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on Payment Systems and Financial Technology |
| By: | Robert M. Hunt; Konstantinos Serfes; Yin Zhang |
| Abstract: | This paper develops a two-sided model of the payment card market with elastic consumer demand, merchant and network market power, ad valorem interchange fees, cardholder rewards and cash as an alternative payment method. Drawing on insights from public finance, we define a credit card tax—an endogenous wedge between consumer and merchant prices generated by interchange fees, rewards, and credit card adoption. We show how this tax affects equilibrium prices, platform profits and welfare. Our analysis yields a novel and policy-relevant result: Contrary to conventional wisdom, capping interchange fees can increase equilibrium rewards when consumer demand is relatively inelastic. This, in turn, raises credit card adoption and intensifies cross-subsidization, benefiting card users, potentially at the expense of cash users. By contrast, when demand is more elastic, fee caps reduce rewards and card usage, improving outcomes for both groups. We also characterize the conditions under which interchange fee caps enhance allocative efficiency and encourage socially desirable payment choices. Overall, the paper offers new theoretical insights into the regulation of two-sided payment markets. |
| Keywords: | credit cards; two-sided networks; merchant competition; interchange fees; regulation |
| JEL: | L13 L40 G28 E42 |
| Date: | 2026–05–28 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedpwp:103315 |
| By: | Mavuma, David; Kahambwe, Chris |
| Abstract: | This study examines the potential effects of transaction costs associated with electronic payments in foreign currency on household purchasing power in the Democratic Republic of the Congo within the framework of the reform proposed by the Central Bank of Congo. Using a transaction cost analysis and simulations based on the tariff structures of major Mobile Money operators, the findings suggest that transaction fees may increase the effective cost of goods and services and reduce consumers’ purchasing power. In a context characterized by poverty, low banking penetration, and a large informal sector, the study highlights the need for appropriate regulatory and inclusion measures to protect vulnerable populations and ensure the achievement of the reform’s financial traceability objectives. |
| Keywords: | Transaction Costs; Mobile Money; Purchasing Power; Payment Reform; Financial Inclusion; Democratic Republic of Congo. |
| JEL: | E42 G21 L81 O16 |
| Date: | 2026–05–24 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:129279 |
| By: | OECD |
| Abstract: | Digital markets have profoundly transformed the way consumers interact with businesses, offering new opportunities for innovative goods and services, greater choice, and enhanced convenience. These evolving dynamics create new challenges for both competition and consumer protection authorities, as practices that impact competition may also have an effect on consumer autonomy and choice, privacy, as well as trust, and vice versa. Traditional analytical frameworks based on price, output, information and transparency often fail to capture the full competition and consumer implications of conduct in digital environments. This note examines areas where the two policy areas converge, where gaps remain and how authorities can work together to address challenges arising from digitalisation. |
| JEL: | D12 D18 K21 L13 L40 L41 |
| Date: | 2026–05–28 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:332-en |
| By: | Bernd Hayo; Matthias Neuenkirch; Manuel Walz |
| Abstract: | This paper analyses the extensive and intensive margins of demand for a retail digital euro. We conducted a representative survey in France, Germany and Italy in November–December 2023. We find that 52–62% of respondents are willing to hold a digital euro, depending on the interest rate spread, with a higher share in Italy than in France or Germany. Design features (cash-like vs deposit-like) appear to play only a very limited role. Average demand depends on the hypothetical interest rate spread relative to current accounts and ranges from EUR 700 to EUR 1, 100, implying an aggregate demand of 1.5–2.5% of GDP. Willingness to hold a digital euro is associated with socio-demographic factors, trust in the ECB and the EU, digitalisation and payment behaviour. Negative interest rate spreads relative to current accounts reduce willingness to hold the digital euro more strongly than positive spreads increase it. Behavioural characteristics tend to be correlated with the likelihood of adoption, whereas economic factors, particularly income and interest rates, are mainly related to the level of demand. This distinction becomes more pronounced when conditioning on positive demand, suggesting that socio-demographic factors primarily influence participation decisions rather than quantities demanded. |
| Keywords: | CBDC demand, digital euro, ECB, household survey, monetary policy |
| JEL: | E41 E42 E51 E58 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12706 |
| By: | Quaicoe, Nana |
| Abstract: | In economies where a portion of the population transacts through mobile money and the other portion strictly uses only cash, can any single interest rate rule serve both groups well? I develop a two-agent New Keynesian model calibrated to Ghana in which included households manage liquidity through mobile money under Baumol– Tobin demand, while excluded households depend on government transfers under fiscal dominance. I find a critical threshold at approximately 70 percent financial exclusion.Below it, aggressive inflation targeting is optimal for both household types. Above it, the welfare surface for included households develops an interior optimum, the optimal Taylor rule diverges across groups, and no single rule resolves the conflict. The distributional cost of monetary policy is convex in exclusion: the welfare variance ratio between household types rises from 7.6:1 at 50 percent exclusion to 98:1 at 80 per- cent, the range observed across Sub-Saharan Africa. Aggregate welfare statistics mask this entirely. The trade-off is reducible only through financial inclusion, not through monetary policy design. |
| Keywords: | monetary policy, financial inclusion, mobile money, TANK model, fiscal dominance, Taylor rule, distributional effects, Sub-Saharan Africa |
| JEL: | E52 E58 G23 O16 |
| Date: | 2026–04–18 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:128793 |
| By: | Marián Suchánek (Masaryk University, Faculty of Economics and Administration); Ján Krchňavý (Masaryk University, Faculty of Economics and Administration) |
| Abstract: | The nature of money is within the discipline of economics typically analysed merely by way of listing its functions grounded in properties of money things. But the discourse has recently more explicitly turned to addressing this foundational question of “What is money?” from the perspective of social ontology that sees money as a social phenomenon. We argue that any such venture should be able to account for the hierarchical structure of money. This argument integrates three distinct aspects of money i.) that in any community there is usually not one but multiple kinds of money; ii.) that these monies are of different qualities and therefore are structured within a hierarchy, and iii.) that these qualitative differences that distinguish individual kinds of money ultimately pertain to the rights and obligations that define each form of money. Building on recent debates about the hierarchy of money in economics—particularly The Money View and Modern Money Theory—this paper seeks to extend these discussions into the domain of social ontology, using the framework of social positioning developed by the Cambridge Social Ontology Group. |
| Keywords: | money; institutions; hierarchy of money; social ontology; money view; social positioning theory |
| JEL: | E42 B41 Z13 E51 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:mub:wpaper:2026-03 |
| By: | Hong Lee (Korea Institute for Industrial Economics and Trade) |
| Abstract: | Digitization has enabled two-sided platforms to reshape search and access in professional service markets long coordinated by incumbent associations. This paper examines the decade-long conflict between LawTalk and the Korean Bar Association and places it in comparative perspective with similar disputes in real estate, tax services, telemedicine, and mobility.<p> Building on two-sided market theory, differentiated-product competition, and recent empirical evidence from Korea’s legal-services market, the paper argues that platform entry in credence-goods markets tends to expand demand by reducing search friction and widening the product space rather than merely reallocating existing demand. The LawTalk case demonstrates how a regulatory shift, from exclusion toward coexistence, can allow for lawful intermediation while maintaining core professional norms.<p> The paper concludes that policy should govern the interface through transparency, auditability, and a clear separation between advertising and professional services, instead of categorical restrictions that reduce access without welfare gains. |
| Keywords: | digital platforms; legal services; anti-competitive behavior; competition theory; competition policy; digitization |
| JEL: | D43 D45 D47 D61 D74 D82 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ris:kieter:022560 |
| By: | Ahmed, Syed Azfar; Siddiqui, Danish Ahmed |
| Abstract: | The research analyzes factors that drive Pakistani Islamic banking customers to adopt Sharia compliant credit cards. The research analyzes how Islamic financial knowledge and perceived usefulness interact with loyalty, religiosity, and management knowledge through the Theory of Planned Behavior and the Technology Acceptance Model to affect consumer attitudes and behavioral intentions. A structured questionnaire yielded data from 267 participants through convenience sampling. Analysis of collected data used Partial Least Squares Structural Equation Modeling (PLS-SEM) through SmartPLS. Knowledge of Islamic financial principles alongside effective knowledge management positively influences customer attitudes as well as their intentions to use Islamic credit cards. The statistical analysis confirmed perceived usefulness together with customer loyalty status as essential factors leading to positive attitudes. Religious preferences showed the opposite influence because they strengthened both customer loyalty and useful perception but reduced adoption intent. Perception of Islamic financial practices showed no direct relationship to adoption intention even though researchers expected it would have an influence. This indicates customers have been prioritizing functionality and trust-based factors above religious aspects. The research findings deliver concrete recommendations for Islamic financial institutions to improve product adoption by educating consumers along with clear product disclosure and individualized support. The study advances theoretical elements through a combination of behavioral and ethical finance approaches that question religious sentiment as the sole factor driving Islamic finance product acceptance. The study supports extensive goals that promote financial inclusion and ethical banking practices for Muslim-majority societies by encouraging institutions to meet changing consumer demands. |
| Keywords: | Intention to Adopt Islamic Finance, Attitude Towards Islamic Finance, Knowledge Management, Loyalty, Loyalty, Perceived Usefulness, Religious Preferences, Knowledge Of Islamic Financial System, Perception of Shariah Compliance |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:esprep:341010 |
| By: | Vergara Cobos, Estefania Belen; Cakir, Selcen; Mei Zahav, Hagai |
| Abstract: | Does cybersecurity preparedness matter for growth, and if so, where? This paper provides evidence that cybersecurity preparedness amplifies growth in digitally exposed sectors, highlighting its role as a key institutional complement to digitalization. The analysis uses an interaction design across countries and sectors on a panel of 178 countries, five sectors, and two growth intervals, exploiting differences across sectors within the same country period and over time. The estimates imply that a one standard deviation increase in cybersecurity preparedness is associated with about 1 to 2 percentage points higher annualized value added growth in sectors that are more vulnerable to cyber risk relative to less exposed sectors within the same country and period. The result is robust across alternative measures of sectoral vulnerability and a range of additional tests. Effects are slightly larger in high income countries, indicating potential differences in the effectiveness of cybersecurity systems. Overall, the results suggest that investments in digital infrastructure and digital adoption may yield larger and more resilient growth returns when accompanied by effective cybersecurity. |
| Date: | 2026–05–28 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11398 |
| By: | Nordine Abidi; Leonardo Gambacorta; Christoffer Kok; Leonardo Madio; Ixart Miquel-Flores; Alberto Partida |
| Abstract: | Investment in cybersecurity in an interconnected banking system has public-good properties: positive externalities can generate systemic underinvestment. Using confidential supervisory data from the European Central Bank, we first identify "laggard" European banks that underinvest relative to their cyber-risk profiles, and then examine how supervisory scrutiny affects their incentives to invest. We exploit the 2024 ECB Cyber Resilience Stress Test (CyRST) as a quasi-natural experiment. In a difference-in-differences design, we find that following the CyRST announcement, laggard banks increased cybersecurity investment by about 80% relative to their peers. The response is stronger among laggards subject to high-intensity supervisory oversight, consistent with scrutiny exerting a disciplining effect. Overall, the results suggest that targeted supervisory scrutiny may help mitigate underinvestment incentives and strengthen banks' operational risk management. |
| Keywords: | cyber risk, bank supervision, stress test, IT investment |
| JEL: | G21 G28 G32 L86 K23 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1351 |
| By: | OECD |
| Abstract: | This policy paper provides an overview of the growing fragmentation of cybersecurity regulations across jurisdictions. It examines the main factors driving this fragmentation and outlines its consequences for both governments and businesses, including higher compliance costs, resource diversion from core cybersecurity functions and challenges to effective international co-operation. The paper also maps existing initiatives aimed at promoting greater regulatory coherence at domestic, regional, and international levels. By bringing these elements together, it seeks to support a shared understanding of the current cybersecurity regulatory landscape and mapping out next steps to foster greater coherence through dialogue among policymakers, regulators, and businesses and strengthening the evidence base. |
| Keywords: | cybersecurity, digital security |
| Date: | 2026–05–27 |
| URL: | https://d.repec.org/n?u=RePEc:oec:stiaab:384-en |
| By: | Charlita De Freitas, Luciano; Kerf, Michel; Evangelista, Priscila Honório; Najles, Julian; Esteves, Luiz Alberto; Andres, Luis Alberto |
| Abstract: | The global data processing and storage industry is undergoing a structural transformation as cloud computing shifts from a differentiated, firm‑specific service toward a standardized and increasingly commoditized global market. International trade theory—specifically the Heckscher‑Ohlin factor proportions framework—is applied to analyze emerging patterns of specialization and comparative advantage in the provision of cloud services. Cloud output is conceptualized as a standardized data processing unit, produced under constant returns to scale using a globally uniform technology. Building on this definition, a conceptual multi‑factor unit cost model is developed that integrates traditional production factors—energy, capital and digital infrastructure, and skilled labor—with non‑factor costs distinctive to the digital economy, notably regulatory compliance costs and geopolitical and environmental risk premia. Comparative advantage is determined by the minimization of total structural data processing unit costs, inclusive of both factor and non‑factor components. This framework explains the observed concentration of data centers in locations characterized by low‑cost and reliable energy, robust connectivity infrastructure, deep pools of specialized human capital, and limited regulatory friction or systemic risk. The analysis suggests that cloud services constitute an emerging frontier of international factor‑endowment trade, where classical sources of comparative advantage interact closely with institutional quality, policy choices, and risk conditions to shape global patterns of specialization. |
| Date: | 2026–05–20 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11391 |
| By: | Ryan Niladri Banerjee; Hyun Song Shin; Jose María Vidal Pastor |
| Abstract: | The elastic supply of money through overdrafts and credit lines overcomes cash-in-advance con straints, enabling large-value payments without waiting for incoming cash. This elasticity is crucial in long supply chains, where cash-in-advance constraints could otherwise cause gridlock. In essence, money elasticity and the supply of working capital are two sides of the same coin, with undrawn credit lines serving as the operative link. This paper examines how shifts in financial conditions influence money elasticity and, in turn, impact firm activity within produc tion networks. Using granular firm-level data, we demonstrate that production-network-driven working capital needs introduce a cyclical element that dances to the tune of financial conditions. Tighter conditions, such as rising credit spreads or a stronger US dollar, significantly reduce output, with spillovers through production networks amplifying the effects. These findings underscore the importance of money elasticity in supporting economic stability. |
| Keywords: | money elasticity, working capital, credit lines, financial conditions, input-output linkages |
| JEL: | E23 E32 E41 E44 E51 F65 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1350 |
| By: | Celso Brunetti; Jeffrey H. Harris; Ioannis Spyridopoulos |
| Abstract: | No, in the mortgage market. Using confidential micro-level data combining mortgage contracts with credit and repayment records for 44 million loans spanning 5, 000 bank mergers over nearly three decades, we find no changes to mortgage rates, approval rates, or delinquency rates. Local mortgage markets remain remarkably competitive despite consolidation, averaging over 100 active lenders in each county every post-merger quarter. Our findings reveal significant merger selection motives: large acquiring banks target community banks with relationship-intensive, portfolio-lending business models, whereas community banks appear to merge together to gain scale and compete. Overall, our study challenges the view that bank mergers increase market concentration and create market power that harms household borrowers. |
| Keywords: | bank mergers; banking consolidation; mortgage lending; market power; competition; community banking; consumer welfare; credit access |
| Date: | 2026–05–13 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfe:103337 |