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on Payment Systems and Financial Technology |
| By: | Davydova, Daria (Ecole Polytechnique Federale de Lausanne); Fahlenbrach, Rudiger (Ecole Polytechnique Federale de Lausanne and ECGI); Sanz, Leandro (Ohio State U); Stulz, Rene M. (Ohio State U and ECGI) |
| Abstract: | Unicorns are startups that choose to stay private even though they are large enough to go public. We propose an efficiency explanation for their existence. Startups relying highly on organization capital are more vulnerable to expropriation of their organization capital if they go public before their position is sufficiently secure. Our main empirical findings are that shocks to the fragility of organization capital decrease the IPO likelihood, unicorn status enables startups to stay private longer by giving them access to new sources of capital, and unicorns and their industries have higher organization capital intensity than other startups. |
| JEL: | G24 G32 G34 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:ecl:ohidic:2024-10 |
| By: | Rösl, Gerhard; Seitz, Franz |
| Abstract: | We analyze the role of a well-functioning cash infrastructure for the stabilizing role of cash and the resilience of cash cycles. For that purpose, experiences from developed countries with low and high cash usage are assessed by distinguishing between demand and supply factors to demonstrate that cash has to keep a vital role as a means of payment not only to maintain its status of a highly liquid store-of-value but also as an efficient tool to combat crises. To do so, access, availability, acceptance, and affordability of cash are crucial building blocks of a robust cash infrastructure. Important aspects are also the public good characteristics of the "institution" cash which should encourage central banks to re-evaluate their position of "neutrality" as a player in the payments market to a more active role. |
| Abstract: | Wir analysieren die Rolle einer gut funktionierenden Bargeldinfrastruktur für die stabilisierende Rolle von Bargeld und die Resilienz des Bargeldkreislaufs. Zu diesem Zweck werden Erfahrungen aus entwickelten Ländern mit geringer und hoher Bargeldnutzung ausgewertet und zwischen Nachfrage- und Angebotsfaktoren unterschieden. Es wird abgeleitet, dass Bargeld als Zahlungsmittel wichtig ist, damit es als hochliquides Wertaufbewahrungsmittel fungieren kann und als effizientes Instrument zur Krisenbekämpfung zur Verfügung steht. Dementsprechend sind Zugang, Verfügbarkeit, Akzeptanz und Erschwinglichkeit von Bargeld entscheidende Bausteine einer robusten Bargeldinfrastruktur. Wichtige Aspekte sind auch die Öffentliches-Gut-Eigenschaften der "Institution" Bargeld, die impliziert, dass Zentralbanken ihre "neutrale" Position als Akteur im Zahlungsverkehr überdenken sollten, um eine aktivere Rolle bei der Unterstützung von Bargeld einzunehmen. |
| Keywords: | Cash, banknotes, ATM, cash infrastructure |
| JEL: | E41 E51 E58 O57 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:hawdps:305297 |
| By: | Timothy N. Cason; Alex Tabarrok; Robertas Zubrickas |
| Abstract: | Crowdfunding can suffer from information asymmetry, leaving some investors disappointed with low-quality projects while other high-quality projects remain unfunded. We show that refund bonuses, which provide investors a payment if a fundraising campaign is unsuccessful, can signal project quality and help overcome the market failure in crowdfunding. Because strong projects have a lower risk of bonus payout, entrepreneurs with strong projects are more likely to offer bonuses. This signals high quality to investors, and due to their updated beliefs this drives investment toward such projects. An experiment provides supporting empirical evidence for the benefits of this signaling solution to the problems of information asymmetry in crowdfunding. |
| Keywords: | Crowdfunding; threshold implementation; adverse selection; experiments |
| JEL: | C72 C90 D82 G23 |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:pur:prukra:1339 |
| By: | Christian de Boissieu |
| Abstract: | Face à l’essor des cryptomonnaies, les banques centrales sont en train de réagir en lançant leurs propres monnaies numériques. L’objet de ce Policy Brief est de faire le point sur la préparation des monnaies numériques de banques centrales (MNBC) par les autorités monétaires, un processus qui concerne tous les pays, émergents, en développement, et plus avancés. Il s’agit aussi d’analyser les conditions et certaines des conséquences (pour les banques, pour l’inclusion financière, pour la conduite de la politique monétaire...) d’une telle innovation financière, en distinguant systématiquement les MNBC de gros et les MNBC de détail. |
| Date: | 2023–04 |
| URL: | https://d.repec.org/n?u=RePEc:ocp:pbecon:pb_19_23 |
| By: | Flores Zendejas, Juan; Nodari, Gianandrea; Dávalos, Jorge |
| Abstract: | What are the effects of political instability on the banking sector? This article examines the short-term impacts on banking activities in Mexico during the late 1920s, a decade marked by civil conflicts and political violence. Although political upheavals affected some regions more than others, banks and depositors were compelled to respond to a general atmosphere of political violence. Drawing on new qualitative and quantitative evidence, this article analyzes how banks and depositors behaved in the context of armed conflicts and assesses the consequences for the banking sector. Our results show a negative effect of political violence on bank deposits and banks' capitalization. We also account for the geographic proximity of violent regions to neighboring municipalities and observe that political instability promoted capital flight, particularly in the northern region of the country, where episodes of political violence were more severe. We conclude that political instability likely contributed to the lack of financial development in Mexico. |
| Keywords: | Political instability, Mexico, Banking fragility, Financial development, Political violence, Banking sector |
| JEL: | N16 N26 E58 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:gnv:wpaper:unige:180827 |
| By: | Arpita Mukherjee (Indian Council for Research on International Economic Relations (ICRIER)); Anupam Gaur |
| Abstract: | The objective of this study is to (a) examine the need and impact of ATMs in promoting and facilitating financial inclusion, (b) present the status of ATMs and other instruments of financial inclusion in India and globally, (c) identify the issues that hinder the effective utilisation of ATMs for financial inclusion purposes, and (d) recommend policies and measures to enhance the efficiency and effectiveness of ATM utilisation to foster financial inclusion so that a broader segment of the population gains access to the financial tools and services they need to improve their economic well-being. |
| Keywords: | ATM, financial inclusion, economic growth, National Strategy for Financial Inclusion, NSFI, RBI |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:bdc:report:24-r-05 |
| By: | Nasrum, Muhammad |
| Abstract: | A credit card is a symbol of different types of consumer credit. Their use to satisfy consumer needs can trigger impulsive spending, often leading to addiction and even debt bondage. This study follows the activities of a credit card community in Indonesia and includes ethnographic fragments in which credit cards are not used for consumptive purposes but rather as productive business capital. Temporality, as a concept in the anthropological study of debt and credit, is used as a research framework as well as a strategy to comprehensively analyse the credit card algorithm from a cultural perspective, including the characteristics and functions of credit cards that are reflected in the decision-making of community members throughout the life cycle of the credit card, from application to business use, which enables this financial facility to provide benefits and maintain trust. |
| Date: | 2024–10–16 |
| URL: | https://d.repec.org/n?u=RePEc:osf:osfxxx:mzr8y |
| By: | Helyette Geman |
| Abstract: | On Friday, March 10 -2023, the US and the world discovered that the Federal Deposit Insurance Corporation (FDIC) had seized the Silicon Valley Bank after SVB’s customers had withdrawn an extraordinary $42 billion from their deposits on March 16. This $4.2 billion an hour, or more than $1 million per second for ten straight hours, an unprecedented event made possible by the use of Apps by many startup founders to access their accounts and advise their friends to do the same -what the Chairman of the House of Financial Services Committee called ‘the first Twitter -fueled bank run’. |
| Date: | 2023–03 |
| URL: | https://d.repec.org/n?u=RePEc:ocp:pbecon:pb_16-23 |
| By: | Gomes, Renato; Lefouili, Yassine |
| Abstract: | This paper explores the pricing of ancillary payment services by platforms and its implications for welfare. We distinguish between two types of platforms: vertical platforms that operate their own closed payment schemes, and stacked platforms that offer payment services through open schemes operated by third parties. We analyze the impact of a regulation mandating platforms to provide access to third-party payment services and examine the regulation of interchange fees within the context of stacked platforms. |
| Keywords: | platforms, payment services, ancillary services, regulation, interoperability, interchange fee |
| JEL: | L51 L86 E42 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:129914 |
| By: | Paul Heidhues; Mats Köster; Botond Kőszegi; Botond Köszegi |
| Abstract: | We develop a theory of digital ecosystems built on the premise that a multi-market firm can steer users it has in one market toward its products in other markets. Due to this “cross-market leverage, ” a leader in an “access-point” market (where users begin their online journeys) derives a high value from offering services in connected markets (where users continue their journeys), and can thus make profitable takeovers. Indeed, because the firm has the outside option of acquiring, and steering users toward, its target’s competitor, it can take over the target at a discount. In contrast, other firms have no or smaller incentives for takeovers, explaining why ecosystems grow out of market leaders at access points. Conversely, cross-market leverage also implies that once an ecosystem has grown, it has an increased value of controlling access points, so it may go to great lengths to dominate these markets. Our theory suggests that ecosystems have mixed implications for consumer welfare. Under plausible assumptions, a to-be ecosystem takes over market leaders, and this consolidation of good services across markets benefits consumers in the short run. But an ecosystem’s takeovers and dominance of access points lower incentives for entry and innovation, and lower the efficiency of access-point markets with superior alternatives. Hence, the long-run welfare implications of ecosystems are often negative. |
| Keywords: | digital ecosystems, takeover, contestability, entry, envelopment, default effects, steering |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11332 |
| By: | Palma, Amalia |
| Abstract: | La transformación digital en el mundo tiene implicancias directas en el ámbito de las políticas públicas, incluidas las políticas de desarrollo social inclusivo, y condicionará el futuro de la protección social. Los altos niveles de vulnerabilidad característicos de América Latina y el Caribe representan desafíos para enfrentar este proceso de digitalización, ya que pueden aumentar la desigualdad y los actuales niveles de exclusión social. En este documento se plantea una definición de inclusión digital y de qué manera este concepto se relaciona con el desarrollo social inclusivo de la región. Además, se proponen algunos elementos para entender cómo los sistemas de protección social se han visto potenciados y afectados por la digitalización y se discute cuáles son los nuevos riesgos que apareja la transformación digital, así como las oportunidades para ser más eficientes en la generación de prestaciones sociales. |
| Date: | 2024–10–28 |
| URL: | https://d.repec.org/n?u=RePEc:ecr:col022:80792 |
| By: | Selman Erol; Michael Junho Lee |
| Abstract: | This paper presents a framework to study of technological resiliency of financial system architecture. Financial market infrastructures, or platforms, compete with services critical functions along various stages in the lifecycle of a trade, and make investments in technological resiliency to guard against attackers seeking to exploit system weaknesses. Platforms’ financial network effects attenuate competition between platforms on security. Exposure to vulnerabilities is magnified in the presence of strategic adversaries. Private provision of technological resiliency is generally sub-optimal, with over- and underinvestment in security depending on market structure. Vulnerabilities evolve over the maturity of a financial system, but there generically exists a tipping point at which technological resiliency diverges from optimal and creates technological drag on the financial system. We find supportive evidence in tri-party repo settlement: the exit of duopolist resulted in a significant drop in IT-related investment by the sole provider, even as peer firms ramp up investment. |
| Keywords: | financial market architecture; technological vulnerability; cyber risk; financial stability |
| JEL: | D47 D82 D86 G29 |
| Date: | 2024–09–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednsr:98922 |
| By: | Henri-Louis Vedie |
| Abstract: | Cette étude est consacrée à la faillite de FTX, considérée comme la deuxième plateforme mondiale d’échanges des cryptomonnaies, derrière Binance, avant l’annonce de sa faillite en novembre 2022. Annonce qui va être un véritable coup de tonnerre, les ébranlant très sérieusement. Après avoir rappelé l’indispensable à connaitre des cryptomonnaies et de leurs plateformes d’échange, l’étude rappelle l’historique d’une faillite arrivant au pire moment, avec des cours du bitcoin qui s’effondrent depuis octobre 2021, fragilisant encore davantage des plateformes d’échange déjà sous surveillance. Elle met aussi en évidence la personnalité contrastée de celui qui l’a créée, Samuel Banking-Fried, insistant sur l’ampleur d’une faillite où tout va se jouer en une semaine. Faillite facilitée par les asymétries d’informations qui caractérisent ce marché et par l’opportunisme de ses acteurs qui les utilisent. Ce que révèle l’existence d’une caisse noire de la chaine de Ponzi FT X /Alameda Research /. Cette faillite conforte le caractère hautement spéculatif des cryptomonnaies, les éloignant chaque jour davantage de ce qu’elles aspiraient à être : une cryptomonnaie refuge attractive pour les banques centrales. Cette faillite, enfin, souligne l’urgence de la régulation, si on ne veut que cela se renouvelle. |
| Date: | 2023–06 |
| URL: | https://d.repec.org/n?u=RePEc:ocp:rpaeco:pb_27-23 |
| By: | Otaviano Canuto |
| Abstract: | Recent initiatives and policy moves by China and other countries to extend the reach of use of the renminbi in the international monetary system, while the U.S. dollar share in global reserves has slightly shrunk in relative terms, have sparked frequent discussions about a hypothetical “de-dollarization” of the global economy. We approach here what that would mean in terms of global currency functions as means of payment and store of value. While we point out a relative decline of the U.S. dollar weight in those functions more recently, we also highlight gravitational factors that tend to uphold its position. Therefore, the “exorbitant privilege” that the U.S. dollar has provided to its issuer is likely to remain. |
| Date: | 2023–04 |
| URL: | https://d.repec.org/n?u=RePEc:ocp:pbecon:pb_21_23 |
| By: | Nasrum, Muhammad |
| Abstract: | This study examines the moral and value-based framing of credit cards as an important tool of Indonesian financial perceptions and practices. By exploring the concept of ‘moral alchemy’, the transformation of cultural values and ethical perspectives on debt and credit is embodied and materialized in credit cards. Using a dynamic mix of multisite ethnography and netnography, I examine how credit card communities in Indonesia are reshaping the use of credit cards from a symbol of risky privileges to tools for financial empowerment. This research combines three areas of interest: Cultural economics, sociocultural perspectives on ethics, and value theory to provide a comprehensive understanding of this phenomenon. My findings show how consumers who are part of the largest community of credit card users in Indonesia actively reshape their moral beliefs to adapt to new financial practices, illustrating the complex interaction between global financial products and local cultural contexts. Such communities represent more than just the adoption of new financial instruments. They also represent a fundamental shift in how consumers and businesses interact with modern financial instruments. This research makes a valuable contribution to the growing literature on financial and economic practices based on socio-cultural perspectives and offers interesting insights into how innovative financial products are adopted and reinterpreted based on moral preferences and values that enable financial returns. |
| Date: | 2024–10–16 |
| URL: | https://d.repec.org/n?u=RePEc:osf:osfxxx:q9y7d |
| By: | Kolaric, Sascha; Kiesel, Florian; Schiereck, Dirk |
| Date: | 2024–06–23 |
| URL: | https://d.repec.org/n?u=RePEc:dar:wpaper:150229 |
| By: | Weng, Hsu-Chi (Department of Real Estate and Construction Management, Royal Institute of Technology); Hermansson, Cecilia (Department of Real Estate and Construction Management, Royal Institute of Technology) |
| Abstract: | This paper examines how behavioral intention, combined with risk tolerance, self-defined financial confidence, and self-control, influences consumer credit usage. Grounded in the theory of planned behavior – which suggests that behavioral intention is the direct precursor to actual behavior – our study explores the moderating effects of risk tolerance, self-defined financial confidence, and self-control on behavioral intention to determine which individuals are more likely to utilize consumer credit among those intending to do so. Using a combination of survey and bank register data, we find that both higher risk tolerance and increased self-confidence are associated with a greater likelihood of taking on consumer credit, while self-control does not significantly moderate the relationship between behavioral intention and consumer credit behavior. Furthermore, we observe that gender differences in financial behavior are notable: men who report high confidence and an intention to use consumer credit tend to accrue more consumer credit, whereas higher self-control in men is linked to reduced credit use. Additionally, although both behavioral intention and higher income are positively associated with increased consumer credit use, stronger self-control in financial activities appears to mitigate this effect. Our study adds to consumer credit research by revealing the complex interplay between behavioral intention, risk tolerance, self-defined financial confidence, and self-control in consumer credit behavior. |
| Keywords: | consumer credit; behavioral intention; risk tolerance; financial confidence; self-control |
| JEL: | D12 D14 D91 G41 |
| Date: | 2024–10–29 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:kthrec:2024_008 |
| By: | Caio Almeida; Maria Grith; Ratmir Miftachov; Zijin Wang |
| Abstract: | Based on options and realized returns, we analyze risk premia in the Bitcoin market through the lens of the Pricing Kernel (PK). We identify that: 1) The projected PK into Bitcoin returns is W-shaped and steep in the negative returns region; 2) Negative Bitcoin returns account for 33% of the total Bitcoin index premium (BP) in contrast to 70% of S&P500 equity premium explained by negative returns. Applying a novel clustering algorithm to the collection of estimated Bitcoin risk-neutral densities, we find that risk premia vary over time as a function of two distinct market volatility regimes. In the low-volatility regime, the PK projection is steeper for negative returns. It has a more pronounced W-shape than the unconditional one, implying particularly high BP for both extreme positive and negative returns and a high Variance Risk Premium (VRP). In high-volatility states, the BP attributable to positive and negative returns is more balanced, and the VRP is lower. Overall, Bitcoin investors are more worried about variance and downside risk in low-volatility states. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2410.15195 |
| By: | Sabrina T. Howell; Dean Parker; Ting Xu |
| Abstract: | The central tension in securities regulation is between protecting investors and enabling broad capital formation. Focusing on VC fund managers, we study key tools of investor protection in private markets: enforcing relationship-based fundraising and restricting eligible investors. A new policy permitting public advertising is disproportionately used by less well-networked, underrepresented fund managers and is less sensitive to local conditions. Yet it has limited take-up because track record matters at arm’s length while strong networks matter in relationship financing; underrepresented managers more often have neither. Arm’s length fundraising also imposes costs to accessing the “crowd” and verifying investors, inducing negative signaling. |
| JEL: | G21 G23 G32 J15 J16 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33080 |
| By: | Nasrum, Muhammad |
| Abstract: | This article presents an anthropological study on credit card use in Indonesia. It focuses on cultural and social knots that mutually influence financial knowledge and experience using the concepts of performativity and temporality in relation to the rapid process of financialization. By focusing on the credit card community in Indonesia, this article explains how they strategize their financial algorithms in the credit card management cycle. This article contributes to anthropological research on the unequal impact of credit card use by exploring the complex relationship between access to financial and ethical justice, variations in cultural contexts, and social hierarchies. The research examines how financial temporality is created through material and institutional practices. The findings presented in this article underscore the importance of considering credit card activities within a broader framework of financialization and complex social dynamics in contemporary Indonesia and other similar contexts. This study contributes to theoretical discussions on the social and cultural elements of financialization by providing an in-depth and specific narrative analysis of credit and debt. |
| Date: | 2024–10–16 |
| URL: | https://d.repec.org/n?u=RePEc:osf:osfxxx:4wjzv |
| By: | Henri-Louis Vedie |
| Abstract: | En 2023, et selon le think tank américain « Atlantic Council », 114 pays ont engagé une réflexion sur La Monnaie numérique de banque centrale (MNBC). Cette réflexion concerne la MNBC de gros, visant à repenser l’interbancarité et la MNBC de détail, celle que la Chine développe avec un succès certain depuis 2014 avec son e yuan, réservé aujourd’hui au seul marché intérieur chinois, en attendant mieux. L’objet de ce Policy Brief est, tout d’abord, de rappeler que les MNBC ne sont ni une monnaie électronique ni un crypto actif, mais une monnaie plurielle. Il se propose, ensuite, et à partir de données du Fonds monétaire international (FMI) et de la Banque des règlements internationaux (BRI), de procéder à une approche, globale et statistique, du nombre de banques centrales et de pays concernés. Enfin, cette approche est complétée par l’exploitation spatiale de données précisant les pays concernés, leurs banques centrales respectives, leur préférence pour une MNBC de gros et/ ou de détail etc. L’approche globale et statistique montre que : si les MNBC progressent en nombre, de façon spectaculaire entre 2018-2022, 80 % des banques sondées sont toujours au stade d’étude de faisabilité ou de la recherche, et qu’elles sont très majoritairement concernées par des MNBC de détail. L’approche spatiale, regroupant 49 pays, confirme cet engouement et cette préférence. Elle montre également un écosystème MNBC diversifié et guère homogène. Ce qui explique pourquoi, si la révolution monétaire est bien en marche, cette marche est des plus contrastées. Elle confirme enfin un temps d’avance pour un pays, la Chine, et pour un continent, l’Asie. |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:ocp:rpaeco:pb_22-24 |
| By: | Lars Hornuf; Matthias Mattusch |
| Abstract: | Fintech startups have set out to revolutionize the financial world. However, little is known about how successful and innovative these firms actually are. This paper investigates firm failure, funding success, and innovation capacity using a hand-collected dataset of 892 German fintechs founded between 2000 and 2021. We find that founders with a business degree and entrepreneurial experience have a better chance of obtaining funding, while founder teams with science, technology, engineering, or mathematics backgrounds file more patents. Early third-party endorsements and foreign partnerships substantially increase firm survival. We also establish the following stylized facts: (1) fintechs focusing on business-to-business models and which position themselves as technical providers prove to be more effective; and (2) fintechs competing in segments traditionally reserved for banks are generally less successful and less innovative. These results have important implications for the early-stage success management of fintech firms and the investment decisions of venture capital funds and government startup programs. |
| Keywords: | Fintech industry, firm funding, firm failure, innovation capacity |
| JEL: | G24 M13 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11301 |
| By: | Payal Malik (Indian Council for Research on International Economic Relations (ICRIER)); Bhargavee Das; Harishankar Thayyil Jagadeesh |
| Abstract: | Cloud computing is the engine powering the Artificial Intelligence (AI) revolution and several other emerging technologies. While current demand and expected market growth have enabled the entry of new players, the market remains highly concentrated, with a few large cloud service providers who enjoy first-mover advantage and leverage certain common characteristics of digital markets such as economies of scale, network effects and conglomerate effects. This report examines these economic characteristics in the context of cloud computing and provides a comprehensive analysis of the competitive landscape of the market in India and worldwide. A key focus of the report is on the competition concerns that have been highlighted by competition authorities across jurisdictions, such as egress fees, committed spending discounts, tying and bundling, limited interoperability, and application portability. This report undertakes a discussion of these technical and financial market barriers within the Indian context through secondary research and stakeholder consultations. It highlights the ways in which the Indian market follows global trends. Finally, the report explores possible options for enhancing competition. |
| Keywords: | Cloud Computing, Competition, Digital Markets, Digital Public Infrastructure, icrier |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:bdc:report:24-r-04 |