Bank Competition and Household Privacy in a Digital Payment Monopoly
Electronic Access:
Free Download. Use the free Adobe Acrobat Reader to view this PDF file
Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
Summary:
Lenders can exploit households' payment data to infer their creditworthiness. When households value privacy, they then face a tradeoff between protecting such privacy and credit conditions. We study how the introduction of an informationally more intrusive digital payment vehicle affects households' cash use, credit access, and welfare. A tech monopolist controls the intrusiveness of the new payment method and manipulates information asymmetries among households and oligopolistic banks to extract data contracts that are more lucrative than lending on its own. The laissez-faire equilibrium entails a digital payment vehicle that is more intrusive than socially optimal, providing a rationale for regulation.
Series:
Working Paper No. 2023/121
Subject:
Consumer credit Credit Data collection Digital financial services Economic and financial statistics Financial institutions Loans Money Technology
Frequency:
regular
English
Publication Date:
June 9, 2023
ISBN/ISSN:
9798400244865/1018-5941
Stock No:
WPIEA2023121
Format:
Paper
Pages:
55
Please address any questions about this title to publications@imf.org