Bank Competition and Household Privacy in a Digital Payment Monopoly

Itai Agur, Anil Ari and Giovanni Dell'ariccia

No 2023/121, IMF Working Papers from International Monetary Fund

Abstract: 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.

Keywords: Privacy; Financial intermediation; Big Tech; Data regulation; data contract; payment vehicle; DC issuer; tech monopolist; bank competition; monopolist digital currency issuer; Credit; Digital financial services; Loans; Consumer credit; Data collection (search for similar items in EconPapers)
Pages: 55
Date: 2023-06-09
New Economics Papers: this item is included in nep-com, nep-fdg, nep-pay and nep-reg
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Bank competition and household privacy in a digital payment monopoly (2025)
Working Paper: Bank Competition and Household Privacy in a Digital Payment Monopoly (2023)
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