nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2024‒05‒20
fifteen papers chosen by

  1. To Pay or Autopay? Fintech Innovation and Credit Card Payments By Jialan Wang
  2. Blockchain Currency Markets By Angelo Ranaldo; Ganesh Viswanath-Natraj; Junxuan Wang
  3. Super Apps and the Digital Markets Act By Simonetta Vezzoso
  4. The Social Meaning of Mobile Money: Earmarking Reduces the Willingness to Spend in Migrant Households By Jean N. Lee; Jonathan Morduch; Saravana Ravindran; Abu S. Shonchoy
  5. Voting Participation and Engagement in Blockchain-Based Fan Tokens By Lennart Ante; Aman Saggu; Benjamin Schellinger; Friedrich Wazinksi
  6. Is it time for marketing to reappraise B2C relationship management? The emergence of a new loyalty paradigm through blockchain technology By Horst Treiblmaier; Elena Petrozhitskaya
  7. Income and the CARD Act’s Ability‐to‐Pay Rule in the US Credit Card Market By Scott L. Fulford; Joanna Stavins
  8. Piercing the Veil of TVL: DeFi Reappraised By Yichen Luo; Yebo Feng; Jiahua Xu; Paolo Tasca
  9. Posting vulnerability on LinkedIn By Orgad, Shani
  10. Understanding Money Using Historical Evidence By Adam Brzezinski; Nuno Palma; Francois R. Velde
  11. Learning From Online Ratings By Xiang Hui; Tobias J. Klein; Konrad Stahl
  12. The Characterization of Clearing Payments in Financial Networks By Ketelaars, Martijn; Borm, Peter; Herings, P.J.J.
  13. Truth by Consensus: A Theoretical and Empirical Investigation By Gabriele Camera, Rod Garratt, Cyril Monnet
  14. The Characterization of Clearing Payments in Financial Networks By Ketelaars, Martijn; Borm, Peter; Herings, P.J.J.
  15. Where Do Banks End and NBFIs Begin? By Viral V. Acharya; Nicola Cetorelli; Bruce Tuckman

  1. By: Jialan Wang
    Abstract: Digital technologies and fintech firms have rapidly reshaped the consumer financial landscape in recent years, and have the potential to help consumers make better decisions and improve their financial health. Existing technologies such as autopay are also experiencing increased takeup, a trend that could be accelerated by innovations such as open banking. I examine the extent to which autopay affects payment behavior for customers of a credit card serviced by a fintech company. Using sharp changes in the company's practices in a regression discontinuity design, I find that a small nudge accounts for half of all autopay enrollment during the sample period, and that enrollment at account opening is persistent. Autopay increases the likelihood of making the minimum payment by 20 to 29pp, more than doubling the baseline rate. The results show that seemingly minor technological defaults can have economically large effects on consumer credit outcomes.
    JEL: D12 D14 G21 G41 G51
    Date: 2024–04
  2. By: Angelo Ranaldo (University of St. Gallen; Swiss Finance Institute); Ganesh Viswanath-Natraj (Warwick Business School); Junxuan Wang (University of Cambridge - Centre for Endowment Asset Management, Cambridge Judge Business School)
    Abstract: We conduct the first comprehensive study of blockchain currencies, stablecoins pegged to traditional currencies and traded on decentralized exchanges. Our findings reveal that the blockchain market generally operates efficiently, with blockchain prices and trading volumes closely aligned with those of their traditional counterparts. However, blockchain-specific factors, such as gas fees and Ethereum volatility, act as frictions. Blockchain prices are determined by macroeconomic fundamentals and order flow. We use a rich transaction-level database of trades and link it to the characteristics of market participants. Traders with significant market share and access to the primary market have a greater impact on pricing, likely due to informational advantages.
    Keywords: Stablecoins, foreign exchange, blockchain, price efficiency, market resilience, microstructure
    JEL: D53 E44 F31 G18 G20 G28
    Date: 2024–04
  3. By: Simonetta Vezzoso
    Abstract: The Digital Markets Act (DMA) aims to ensure contestability and fairness in digital markets, particularly focusing on regulating Big Tech companies. The paper explores the DMA's capacity to address both current and future challenges in digital market contestability and fairness, spotlighting the trend towards platform integration and the potential rise of "super-apps" akin to WeChat and KakaoTalk. Specifically, it investigates WhatsApp, owned by Meta, as a gatekeeper that might expand its service offerings, integrating additional functionalities like AI and metaverse technologies. The paper discusses whether the DMA's obligations, such as mandated interoperability and data portability, can mitigate the emergent risks to market fairness and contestability from such integrations. Despite recognizing that the DMA has the potential to address many issues arising from platform integration, it suggests the necessity for adaptability and a complementary relationship with traditional antitrust law to ensure sustained contestability and fairness in evolving digital markets.
    Date: 2024–04
  4. By: Jean N. Lee (World Bank); Jonathan Morduch (Robert F. Wagner Graduate School of Public Service, New York University); Saravana Ravindran (Lee Kuan Yew School of Public Policy, National University of Singapore); Abu S. Shonchoy (Department of Economics, Florida International University)
    Abstract: Behavioral household finance shows that people are often more willing to spend when using less tangible forms of money like debit cards or digital payments than when spending in cash. We show that this “payment effect†cannot be generalized to mobile money. We surveyed families in rural Northwest Bangladesh, where mobile money is mainly received from relatives working in factories. The surveys were embedded within an experiment that allows us to control for the relationships between senders and receivers of mobile money. The finding suggests that the source of funds matters, and mobile money is earmarked for particular purposes and thus less fungible than cash. In contrast to the expectation of greater spending, the willingness to spend in the rural sample was lower by 24 to 31 percent. In urban areas, where the sample does not receive remittances on net, there are no payment effects associated with mobile money.
    Keywords: payment effect, digital finance, willingness to pay, social meaning of money, earmarks
    JEL: O15 G41 G50 D91 D14
    Date: 2024–04
  5. By: Lennart Ante; Aman Saggu; Benjamin Schellinger; Friedrich Wazinksi
    Abstract: This paper investigates the potential of blockchain-based fan tokens, a class of crypto asset that grants holders access to voting on club decisions and other perks, as a mechanism for stimulating democratized decision-making and fan engagement in the sports and esports sectors. By utilizing an extensive dataset of 3, 576 fan token polls, we reveal that fan tokens engage an average of 4, 003 participants per poll, representing around 50% of token holders, underscoring their relative effectiveness in boosting fan engagement. The analyses identify significant determinants of fan token poll participation, including levels of voter (dis-)agreement, poll type, sports sectors, demographics, and club-level factors. This study provides valuable stakeholder insights into the current state of adoption and voting trends for fan token polls. It also suggests strategies for increasing fan engagement, thereby optimizing the utility of fan tokens in sports. Moreover, we highlight the broader applicability of fan token principles to any community, brand, or organization focused on customer engagement, suggesting a wider potential for this digital innovation.
    Date: 2024–04
  6. By: Horst Treiblmaier (Modul University Vienna); Elena Petrozhitskaya (Modul University Vienna)
    Abstract: Blockchain technology is predicted to become a powerful driver of marketing transformation. At present, most envisioned use cases are in an early stage with an uncertain industrial impact and an immature theoretical integration in academic research. To help close this research gap, we investigate how blockchain-based loyalty programs transform B2C relations through innovative customer services that bear important properties of a sharing economy. Specifically, we identify five potential advantages of blockchain-based programs over traditional loyalty programs pertaining to usage, accrual, relevance, expiration, and transferability. We then apply expectancy theory to assess consumers' perceptions in two empirical studies, both of which reveal an overall preference for blockchain-based loyalty programs over traditional models: an analysis of 5, 059 Twitter tweets detects more positive feedback for the blockchain-based program, and a survey of 206 consumers reveals a significantly more positive attitude toward the blockchain-based loyalty program with respect to accrual, relevance, expiration, and transferability.
    Keywords: Expectancy theory, Blockchain, tokens, Tokenization, Loyalty, Loyalty Programs, Marketing
    Date: 2023
  7. By: Scott L. Fulford; Joanna Stavins
    Abstract: In consumer credit, “ability‐to‐pay” (ATP) rules require lenders to consider whether the consumer can repay a loan without experiencing undue hardship. ATP rules have recently been implemented or considered in many countries and markets. Using a large panel of credit card accounts, we study the 2009 Credit Card Accountability Responsibility and Disclosure (CARD) Act’s ATP rule and its effect, if any, on the US credit card market. We find that the rule appears to have had no effect on bank credit decisions because actual credit limits are almost always substantially lower than reasonable ATP limits. We examine other factors that may explain banks’ credit decisions. Nearly 27 percent of consumer accounts that had a change in cardholder income received a credit limit increase of $100 or more in the same month as the income change. Most credit limit increases followed an income increase, although 19 percent of the instances of an income decrease also were followed by a credit limit increase. Most credit limit increases occurred without cardholders providing banks with income updates. The magnitude of the income change coefficient when an income update occurred is estimated to be nearly zero. We conclude that after the origination of an account, the direction and size of the account holder’s income updates are largely unimportant for credit limit changes from either a regulatory or bank profitability standpoint.
    Keywords: CARD Act; credit cards; credit limits; ability to pay
    JEL: D14 E42 G21 G51
    Date: 2024–04–01
  8. By: Yichen Luo; Yebo Feng; Jiahua Xu; Paolo Tasca
    Abstract: Total value locked (TVL) is widely used to measure the size and popularity of protocols and the broader ecosystem in decentralized finance (DeFi). However, the prevalent TVL calculation framework suffers from a "double counting" issue that results in an inflated metric. We find existing methodologies addressing double counting either inconsistent or flawed. To mitigate the double counting issue, we formalize the TVL framework and propose a new framework, total value redeemable (TVR), designed to accurately assess the true value within individual DeFi protocol and DeFi systems. The formalization of TVL indicates that decentralized financial contagion propagates through derivative tokens across the complex network of DeFi protocols and escalates liquidations and stablecoin depegging during market turmoil. By mirroring the concept of money multiplier in traditional finance (TradFi), we construct the DeFi multiplier to quantify the double counting in TVL. Our empirical analysis demonstrates a notable enhancement in the performance of TVR relative to TVL. Specifically, during the peak of DeFi activity on December 2, 2021, the discrepancy between TVL and TVR widened to \$139.87 billion, resulting in a TVL-to-TVR ratio of approximately 2. We further show that TVR is a more stable metric than TVL, especially during market turmoil. For instance, a 25% decrease in the price of Ether (ETH) results in an overestimation of the DeFi market value by more than \$1 billion when measuring using TVL as opposed to TVR. Overall, our findings suggest that TVR provides a more reliable and stable metric compared to the traditional TVL calculation.
    Date: 2024–04
  9. By: Orgad, Shani
    Abstract: Digital spaces such as LinkedIn, the world’s largest professional digital network, constitute central sites for self-promotion, where job seekers and the employed present their polished “best” professional selves. However, in recent years, LinkedIn members are increasingly publishing accounts that highlight their vulnerabilities and struggles. This article examines the emergence of vulnerability on LinkedIn by analyzing how vulnerability is articulated in a sample of 40 posts (2021–2023). It identifies three genres: (1) Triumph over tragedy: vulnerability as a vector for self-growth and resilience; (2) Snap: vulnerability as a breaking point; and (3) Subversive commentary on self-promotion. On one hand, posting vulnerability on LinkedIn is a strategic form of digital self-branding, which monetizes vulnerability and depoliticizes its meanings. At the same time, vulnerability posts have the potential to form a basis for resistance to digital and work cultures’ glorification of overwork, individualized resilience and self-sufficiency, and the constant pressure to self-promote.
    Keywords: authenticity; genre; professional self; self-promotion; social media posts; vulnerability; work; Sage deal
    JEL: R14 J01
    Date: 2024–04–16
  10. By: Adam Brzezinski; Nuno Palma; Francois R. Velde
    Abstract: Debates about the nature and economic role of money are mostly informed by evidence from the 20th century, but money has existed for millennia. We argue that there are many lessons to be learned from monetary history that are relevant for current topics of policy relevance. The past acts as a source of evidence on how money works across different situations, helping to tease out features of money that do not depend on one time and place. A close reading of history also offers testing grounds for models of economic behavior and can thereby guide theories on how money is transmitted to the real economy.
    Keywords: Monetary policy; Monetary History; Natural Experiments
    JEL: E40 E50 N10
    Date: 2024–04–05
  11. By: Xiang Hui; Tobias J. Klein; Konrad Stahl
    Abstract: Online ratings play an important role in many markets. However, how fast they can reveal seller types remains unclear. We propose a simple model of rating behavior where learning about the seller type influences the rating decision. We calibrate the model to eBay data and find that ratings can be very informative. After 25 transactions, the likelihood of correctly predicting the seller type is above 95 percent.
    Keywords: Online markets, rating, reputation
    JEL: D83 L12 L13 L81
    Date: 2024–04
  12. By: Ketelaars, Martijn (Tilburg University, Center For Economic Research); Borm, Peter (Tilburg University, Center For Economic Research); Herings, P.J.J. (Tilburg University, Center For Economic Research)
    Keywords: transfer schemes; additional cash vectors; homeomorphism; axiomatization; proportional rule
    Date: 2024
  13. By: Gabriele Camera, Rod Garratt, Cyril Monnet
    Abstract: Truthful reporting about the realization of a publicly observed event cannot be guaranteed by a consensus process. This fact, which we establish theoretically and verify empirically, holds true even if some individuals are compelled to tell the truth, regardless of economic incentives. We document results from an experiment where subjects routinely misreported a commonly known event when they could monetarily gain from it. Relying on majority consensus did not help uncover the truth, especially if complying with the majority granted small personal monetary gains. This highlights the difficulties in relying on shared consensus protocols to agree on specific events, and the importance of institutions with trusted, impartial observers
    Keywords: DeFi, digital currency, dishonesty, trust
    JEL: C70 C90
    Date: 2024–04
  14. By: Ketelaars, Martijn (Tilburg University, School of Economics and Management); Borm, Peter (Tilburg University, School of Economics and Management); Herings, P.J.J. (Tilburg University, School of Economics and Management)
    Date: 2024
  15. By: Viral V. Acharya; Nicola Cetorelli; Bruce Tuckman
    Abstract: In recent years, assets of non-bank financial intermediaries (NBFIs) have grown significantly relative to those of banks. These two sectors are commonly viewed either as operating in parallel, performing different activities, or as substitutes, performing substantially similar activities, with banks inside and NBFIs outside the perimeter of banking regulation. We argue instead that NBFI and bank businesses and risks are so interwoven that they are better described as having transformed over time rather than as having migrated from banks to NBFIs. These transformations are at least in part a response to regulation and are such that banks remain special as both routine and emergency liquidity providers to NBFIs. We support this perspective as follows: (i) The new and enhanced financial accounts data for the United States (“From Whom to Whom”) show that banks and NBFIs finance each other, with NBFIs especially dependent on banks; (ii) Case studies and regulatory data show that banks remain exposed to credit and funding risks, which at first glance seem to have moved to NBFIs, and also to contingent liquidity risk from the provision of credit lines to NBFIs; and (iii) Empirical work confirms bank-NBFI linkages through the correlation of their abnormal equity returns and market-based measures of systemic risk. We discuss some potential regulatory responses, including treating the two sectors holistically; recognizing the implications for risk propagation and amplification; and exploring new ways to internalize the costs of systemic risk.
    JEL: G01 G20 G21 G22 G23 G24 G28 G29
    Date: 2024–04

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.