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on Payment Systems and Financial Technology |
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Issue of 2024‒07‒22
twenty-one papers chosen by |
| By: | Christopher Henry; Matthew Shimoda; Doina Rusu |
| Abstract: | We present key results from the 2023 Methods-of-Payment (MOP) Survey, including updated payment shares based on a three-day shopping diary. Results show that measures of cash management and use have remained fairly stable since 2020, along with the estimated share of payments made online. In 2023, Canadians increased their adoption of payment alternatives such as mobile apps and Interac e-Transfer. New questions were introduced into the MOP survey instrument in 2023 to measure perceived access to cash from automated banking machines and banks. |
| Keywords: | Bank notes; Digital currencies and fintech; Financial services |
| JEL: | D83 E41 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:bca:bocadp:24-08&r= |
| By: | Christophe Lebrun (HEG - Haute Ecole de Gestion de Genève); Oetske Leroux-Fankhauser (HEG - Haute Ecole de Gestion de Genève); Natkamon Tovanich (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique, X - École polytechnique); Thibault Vatter (HEG - Haute Ecole de Gestion de Genève); Arnaud Gaudinat (HEG - Haute Ecole de Gestion de Genève) |
| Abstract: | As stablecoins address the challenges of price stability in the cryptocurrency market, this paper provides a comprehensive taxonomy of stablecoins, categorizing them based on governance, value, and design dimensions. Our study aims to enrich the ongoing discourse in digital currency and provide insights into the future trajectory of stablecoins in decentralized finance. |
| Keywords: | Stablecoins, Taxonomy, Cryptocurrencies, Blockchain, Decentralized Finance (DeFi) |
| Date: | 2024–07–09 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04607181&r= |
| By: | World Bank |
| Abstract: | Cash-transfer payment mechanisms abound and have diversified greatly in recent years. Payments can be made manually (in person) on a set schedule at a brick-and-mortar location such as a bank, post office, or government office or digitally via mobile money, biometrically authenticated smart cards or to a designated financial account, such as through a local bank or payment center. Research conducted before 2016 has shown that digital transfers may be more cost-effective for implementers than physical cash payments, expand customer coverage for participating mobile network operators, and provide avenues to increase financial inclusion for the poor, among other potential benefits. However, recent studies show that these benefits are not guaranteed. |
| Date: | 2024–03–01 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:hdnspu:191203&r= |
| By: | Hilpert, Hanns Günther |
| Abstract: | In China, money, currency and payment transactions are manifestations of state sovereignty and political power. The primary objective of Chinese monetary policy is to maintain domestic stability, expand the scope of its own influence internationally, and reshape the global financial and monetary system to make it more compatible with the structures of the Chinese one-party state. China is pursuing the internationalisation of the renminbi on several tracks in small persistent steps and with a long-term perspective, but it has so far shied away from the decisive transition to convertibility. For the time being, the renminbi does not play a significant role on the global financial and currency markets. However, it is gaining ground as a trading, credit and reserve currency in Asia and the Global South. China is a pioneer in the development and introduction of digital central bank money. It is striving to play a leading role in the digitalisation of international payment transactions. Prospectively, the technology and infrastructure developed in China and the standards set for cross-border payments using blockchain and real-time transactions could replace the current international banking and clearing system in a cost-effective manner. The Chinese leadership believes that digital central bank money offers great potential: In terms of domestic policy, it creates further opportunities for surveillance and repression. Internationally, it would become easier for China and third countries to circumvent Western financial sanctions. In response to China's currency campaign, the European Union and the European Central Bank should step up their own efforts to internationalise and digitise the euro. Europe should avoid dependence on China when it comes to the future critical infrastructure of an interoperable system for international payments with digital central bank money. |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:swprps:298842&r= |
| By: | Berkouwer, Susanna; Biscaye, Pierre; Hsu, Eric; Kim, Oliver; Lee, Kenneth; Miguel, Edward; Wolfram, Catherine |
| Abstract: | In response to the Covid-19 crisis, 186 countries implemented direct cash transfers to households, and 181 introduced in-kind programs that lowered the cost of utilities such as electricity, water, transport, and mobile money. During times of crisis, do people prefer in-kind transfers or cash, and why? In this paper, we compare electricity transfers against a benchmark of cash transfers (mobile money) among 2000 rural and urban residents of Kenya with pre-paid electricity meter connections. We offer participants an incentivized choice between electricity transfers or mobile money, totaling approximately USD 10 to 15, and then implement their choice over three months. We generate three main findings. First, participants overwhelmingly prefer cash, with three-quarters of participants opting for mobile money even when offered electricity tokens with a cash value that is 40 percent higher, possibly due to the flexibility in expenditures or credit constraints. Second, despite relatively low baseline electricity consumption, preference for cash is slightly lower in rural areas, possibly due to higher transaction costs for purchasing electricity, lower mobile money penetration, or savings constraints. Third, electricity tokens transfers generate a larger increase in electricity consumption than equivalent cash transfers, suggesting a role for mental accounting; however, we estimate no impact of either electricity or cash transfers on a broad set of socioeconomic outcomes. These patterns suggest that mobile money transfers generate larger welfare gains than electricity credit, at least in settings with high mobile money penetration. |
| Keywords: | Economics, Applied Economics, Clinical Research, Development economics, Cash transfers, Electricity subsidies, Government programs, Utility subsidies, Kenya, Electrical and Electronic Engineering, Mechanical Engineering, Energy, Banking, finance and investment, Applied economics, Econometrics |
| Date: | 2023–11–01 |
| URL: | https://d.repec.org/n?u=RePEc:cdl:econwp:qt77q3w4sm&r= |
| By: | Francisco Jesús Guerrero López (Universidad de San Andrés); Paula Margaretic (Universidad de Chile); Lucía Quesada (Universidad de San Andrés); Federico Sturzenegger (Universidad de San Andrés) |
| Abstract: | In recent years, traditional banks have faced increasing competition from digital banks, fintechs, and big tech companies. This paper builds a framework to discuss optimal regulation within this more complex competitive landscape. To achieve this, we establish a model where banks compete with a single fintech. All players choose the degree of specialization. Banks hold a geographical advantage for some customers, while the fintech reaches all customers equally. Due to fixed costs, the market operates under imperfect competition, leading to parameter values where the regulator may seek to exclude non-bank intermediaries and others where the regulator may prefer to exclude banks, shifting intermediation exclusively to big tech companies. These distinct patterns align with observed competition in financial markets, where competition with big tech companies is intense in the customer business and less so in corporate lending. Our model contributes to the argument that, for certain types of lending, banking regulation tends to be overly restrictive towards non-bank intermediaries, resulting in significant welfare losses. |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:aoz:wpaper:327&r= |
| By: | Bernhard K Meister; Henry CW Price |
| Abstract: | The gas fee, paid for inclusion in the blockchain, is analyzed in two parts. First, we consider how effort in terms of resources required to process and store a transaction turns into a gas limit, which, through a fee, comprised of the base and priority fee in the current version of Ethereum, is converted into the cost paid by the user. We hew closely to the Ethereum protocol to simplify the analysis and to constrain the design choices when considering multidimensional gas. Second, we assume that the gas price is given deus ex machina by a fractional Ornstein-Uhlenbeck process and evaluate various derivatives. These contracts can, for example, mitigate gas cost volatility. The ability to price and trade forwards besides the existing spot inclusion into the blockchain could be beneficial. |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2406.06524&r= |
| By: | Alessandro Bitetto (University of Pavia); Paola Cerchiello (University of Pavia) |
| Abstract: | Initial Coin Offerings (ICOs) have emerged as a novel way of start-up funding based on blockchain technology and this paper aims to explain the nexus between ICOs business purposes and underpricing, i.e. when the price of the offered token is lower than the one traded on the market. In particular, we focus on the impact of the Environmental, Social and Governance (ESG) pillars on the ICOs' underpricing. Therefore, we built up a wide and comprehensive dataset comprising $\sim8000$ ICOs spanning from 2015 through 2023, containing both technical and financial information. Moreover, we assessed an ESG score using AI-based textual analysis performed over the whitepapers. The main results show that a higher ESG orientation leads to less underpricing, especially in the early trading days. Our findings may represent a useful support to an enhanced and reliable decision-making process. |
| Keywords: | Initial coin offering (ICO), ESG, Text analysis, Underpricing. |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:pav:demwpp:demwp0221&r= |
| By: | Salvaggio, Salvino A. |
| Abstract: | This brief case study review explores the digital transformation journeys of renowned orchestras worldwide, highlighting key learnings and strategies. The paper examines five case studies from international orchestras. These institutions have used digital platforms, data analytics, and innovative technologies to enhance audience engagement, expand reach, and improve operational efficiency. The findings emphasise the importance of digital transformation for long-term sustainability and competitiveness in the performing arts. Key insights include the potential for increased global audience engagement, diversified revenue streams, and enhanced customer experiences through data-driven strategies. Case studies were built upon publicly available material rather than official documents or interviews, which may imply some imprecision. |
| Date: | 2024–06–18 |
| URL: | https://d.repec.org/n?u=RePEc:osf:osfxxx:ugsjh&r= |
| By: | Carole Roan Gresenz; Jean M Mitchell; Belicia Rodriguez; R. Scott Turner; Wilbert Van der Klaauw |
| Abstract: | We examine the effect of undiagnosed memory disorders on credit outcomes using nationally representative credit reporting data merged with Medicare data. Years prior to eventual diagnosis, average credit scores begin to weaken and payment delinquency begins to increase, overall and for mortgage and credit card accounts specifically. Credit outcomes consistently deteriorate over the quarters leading up to diagnosis. The harmful financial effects of undiagnosed memory disorders exacerbate the already substantial financial pressure households face upon diagnosis of a memory disorder. Our findings substantiate the possible utility of credit reporting data for facilitating early identification of those at risk for memory disorders. |
| Keywords: | Debt repayment; memory disorders; credit cards; mortgages |
| JEL: | I1 G41 G51 |
| Date: | 2024–05–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednsr:98386&r= |
| By: | Mulindi, Hillary; Nyagaka, Hesborn N.; Cheruiyot, Kiplangat Josea; Onyango, Christine; Tiriongo, Samuel |
| Abstract: | Intense competition from alternative financial service providers and evolving customer expectations have presented formidable challenges to the banking sector's quest for customer retention and profitability. On this account, this paper delves into the dynamics of customer satisfaction in the banking sector with a view to inform customer centricity. Using the banking sector customer satisfaction survey data and multinomial logit, the study shows that bank customers with multiple bank accounts with other banks have a low likelihood of being dissatisfied while the human interaction is still valued by bank customers, even though banks are quickly automating their processes. Moreover, prompt customer complaint resolution leads to higher satisfaction. The key policy issues arising from the study is the need for banks to develop a robust complain handling strategies and to tailor their products to the customers needs. |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:kbawps:297984&r= |
| By: | Botea, Ioana Alexandra; Coudouel, Aline; Heinemann, Alessandra; Kuttner, Stephanie Anne; Rawal, Palak |
| Abstract: | To help policy makers make practical programmatic design choices, this series summarizes recent literature on cash transfers and explains how the design of cash transfer programs can affect outcomes. The series is launched with an initial set of five thematic briefs on benefit size, timing (frequency and duration), transfer modality (cash versus in-kind), payment mechanism (physical versus digital), and gender. The evidence is largely based on impact evaluations published in the past decade. Although the impacts of cash transfers can vary depending on the context, this overview brief aims to present main key take aways on how design features can impact cash transfer outcomes. |
| Date: | 2024–03–01 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:hdnspu:191205&r= |
| By: | Markus Bibinger |
| Abstract: | The scope of this manuscript is to review some recent developments in statistics for discretely observed semimartingales which are motivated by applications for financial markets. Our journey through this area stops to take closer looks at a few selected topics discussing recent literature. We moreover highlight and explain the important role played by some classical concepts of probability and statistics. We focus on three main aspects: Testing for jumps; rough fractional stochastic volatility; and limit order microstructure noise. We review jump tests based on extreme value theory and complement the literature proposing new statistical methods. They are based on asymptotic theory of order statistics and the R\'{e}nyi representation. The second stage of our journey visits a recent strand of research showing that volatility is rough. We further investigate this and establish a minimax lower bound exploring frontiers to what extent the regularity of latent volatility can be recovered in a more general framework. Finally, we discuss a stochastic boundary model with one-sided microstructure noise for high-frequency limit order prices and its probabilistic and statistical foundation. |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2406.07388&r= |
| By: | Sulehri, Fiaz Ahmad; Ali, Amjad |
| Abstract: | Financial inclusion, ensuring access to affordable financial products and services, is vital for economic development and poverty reduction. This study investigates the relationship between bank concentration, policy mix, and financial inclusion dynamics in developed and developing nations across 2014, 2017, and 2021. Utilizing financial inclusion as the dependent variable, factors such as bank concentration, fiscal freedom, monetary freedom, globalization, education, and urbanization are examined as independent determinants. Separate analyses for each country group enable cross-country comparisons and policy insights. The findings reveal a consistent hindrance to financial inclusion due to high bank concentration across all years and in both developing and developed countries, highlighting the critical need to diversify financial institutions for enhanced access. The impact of fiscal freedom shows shaded patterns, with a modestly negative effect in 2017 for developing nations, underscoring the necessity for tailored fiscal policies to actively promote inclusion. Monetary freedom positively influences financial inclusion in 2014 and 2017, diminishing by 2021. Globalization consistently fosters financial inclusion, though its significance fades in developed countries in 2021. Education emerges as a key driver, displaying a robust positive relationship across all years and countries. Urbanization's impact varies, with significant positive effects in 2017 but diminishing significance by 2021. Policymakers are urged to diversify financial institutions, tailor fiscal policies, and ensure monetary stability. Fostering globalization and strategic investments in education are identified as effective strategies for enhancing financial inclusion, with a call for adaptable, context-specific approaches to ensure inclusive economic growth. |
| Keywords: | Financial Inclusion, Bank Concentration, Monetary and Fiscal Freedom, Globalization |
| JEL: | E44 G21 O15 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:121284&r= |
| By: | Ofori, Pamela E.; Ofori, Isaac K.; Castelnovo, Paolo |
| Abstract: | The Sustainable Development Goal 5 emphasises the need to achieve gender parity in economic participation. Perusing the extant scholarship on female economic inclusion in Africa, we identify two pressing gaps. First, we find that previous studies have not explored how innovation affects female economic inclusion (FEI). Second, we note that prior studies have not examined the interactive effect of innovation and economic freedom on FEI. This study addresses these gaps by using macro data from 1995-2022 for a sample of 51 African countries. Findings from the two-step system GMM estimator reveal the following: (1) innovation reduces FEI, whereas economic freedom increases it, and (2) economic freedom moderates innovation to promote FEI. Further, we find that this positive total effect of innovation on FEI is remarkable at higher thresholds of economic freedom. We conclude that for innovation to promote FEI in Africa, investments in promoting economic freedom are critical. |
| Keywords: | Africa, Innnovation, Economic freedom, Female economic inclusion, GMM |
| JEL: | O31 O55 E24 J16 J21 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:esprep:298786&r= |
| By: | Woodcock, Ramsi |
| Abstract: | The news industry in the United States faces a funding crisis because the tech giants, particularly Google and Facebook, have acceded to the advertising monopolies once enjoyed by the newspaper industry itself. Breakup of these monopolies is unlikely to restore the news industry’s profits, however, because search and social media will remain better ad distribution channels than the news whether search and social media are competitive or monopolized. A better solution to the funding crisis would be for government to divide the advertising distribution market, reallocating to the news industry some of the ad impressions taken from it by the tech giants. This indirect, property-rights-based approach to government subsidization would address concerns, however misguided, that direct subsidization à la the BBC might lead to political interference in newsgathering. An important collateral benefit would be the opportunity to limit the total amount of advertising consumed by the economy by licensing fewer total ad impressions than are currently consumed. This would lead to an efficiency gain because advertising’s information function has withered in the information age, making advertising almost entirely manipulative in character, and therefore a threat to consumer sovereignty. Ad distribution revenues would not fall, however, because advertising cancels—firms advertise because others advertise, not because advertising increases sales—and so firms will bid up prices in proportion to the decline in available impressions. The proposed division and reduction of the advertising market would be constitutional because the First Amendment only protects commercial speech that promotes consumer sovereignty. Because advertising has become almost entirely manipulative in the information age, the First Amendment no longer protects it. |
| Date: | 2024–06–23 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:yevt8&r= |
| By: | Michelle W. Bowman |
| Date: | 2024–06–17 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgsq:98390&r= |
| By: | Viral V. Acharya; Nicola Cetorelli; Bruce Tuckman |
| Abstract: | Traditional approaches to financial sector regulation view banks and nonbank financial institutions (NBFIs) as substitutes, one inside and the other outside the perimeter of prudential regulation, with the growth of one implying the shrinking of the other. In this post, we argue instead that banks and NBFIs are better described as intimately interconnected, with NBFIs being especially dependent on banks both for term loans and lines of credit. |
| Keywords: | non-bank financial intermediaries; funding; credit lines |
| JEL: | G01 G21 G23 G28 |
| Date: | 2024–06–17 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednls:98393&r= |
| By: | Salvaggio, Salvino A. |
| Abstract: | This brief article explores the transformative role of virtual orchestras in modern musical performance and production. It examines how digital technologies are reshaping the ways in which music is composed, staged, and experienced, highlighting both the opportunities and challenges posed by this evolution. The discussion covers the technological developments enabling these changes, alongside potential cultural and ethical implications, especially concerning the impact on live musicianship and audience engagement. Importantly, it also addresses why understanding these developments is crucial for orchestra managers, who must handle these innovations while maintaining artistic integrity and financial sustainability. This paper aims to provide insights into the integration of virtual orchestras within traditional and contemporary music landscapes. |
| Date: | 2024–06–04 |
| URL: | https://d.repec.org/n?u=RePEc:osf:osfxxx:uqhvy&r= |
| By: | Webster, Richard J; Harrison, Mary-Ann; Zitikyte, Gabriele |
| Abstract: | Decision makers around the world are announcing climate targets, but often assume that future technologies will make their decarbonisation promises of today achievable tomorrow. Concerningly, the IPCC states that current technologies are insufficient to address the climate crises. Digital tools (e.g., software, phone apps, dashboards) provide an interesting microcosm to investigate the pace of emerging technologies, as they are rapidly developed, easily scaled, and leverage analytics; yet little is known about digital tools for climate action. This scoping review aims to i) identify digital tools for climate mitigation, ii) assess their pace of innovation, and iii) perform a gap analysis. We identified 352 digital tools for climate mitigation. This repository of tools has particular value as 72% of these digital tools were found to be open source. A novel statistical analysis was used to determine the pace of innovation and assess the maturity of climate mitigation digital technologies. Encouragingly, digital tools for climate mitigation are emerging at an annual rate of 19% (95% CI: 16- 22%), with open-source solutions driving this exponential growth. This snowballing growth of climate mitigation digital innovations might yield disruptive solutions for emissions savings and is optimistic news for tackling the climate crisis. |
| Date: | 2024–06–06 |
| URL: | https://d.repec.org/n?u=RePEc:osf:osfxxx:92sp3&r= |
| By: | Jessica N. Flagg; Simona Hannon; Cisil Sarisoy; Mark Wicks |
| Abstract: | In this note, we estimate the size of an understudied segment of the consumer credit market—retail credit. Retail credit consists of the amounts owed to retail stores by their customers for purchases made on credit extended in partnership with a financial institution. Although retail credit is included in the consumer credit totals in Federal Reserve Statistical Release G.19, "Consumer Credit, " a principal economic indicator providing the official estimate for consumer credit holdings in the U.S., it is not separately categorized on the release. |
| Date: | 2024–06–21 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfn:2024-06-21&r= |