with registered mobile money agents and active mobile money agents. The empirical evidence is based on quantile regressions. The findings overwhelmingly show that mobile money innovations are relevant in improving health performance or total life expectancy exclusively in bottom quantiles of the conditional distribution of total life expectancy. In other words, countries with below-median levels of total life expectancy are more susceptible to benefit from mobile money innovations compared to countries with above-median levels of total life expectancy. It follows that common or general policy measures on the linkage between mobile money innovations and health performance are unlikely to succeed unless attendant policies are contingent on initial levels of health performance and hence, tailored differently across countries with various initial levels of health performance. More policy implications are discussed. |
| Keywords: | Mobile phones; financial inclusion; health; sub-Saharan Africa |
| JEL: | O40 G20 I10 I32 I20 |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:exs:wpaper:23/038&r=pay |
| By: | Ozili, Peterson K |
| Abstract: | Little attention has been paid to the role of gender equality in promoting financial stability and financial inclusion. This article examines the effect of gender equality on financial stability and financial inclusion for 14 developing countries using yearly data from 2005 to 2021. The findings reveal that gender equality has a significant positive effect on financial stability and financial inclusion in developing countries. Gender equality has a significant positive effect on financial stability and financial inclusion in African countries. Gender equality has a significant positive effect on financial stability but not for financial inclusion in non-African countries. |
| Keywords: | gender equality, gender inequality, financial inclusion, financial stability, access to finance, ZSCORE, bank branches. |
| JEL: | G21 |
| Date: | 2023–04–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:117805&r=pay |
| By: | Toutaoui, Jonas |
| Abstract: | Digital technologies, such as mobile technologies, analytics, and cloud computing are ubiquitous in our daily lives and affect individuals, companies, and societies at large. Especially established companies find themselves confronted with changing customer demands and new competitors (e.g., start-ups), thus starting concentrated efforts of undergoing so-called digital transformations (DT). Such DT not only enhance existing value creation but may massively change existing or create completely new value creation paths for the established companies. These alterations form the affordances of novel digital technologies, i.e., their action potentials, and can usually be classified in one of three categories: value proposition and value networks, agility and ambidexterity, and digital channels. Previous research has predominantly examined how established companies initiate their efforts with DT strategies and what elements compose a DT. A few studies started to investigate outcomes of the DT of established companies and primarily focused on longer-term outcomes on an organizational level (e.g., improved financial performance), while the success rate of DT remains low. Research on outcomes specific to DT’s changes to value creation paths, also on levels other than the organizational level, is scarce. Latest research started to identify such outcomes and indicated that they may hinder DT success (e.g., self-depletion of agile developers, privacy concerns of customers). However, we require more insights to gain a more comprehensive picture of DT, to address hindrances once they are known, and to finally increase DT success rate. Hence, this thesis aims to unveil unknown outcomes of DT of established companies on an organizational and individual level (with individuals being customers or employees of established companies). Against this backdrop, four articles are part of this thesis, organized along changes in value creation paths during the DT. The first article uncovers novel outcomes on an organizational level of actualized changes in value propositions and value networks. Established companies often create additional platform-based digital business models during their DT, concurrent to their established business models. The change towards concurrent business models, with one being platform-based, create outcomes in terms of important synergy potential and both business models can fuel each other. In the second article, outcomes of changes in agility and ambidexterity are examined. Within the IT function, DT often leads to ambidextrous bi-modal IT functions, consisting of one “agile IT” and one “traditional IT”. Establishing this bi-modal IT (in the sense of actualizing the affordance of increased agility and ambidexterity) creates tensions and paradoxes on an organizational (e.g., resource conflicts) and individual level (e.g., emotional tensions). Additionally, the article shows how intertwined paradoxes, tensions, and management approaches are across levels, highlighting the complexity of DT and its outcomes. In the third article, I investigate outcomes on an individual level of digital channels in a customer context. Robo-advisors as a novel digital technology can allow for automated and digital wealth management for new customer segments. The article shows that, as opposed to analogue channels, digital properties of robo-advisors enable dynamic recommendations (similarly to well-known dynamic pricing in e-commerce). These recommendations can improve the economic decision-making of individual customers and are also to the benefit of the financial provider. Moreover, anthropomorphism (i.e., human-like representation of the robo-advisor) allow a social atmosphere which further increases the effects on customers. The last article studies outcomes on an individual level of digital channels, specifically chatbots, in an employee context. With chatbots being used more and more within companies (e.g., for IT helpdesk self-services), effectiveness of the interactions remains questionable and outcomes for employees unclear. In an experiment focusing on the attribution of gender-typical design cues to a chatbot, which we often see in today’s applications, users applied stereotypical prejudices to chatbots, even though they were thoroughly briefed on how the artificial intelligence was trained and that it didn’t have a gender. These prejudices then affected trust levels towards the chatbot, influencing the effectiveness of the interaction. Overall, this thesis provides new perspectives on the outcomes of changes in value creation paths during the DT of established companies. Going beyond mostly organizational-level longer-term outcomes, the studies comprised in this thesis offer a more detailed and nuanced understanding of the outcomes of DT, on an individual and organizational level, along the main changes in value creation in DT. By uncovering rather negative outcomes, the studies also help understanding why DT potentially fail. Finally, the results contribute to different theories in IS by extending (e.g., social presence theory) or challenging them (e.g., structural ambidexterity). Apart from these research contributions, this thesis also offers important insights for practitioners managing the DT of their companies. |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:dar:wpaper:138455&r=pay |
| By: | Nicolas Kusz (UP1 EMS - Université Paris 1 Panthéon-Sorbonne - École de Management de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne, PRISM Sorbonne - Pôle de recherche interdisciplinaire en sciences du management - UP1 - Université Paris 1 Panthéon-Sorbonne); Jean-François Lemoine (PRISM Sorbonne - Pôle de recherche interdisciplinaire en sciences du management - UP1 - Université Paris 1 Panthéon-Sorbonne, ESSCA Research Lab - ESSCA - Ecole Supérieure des Sciences Commerciales d'Angers) |
| Abstract: | To offer a new channel of interaction to in addition to their website and their smartphone application, more and more companies develop "voice app" integrated into Google and Alexa systems, With spectacular progress in voice recognition and synthetic voice technologies, the voice assistant makes it possible to establish a real dialogue between the human and the system. Our research aims to measure the influence of the type of voice of a voice assistant (human versus artificial) on the cognitive reactions of users. Our qualitative study conducted with 15 people suggests that the voice type of the assistant influences ease of use and perceived anthropomorphism by users. Furthermore, our results reveal that anthropomorphism has a negative impact on usability; the user seems to forget that he's talking to a machine and forget adjusting his requests accordingly. |
| Abstract: | Afin de proposer un canal d'interaction en complément de leur site web et de leur application smartphone, de plus en plus d'entreprises développent leur « voice app » accessibles depuis un système Google et Alexa. Avec les progrès majeurs des technologies de reconnaissance vocale et de voix de synthèse, l'assistant vocal permet d'instaurer un véritable dialogue entre l'homme et le système. Notre recherche vise à mesurer l'influence du type de voix d'un assistant vocal (humain versus artificiel) sur sa facilité d'utilisation perçue. Notre étude qualitative exploratoire menée auprès de 15 répondants suggère que le type de voix de l'application vocale influence la facilité d'utilisation et l'anthropomorphisme perçu par les utilisateurs. En outre, nos résultats révèlent que l'anthropomorphisme a un impact négatif sur la facilité d'utilisation ; l'utilisateur semble oublier qu'il s'adresse à une machine et qu'il doit ajuster ses requêtes en conséquence. |
| Keywords: | voice assistant, synthetic voice, usability, anthropomorphism., assistant vocal, voix de synthèse, facilité d'utilisation, anthropomorphisme |
| Date: | 2023–05–29 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04124918&r=pay |
| By: | Domonkos F. Vamossy |
| Abstract: | I examine potential mechanisms behind two stylized facts of initial public offerings (IPOs) returns. By analyzing investor sentiment expressed on StockTwits and Twitter, I find that emotions conveyed through these social media platforms can help explain the mispricing of IPO stocks. The abundance of information and opinions shared on social media can generate hype around certain stocks, leading to investors' irrational buying and selling decisions. This can result in an overvaluation of the stock in the short term but often leads to a correction in the long term as the stock's performance fails to meet the inflated expectations. In particular, I find that IPOs with high levels of pre-IPO investor enthusiasm tend to have a significantly higher first-day return of 29.54%, compared to IPOs with lower levels of pre-IPO investor enthusiasm, which have an average first-day return of 16.91%. However, this initial enthusiasm may be misplaced, as IPOs with high pre-IPO investor enthusiasm demonstrate a much lower average long-run industry-adjusted return of -8.53%, compared to IPOs with lower pre-IPO investor enthusiasm, which have an average long-run industry-adjusted return of -1.1%. |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2306.12602&r=pay |
| By: | Basile Caparros; Amit Chaudhary; Olga Klein |
| Abstract: | Liquidity providers (LPs) on decentralized exchanges (DEXs) can protect themselves from adverse selection risk by updating their positions more frequently. However, repositioning is costly, because LPs have to pay gas fees for each update. We analyze the causal relation between repositioning and liquidity concentration around the market price, using the entry of a blockchain scaling solution, Polygon, as our instrument. Polygon's lower gas fees allow LPs to update more frequently than on Ethereum. Our results demonstrate that higher repositioning intensity and precision lead to greater liquidity concentration, which benefits small trades by reducing their slippage. |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2306.17742&r=pay |
| By: | Isil Erel; Jack Liebersohn; Constantine Yannelis; Samuel Earnest |
| Abstract: | Financial technology has reshaped commercial banking. It has the potential to radically alter the transmission of monetary policy by lowering search costs and expanding bank markets. This paper studies the reaction of online banks to changes in federal fund rates. We find that these banks increase rates that they offer on deposits significantly more than traditional banks do. A 100 basis points increase in the federal fund rate leads to a 30 basis points larger increase in rates of online banks. Consistent with the rate movements, online bank deposits experience inflows, while traditional banks experience outflows during monetary tightening in 2022. The findings are consistent across banking markets of different competitiveness and demographics. Our findings shed new light on the role of online banks in interest rate pass-through and deposit channel of monetary policy. |
| JEL: | E52 E58 G21 G23 G28 |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31380&r=pay |
| By: | Genakos, C.; Roumanias, C.; Valletti, T. |
| Abstract: | We present novel evidence from a large panel of UK consumers who receive personalized reminders from a specialist price-comparison website about the precise amount they could save by switching to their best-suited alternative mobile telephony plan. We document three phenomena. First, even self-registered consumers with positive savings exhibit inertia. Second, we show that being informed about potential savings has a positive and significant effect on switching. Third, controlling for savings, the effect of incurring overage payments is significant and similar in magnitude to the effect of savings: paying an amount that exceeds the recurrent monthly fee weighs more on the switching decision than being informed that one can save that same amount by switching to a less inclusive plan. We interpret this asymmetric reaction on switching behavior as potential evidence of loss aversion. In other words, when facing complex and recurrent tariff plan choices, consumers care about savings but also seem to be willing to pay upfront fees in order to get “peace of mind†. |
| Keywords: | tariff/plan choice, inertia, switching, loss aversion, mobile telephony |
| JEL: | D91 D12 D81 L96 M30 |
| Date: | 2023–07–11 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:2351&r=pay |
| By: | Tran Huynh (Friedrich Schiller University Jena) |
| Abstract: | This study investigates the causal effect of financial literacy on mortgage payment delinquency. Using an Instrumental-Variable (IV) approach, we find that increased financial literacy significantly reduces the probability of mortgage delinquency. The identified causal effect is robust to different specifications of the IV and cannot be explained by formal education, income, and many other individual characteristics. Our study also examines the heterogeneity of the impact across various demographic groups. We find that the effect of financial literacy on delinquency likelihood is negative and significantly different from zero for any age, gender, income, or education level. However, the magnitude of the effect decreases with age and is higher in states where the population’s financial literacy is low, as compared with high-literate states. |
| Keywords: | financial literacy, mortgage delinquency, NFCS surveys, instrumental variables |
| JEL: | G51 G53 |
| Date: | 2023–07–04 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2023-007&r=pay |
| By: | Ozili, Peterson K |
| Abstract: | The study investigates the impact of monetary policy on the level of financial inclusion in the big-five emerging market countries from 2004 to 2020. Several indicators of financial inclusion and the central bank interest rate were used in the analysis. It was found that the monetary pol-icy rate has a mixed effect on financial inclusion, and the effect depends on the dimension of fi-nancial inclusion examined. Specifically, a high monetary policy rate has a significant negative impact on financial inclusion through a reduction in the number of depositors in commercial banks. A high monetary policy rate also has a significant positive impact on financial inclusion through greater bank branch expansion. The policy implication is that both contractionary and expansionary monetary policies lead to positive improvements in specific indicators of financial inclusion, because increase in interest rate leads to bank branch expansion which is beneficial for financial inclusion and decrease in interest rate leads to increase in the number of depositors in commercial banks which is also beneficial for financial inclusion. It was also found that the rising monetary policy rate has a negative effect on all indicators of financial inclusion in the post-financial crisis period. Overall, the effect of monetary policy on financial inclusion seem to depend on the monetary policy tool used by the monetary authority and the dimension of financial inclusion examined. The monetary authorities should pay attention to how their monetary policy choices might affect the level of financial inclusion and reduce the benefits that society gains from financial inclusion. |
| Keywords: | monetary policy, interest rate, financial inclusion, access to finance, emerging markets |
| JEL: | E51 E52 E58 G21 |
| Date: | 2023–06–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:117804&r=pay |
| By: | Gugler, Klaus; Szücs, Florian; Wohak, Ulrich |
| Abstract: | We evaluate the impact of big-tech acquisitions on the incentives for investment and innovation. Using data on several hundred acquisitions by Google, Apple, Facebook, Amazon and Microsoft (GAFAM), we study the evolution of venture capital investment and patenting relative to control groups. The results show a clear negative impact on investment, while the effect on innovation depends on the acquirer and period. Both outcomes improve over time, as GAFAM firms become more similar in terms of their product and tech-portfolios, increasing competition. Yet, around 10% of acquisitions impact both metrics negatively. |
| Keywords: | M&A; big-tech; innovation; investment |
| Date: | 2023–07 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wus005:44832240&r=pay |
| By: | Bertin Martens |
| Abstract: | This paper explores the crucial role of search engines in modern digital economies and their impact on user welfare. |
| Date: | 2023–07 |
| URL: | http://d.repec.org/n?u=RePEc:bre:wpaper:node_9228&r=pay |
| By: | Klaus Gugler (Department of Economics, Vienna University of Economics and Business); Florian Szücs (Department of Economics, Vienna University of Economics and Business); Ulrich Wohak (Department of Economics, Vienna University of Economics and Business) |
| Abstract: | We evaluate the impact of big-tech acquisitions on the incentives for investment and innovation. Using data on several hundred acquisitions by Google, Apple, Facebook, Amazon and Microsoft (GAFAM), we study the evolution of venture capital investment and patenting relative to control groups. The results show a clear negative impact on investment, while the effect on innovation depends on the acquirer and period. Both outcomes improve over time, as GAFAM firms become more similar in terms of their product and tech-portfolios, increasing competition. Yet, around 10% of acquisitions impact both metrics negatively. |
| Keywords: | M&A, big-tech, innovation, investment |
| JEL: | D22 G34 K21 L41 |
| Date: | 2023–07 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwwuw:wuwp340&r=pay |
| By: | Pascal Alphonse (LUMEN - Lille University Management Lab - ULR 4999 - Université de Lille) |
| Abstract: | In the space of a decade, a new digital communication standard, XBRL, has profoundly transformed the communication, access and processing of financial and, now, non-financial regulatory information. This article presents the XBRL standard and the key stages in its development, analyzes its contributions to the business world and proposes a discussion on the thorny issue of quality assurance for XBRL reports. |
| Abstract: | En une décennie un nouveau standard de communication digitale, le standard XBRL, est venu transformer en profondeur le reporting, l'accès et le traitement de l'information règlementaire financière et désormais extra-financière. Cet article présente le standard XBRL et fournit les points de repères essentiels de son développement, analyse ses apports pour le monde économique, et propose une discussion de la question épineuse de l'assurance qualité du reporting XBRL. |
| Keywords: | XBRL eXtensible Business Reporting Language, Financial Reporting, Accounting, Auditing, XBRL |
| Date: | 2023–06–22 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-04138189&r=pay |