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The need for data products in personal finance

Edouard Ribes ()
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Edouard Ribes: CERNA i3 - Centre d'économie industrielle i3 - Mines Paris - PSL (École nationale supérieure des mines de Paris) - PSL - Université Paris Sciences et Lettres - I3 - Institut interdisciplinaire de l’innovation - CNRS - Centre National de la Recherche Scientifique

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Abstract: Background context: Current societal challenges around healthcare, education and retirement require households to increasingly leverage personal finance instruments. To meet this trends the lending, insurance and investment industries need to become more efficient and affordable. Specific knowledge gap the work aims to fill: To date, the distribution chains of financial instruments remains costly and inefficient. To transform, the associated industries need to further leverage digital medias to accelerate products distribution and maintenance. Some of the benefits of digitalization have already been capture & depicted in the recent literature sitting at the frontier between personal finance and financial technologies. However the scope of those studies has so far been limited to the distribution of those instruments & there has been little discussion about the opportunities associated to the maintenance of financial contracts, notably through the structuration of data products/ warehouses. This is a gap this article aims to address. Methods used in the study: This paper leverage standard economic modeling techniques and option theory to describe the impact of digital medias and notably data products on the financial instruments brokerage system. It also leverages order of magnitude founds in the literature to perform a high level calibration of those models to one of the Big 5 European financial market, namely the French investment industry. Key findings: The proposed models show 3 stylized facts about data products when applied to the French investment industry. First, such a market can only support two data product suppliers. Second, it comes with a large asymmetry in prices (prices differ by a factor 2 or 4 between actors) and clients profiles between the two data suppliers. Third, the market is not completely efficient as its equilibrium results in about 35\% of the market not being equipped with a data products. Implications: Data products can yield a 10 to 20% productivity increase for independent financial advisors and brokers distributing financial instruments. Those gains will likely be passed in some form to households, thereby increasing the overall efficiency of the financial system and supporting households financial professionalization.

Keywords: Personal finance; households economics; wealth; technological change; financial services; The proposed models show 3 stylized facts about data (search for similar items in EconPapers)
Date: 2023-03-01
New Economics Papers: this item is included in nep-ban, nep-big and nep-fle
Note: View the original document on HAL open archive server: https://hal.science/hal-04015599
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