The deployment of services based on digital technologies is causing a deep transformation of the financial sector. New technologies modify the verification, the transmission, the storage and the access to financial data. Digital innovations impact all the services traditionally offered by financial intermediaries, such as payments, loans, financial advice or the registration of financial transactions. This transformation of the financial landscape results in the entry of new players, new forms of competitive interactions and regulatory changes.
The aim of the digital finance research chair is to fund research projects about the digital transformation of financial intermediaries.
Five main topics are covered: digital payments, online lending, blockchain, robo-advisors, and inclusive digital finance.
The modalities of access to bank accounts and the processing of payments have evolved dramatically over the recent years with the development of Internet and mobile transactions. Several innovations have appeared on the market: aggregators that allow consumers to benefit from a consolidated view of their accounts, payment initiation services, instant-payments and virtual currencies. How will they impact the business models of banks, the competitive interactions between banks and non-banks and the regulatory framework?
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Since the financial crisis of 2007-2008, alternative finance providers such as crowdfunding and P2P lending platforms have started to offer loans on the Internet. How do these players compete with banks? Do they improve the allocation of credit in the economy? Do they help underserved consumers and businesses to access credit? And if so, how? Is it at the expense of the quality of risk management? How should they be regulated?
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The blockchain (Distributed Ledger Technology) is a technology that enables to record financial information and settle transactions without the intervention of a central control body. There are different types of blockchains (public, private, hybrid) corresponding to different modes of governance of the network. When is the blockchain more efficient than other technologies? What are the potential applications of blockchain in finance and will it transform the role of financial intermediaries? How should it be regulated?
In many developing countries, digital technologies may help underserved consumers to access finance, facilitate payments between businesses and improve access to credit. What will be the impact of the deployment of digital technologies on the adoption of financial services in developing countries? How will the presence of non-banks shape the development of the financial system in these countries? How should they be regulated?
Robo advisors rely on algorithms to offer automated portfolio management online and financial advice to consumers. How do robo advisors impact consumers’ savings decisions? Will they disrupt the business models of asset management and increase the quality and the variety of services offered to consumers? How will they compete with banks and other financial intermediaries? How should they be regulated?
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A recent list of publications and working papers
La blockchain est une technologie permettant d’effectuer et d’enregistrer des transactions ordonnées sous format numérique dans un réseau décentralisé sans avoir recours à un tiers de confiance. Les échanges sont sécurisés par l’usage d’algorithmes de cryptographie. Dans cet article, nous étudions l’impact de cette innovation sur l’activité des intermédiaires financiers. Nous montrons que la blockchain est susceptible de réduire les coûts associés à l’intermédiation financière, entraînant une évolution du rôle du tiers de confiance pour les transactions financières. Cependant, la réglementation doit encadrer son développement afin de sécuriser les échanges et de favoriser son adoption.
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In recent years, many studies have emphasized the cost-saving potential of electronic payments. Yet, cash is still heavily used to pay for point-of-sale transactions in many developed economies. We introduce a model of optimal cash holdings and payments that exploits survey payment diaries from Austria, Canada, France, Germany, the Netherlands and the United States. Our results provide evidence that differences in incentives, such as the relative cost of cards compared with cash, and differences in ATM withdrawal costs, are key factors explaining why cash remains top-of-wallet across many developed economies. Indeed, we show that once obtained, cash goes first because it ”burns” in consumers’ wallets.
The objective of our paper is to explore the role of P2P lending platforms through the prism of the theory of financial intermediation. P2P lending platforms perform the brokerage function of financial intermediaries by matching lenders’ supply and borrowers’ demand of funding, according to the risk and the maturity of their needs. Unlike banks, P2P lending platforms do not create money and do not perform risk and maturity transformation. However, they can organize secondary markets to trade loan contracts before maturity and some P2P lending platforms aim at providing a fixed income to lenders. To ensure efficient and sustainable financial intermediation, P2P lending platforms need to ensure that they are not subject to principal-agent problems and that their incentives coincide with those of lenders. The possibility of orderly resolution of P2P lending platforms failures might decrease moral hazard problems that are inherent in the modern financial intermediation.
The protection of financial personal data has become a major concern for Internet users in the digital economy. This paper investigates whether the consumers’ use of non-bank payment instruments that preserve financial privacy from banks and relatives may increase their online purchases. We analyze the purchasing decisions and the use of bank and non-bank payment instruments of a representative sample of French Internet consumers in 2015. Using two econometric methods, namely a two-step regression and a Bayesian Markov Chain Monte Carlo model to account for a potential endogeneity problem, we find evidence that the use of a non-bank payment instrument positively influences consumers’ online purchases.
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