Payments and privacy in the digital economy

Toni Ahnert, Peter Hoffmann and Cyril Monnet

No 2662, Working Paper Series from European Central Bank

Abstract: We propose a model of financial intermediation, payments choice, and privacy in the digital economy. While digital payments enable mer-chants to sell goods online, they reveal information to their lender. Cash guarantees anonymity, but limits distribution to less efficient of-fline venues. In equilibrium, merchants trade off the efficiency gains from online distribution (with digital payments) and the informational rents from staying anonymous (with cash). Privacy-preserving digi-tal payments raise welfare by reducing privacy concerns, but only ar-rangements that enable data-sharing through consent functionalities guarantee that the social optimum is attained. JEL Classification: D82, E42, E58, G21

Keywords: Central Bank Digital Currency; data sharing; financial intermediation; payments; privacy (search for similar items in EconPapers)
Date: 2022-05
New Economics Papers: this item is included in nep-ban, nep-cba, nep-fdg, nep-isf, nep-mon and nep-pay
Note: 848910
References: Add references at CitEc
Citations: View citations in EconPapers (9)

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Working Paper: Payments and privacy in the digital economy (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20222662

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