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on Payment Systems and Financial Technology |
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Issue of 2024‒02‒05
thirteen papers chosen by |
| By: | Heng Chen; Daneal O’Habib; Hongyu Xiao |
| Abstract: | This paper develops a travel-based metric to measure Canadians’ access to cash from automated banking machines (ABMs) and financial institution branches. Our findings indicate that the average distance Canadians need to travel to reach the nearest ABM is 2.0 km, while the average distance to the nearest branch is 4.5 km. Moreover, more than 90% of Canadians live within 5 km of an ABM, and 84% live within 5 km of a branch. The total number of ABMs in Canada increased by 3.7% between 2019 and 2022, and our results show that, overall, access to cash remained stable in that period. However, the total number of branches decreased by 5.2%. The decline in branch coverage is concentrated in rural areas at 7.2%. This may increase the challenge of accessing cash in these regions. Rural Canadians already have less access to cash: they need to drive an average distance of 4.0 km to the nearest ABM and 9.6 km to the nearest branch, each distance twice the national average. |
| Keywords: | Financial services; Regional economic developments |
| JEL: | G21 J15 R51 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocadp:23-28&r=pay |
| By: | Xiao, Leon Y. (IT University of Copenhagen) |
| Abstract: | Loot boxes are gambling-like products inside video games that can be bought with real-world money to obtain random rewards. They are widely available to children, and stakeholders are concerned about potential harms, e.g., overspending. UK advertising must disclose, if relevant, that a game contains (i) any in-game purchases and (ii) loot boxes specifically. An empirical examination of relevant adverts on Meta-owned platforms (i.e., Facebook, Instagram, and Messenger) and TikTok revealed that only about 7% disclosed loot box presence. The vast majority of social media advertising (93%) was therefore non-compliant with UK advertising regulations and also EU consumer protection law. In the UK alone, the 93 most viewed TikTok adverts failing to disclose loot box presence were watched 292, 641, 000 times total or approximately 10 impressions per active user. Many people have therefore been repeatedly exposed to prohibited and socially irresponsible advertising that failed to provide important and mandated information. Implementation deficiencies with ad repositories, which must comply with transparency obligations imposed by the EU Digital Services Act, are also highlighted, e.g., not disclosing the beneficiary. How data access empowered by law can and should be used by researchers is practically demonstrated. Policymakers should consider enabling more such opportunities for the public benefit. |
| Date: | 2024–01–02 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:s92j3&r=pay |
| By: | Daniel Huttenlocher; Hannah Li; Liang Lyu; Asuman Ozdaglar; James Siderius |
| Abstract: | Many online platforms of today, including social media sites, are two-sided markets bridging content creators and users. Most of the existing literature on platform recommendation algorithms largely focuses on user preferences and decisions, and does not simultaneously address creator incentives. We propose a model of content recommendation that explicitly focuses on the dynamics of user-content matching, with the novel property that both users and creators may leave the platform permanently if they do not experience sufficient engagement. In our model, each player decides to participate at each time step based on utilities derived from the current match: users based on alignment of the recommended content with their preferences, and creators based on their audience size. We show that a user-centric greedy algorithm that does not consider creator departures can result in arbitrarily poor total engagement, relative to an algorithm that maximizes total engagement while accounting for two-sided departures. Moreover, in stark contrast to the case where only users or only creators leave the platform, we prove that with two-sided departures, approximating maximum total engagement within any constant factor is NP-hard. We present two practical algorithms, one with performance guarantees under mild assumptions on user preferences, and another that tends to outperform algorithms that ignore two-sided departures in practice. |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2401.00313&r=pay |
| By: | Mishra, Mukesh Kumar |
| Abstract: | Big data has become a crucial asset for the modern Indian banking sector, driving innovation, improving decision-making, and ultimately enhancing the overall banking experience for customers. As technology continues to advance, the role of big data in banking is likely to evolve, bringing about further improvements in efficiency, security, and customer-centric services. The integration of big data analytics in banking operations has brought about several changes, enhancing efficiency, customer experience, risk management, and decision-making processes. This paper explores the transformative role of big data as a service (BDaaS) and its applications in the Indian banking sector. The study highlights how BDaaS serves as a robust and innovative instrument, contributing significantly to the identification and prevention of security issues and fraudulent behavior within the industry. The experimental results suggest that deploying big data technology is crucial for various aspects, particularly in handling financial risks and managing operational workflows within the banking sector. |
| Keywords: | Big Data, Banking System |
| JEL: | G1 G21 O33 G28 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:280834&r=pay |
| By: | Vladimir Valerevich Syropyatov (Postgraduate student of St. Petersburg State University, 62 Tchaikovsky Street, 191194, Saint Petersburg, Russia Author-2-Name: Igor Anatolevich Arenkov Author-2-Workplace-Name: Doctor of Economics, Professor, Head of the Department of Enterprise Economics and Entrepreneurship of St. Petersburg State University, 62 Tchaikovsky Street, 191194, Saint Petersburg, Russia Author-3-Name: Soman Sajid Author-3-Workplace-Name: "Graduate of St. Petersburg School of Economics and Management, marketing expert in IT company, 3 Kantemirovskaya Street, 194100, St. Petersburg, Russia. " Author-4-Name: Daniyal Haider Mahar Author-4-Workplace-Name: "Postgraduate of St. Petersburg School of Economics and Management, 3 Kantemirovskaya Street, 194100, St. Petersburg, Russia. " 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 - This study investigates the role of customer service support (CSS) in co-creating brand value and enhancing corporate performance in the fintech industry. The research focuses on analyzing the impact of CSS on the customer journey from registration to first deposit. Methodology – The study utilizes historical data analysis and A/B testing. Client data from a leading fintech company is analyzed to compare conversion rates between those who used CSS versus those who did not. An A/B test is then conducted using a specialized support team targeting clients who haven't made a deposit and had less than 2 chats with CSS. Findings – Clients who used CSS before depositing had 5 times higher conversion rates. The A/B test found a 3.1 percentage point (9.3% relative) increase in conversion from using targeted support. Novelty – This study provides new empirical evidence on the impact of CSS as a brand value co-creator in fintech, with a novel methodology to enhance corporate performance. Type of Paper - Empirical" |
| Keywords: | Brand value; Brand co-creation; Fintech; Customer service; Performance |
| JEL: | M14 M31 |
| Date: | 2023–12–31 |
| URL: | http://d.repec.org/n?u=RePEc:gtr:gatrjs:jfbr217&r=pay |
| By: | Vahidin Jeleskovic; Claudio Latini; Zahid I. Younas; Mamdouh A. S. Al-Faryan |
| Abstract: | The growing interest in cryptocurrencies has drawn the attention of the financial world to this innovative medium of exchange. This study aims to explore the impact of cryptocurrencies on portfolio performance. We conduct our analysis retrospectively, assessing the performance achieved within a specific time frame by three distinct portfolios: one consisting solely of equities, bonds, and commodities; another composed exclusively of cryptocurrencies; and a third, which combines both 'traditional' assets and the best-performing cryptocurrency from the second portfolio.To achieve this, we employ the classic variance-covariance approach, utilizing the GARCH-Copula and GARCH-Vine Copula methods to calculate the risk structure. The optimal asset weights within the optimized portfolios are determined through the Markowitz optimization problem. Our analysis predominantly reveals that the portfolio comprising both cryptocurrency and traditional assets exhibits a higher Sharpe ratio from a retrospective viewpoint and demonstrates more stable performances from a prospective perspective. We also provide an explanation for our choice of portfolio optimization based on the Markowitz approach rather than CVaR and ES. |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2401.00507&r=pay |
| By: | Lioba Heimbach; Vabuk Pahari; Eric Schertenleib |
| Abstract: | The prevalence of maximal extractable value (MEV) in the Ethereum ecosystem has led to a characterization of the latter as a dark forest. Studies of MEV have thus far largely been restricted to purely on-chain MEV, i.e., sandwich attacks, cyclic arbitrage, and liquidations. In this work, we shed light on the prevalence of non-atomic arbitrage on decentralized exchanges (DEXes) on the Ethereum blockchain. Importantly, non-atomic arbitrage exploits price differences between DEXes on the Ethereum blockchain as well as exchanges outside the Ethereum blockchain (i.e., centralized exchanges or DEXes on other blockchains). Thus, non-atomic arbitrage is a type of MEV that involves actions on and off the Ethereum blockchain. In our study of non-atomic arbitrage, we uncover that more than a fourth of the volume on Ethereum's biggest five DEXes from the merge until 31 October 2023 can likely be attributed to this type of MEV. We further highlight that only eleven searchers are responsible for more than 80% of the identified non-atomic arbitrage volume sitting at a staggering 137 billion US$ and draw a connection between the centralization of the block construction market and non-atomic arbitrage. Finally, we discuss the security implications of these high-value transactions that account for more than 10% of Ethereum's total block value and outline possible mitigations. |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2401.01622&r=pay |
| By: | Kolmykov Kirill (Department of Economics, Lomonosov Moscow State University) |
| Abstract: | Currently, the advantages of decentralization through blockchain technology in the financial sector are actively discussed. In this article, we investigate the decentralization in the governance of Decentralized Autonomous Organizations (DAO) using the Gini coefficient as an indicator of inequality among the token owners. This metric is analyzed in the context of Return on Investment (ROI) for companies in the decentralized finance (DeFi) sector. Our goal is to understand whether the level of "real" decentralization in blockchain-based governance affects financial efficiency, and to explore the benefits and possible limitations of such an approach. This analysis allows for a deeper understanding of the significance and impact of decentralization on the functioning and productivity of organizations in the DeFi sector, and to determine the extent to which this impact is positively or negatively reflected in their success and profitability. Additionally, the results of this analysis will provide a fuller understanding of the dynamics and potential of blockchain for organization governance. |
| Keywords: | Blockchain, Decentralized Finance, Cryptocurrency, DAO |
| JEL: | G23 G32 O16 |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:upa:wpaper:0061&r=pay |
| By: | Vahidin Jeleskovic; Stephen Mackay |
| Abstract: | Cryptocurrencies have emerged as a novel financial asset garnering significant attention in recent years. A defining characteristic of these digital currencies is their pronounced short-term market volatility, primarily influenced by widespread sentiment polarization, particularly on social media platforms such as Twitter. Recent research has underscored the correlation between sentiment expressed in various networks and the price dynamics of cryptocurrencies. This study delves into the 15-minute impact of informative tweets disseminated through foundation channels on trader behavior, with a focus on potential outcomes related to sentiment polarization. The primary objective is to identify factors that can predict positive price movements and potentially be leveraged through a trading algorithm. To accomplish this objective, we conduct a conditional examination of return and excess return rates within the 15 minutes following tweet publication. The empirical findings reveal statistically significant increases in return rates, particularly within the initial three minutes following tweet publication. Notably, adverse effects resulting from the messages were not observed. Surprisingly, sentiments were found to have no discerni-ble impact on cryptocurrency price movements. Our analysis further identifies that inves-tors are primarily influenced by the quality of tweet content, as reflected in the choice of words and tweet volume. While the basic trading algorithm presented in this study does yield some benefits within the 15-minute timeframe, these benefits are not statistically significant. Nevertheless, it serves as a foundational framework for potential enhance-ments and further investigations. |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2401.00603&r=pay |
| By: | Shah, Anand; Bahri, Anu |
| Abstract: | This study proposes a new risk measure for stablecoins, that is based on the probability of the stablecoin’s price hitting a threshold exchange rate post which the stablecoin is subjected to the risk of “break the buck/ death spiral”. We also juxtapose the risk measure computed using different models - Vasicek, CIR, ARMA+GARCH and Vasicek+GARCH and suggest the policy implication of the estimated model parameters - rate of reversion (a) and long term mean exchange rate (b) for stablecoin issuers. The study compares the volatility behaviour of the stablecoins with that of the traditional cryptocurrency, Bitcoin, equity index, NASDAQ composite and fiat currency, EURO. Stablecoins tend to be “stable” barring the events such as Terra – Luna crisis, FTX Bankruptcy and Silicon Valley Bank crisis. Traditional asset backed stablecoins – Tether, USD Coin, Binance USD and True USD are less risky than the decentralized algorithmic stablecoin, FRAX and decentralized cryptoasset backed stablecoin, DAI. The proposed risk measure could be of utility to the stablecoin issuers of algorithmic and cryptoasset backed stablecoins and the regulators for setting the capital requirement to guard against the break the buck/ death spiral risk. |
| Keywords: | Cryptocurrency, Stablecoins, Terra – Luna crisis, FTX Bankruptcy, Silicon Valley Bank crisis, Risk Measure, VaR, Vasicek, CIR, GARCH, Bitcoin, Tether, USD Coin, Binance USD, True USD, DAI, FRAX |
| JEL: | F31 G01 G11 G15 G23 G28 |
| Date: | 2023–12–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:119646&r=pay |
| By: | Patrick Aldridge; David Cimon; Rishi Vala |
| Abstract: | Central banks may engage in large-scale lending and asset purchases to stabilize financial markets and implement monetary policy during crises. The ability of these actions to restore financial market functioning is well documented; however, they come with costs. We provide a literature review of the costs associated with these central bank actions, without commenting on the net benefits they provide. We find support for the premise that crisis actions may negatively impact market liquidity, distort asset prices, create conflicts between monetary and financial stability objectives and increase rent seeking and unproductive uses of the liquidity provided by the central bank. We discuss measures that may mitigate the negative impacts of crisis actions. |
| Keywords: | Central bank research; Financial institutions; Financial markets; Financial stability, Lender of last resort |
| JEL: | E5 E58 G10 G20 |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocadp:23-30&r=pay |
| By: | William A. Allen (National Institute of Economic and Social Research) |
| Abstract: | The history of ‘money doctors’ despatched to give financial advice to countries thought to be in need of it has mainly concentrated on American advisers (e.g. Flandreau 2003). This paper gives an account of a British mission to Poland in 1923 – 1924, a period which coincided with the ending of Poland’s hyper-inflation. It describes how the mission contributed to Poland’s monetary stabilisation in 1924, and explores the tensions that arose about the scope and functions of the mission, and of foreign advisers more generally, both between the mission and the Polish authorities, and within the mission. |
| Keywords: | Poland, money doctors, inflation, Hilton Young, Grabski, monetary reform |
| JEL: | N14 N24 N44 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:nbp:nbpmis:366&r=pay |
| By: | Bindseil, Ulrich; Senner, Richard |
| Abstract: | Rapid and large deposit outflows from banks have regained attention in the context of the March 2023 demises of Credit Suisse, SVB and other regional US banks. Moreover, the possible introduction of CBDC or a marked success of stablecoins are perceived as additional clouds over the future of deposit funding. While the bank run literature rarely pays attention to where bank deposits can flow to, this paper distinguishes the different flow of funds mechanics across all possible destinations and reviews for each the current and prospective future factors that may contribute to the observed increase of the speed and size of bank runs. While some of these factors can be contained through policy measures, others, like the intensified competition between banks will inevitably stay, and bank balance sheet management and liquidity regulation need to accept the new normal of somewhat less stable and more expensive sight deposits. JEL Classification: E42, E51, G21, G23 |
| Keywords: | bank funding, bank runs, financial stability, flows of funds, liquidity crisis |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20242887&r=pay |