Bank Debits Research Articles

Redeemable Platform Currencies

AbstractCan massive online retailers such as Amazon and Alibaba issue digital tokens that potentially compete with bank debit accounts? There is a long history of trading stamps and loyalty points, but new technologies are poised to sharply raise the significance of redeemable assets as a store of value. Here, we develop a simple stylized model of redeemable tokens that can be used to study sales and pricing strategies for issuing tokens, including ICOs. Our central finding is that platforms can potentially earn higher revenues by making tokens non-tradable unless they can generate a sufficiently high outside-platform convenience yield.

Redeemable Platform Currencies

Can massive online retailers such as Amazon and Alibaba issue digital tokens that potentially compete with bank debit accounts? There is a long history of trading stamps and loyalty points, but new technologies are poised to sharply raise the significance of redeemable assets as a store of value. Here we develop a simple stylized model of redeemable tokens that can be used to study sales and pricing strategies for issuing tokens, including ICOs. Our central finding is that platforms can generally earn higher revenues by making tokens non-tradable unless they can generate a sufficiently high outside-platform convenience yield.

Cash use across countries and the demand for central bank digital currency

Within any country, the demand for central bank digital currency (CBDC) will be influenced by trends in the level of cash use. While having access to digital currency is more convenient than having to travel to an automated teller machine, this only makes digital currency as convenient as a bank debit card — not better. Demand for digital currency will thus be weak in countries where the adoption of cash substitutes (eg cards, electronic money, mobile phone payments) has suppressed demand for cash. By contrast, where cash use is high due to a lack of substitutes, demand for digital currency should be stronger. Building on the observation that demand for CBDC is tied to the current level of cash use, this paper uses four measures to assess trends in the demand for cash in 11 countries. A tentative forecast of cash use is also made. After showing that declining cash use is largely associated with demographic change, the study ties the level of cash use to the likely demand for CBDC in different countries. In this process, it is suggested that one measure of cash use is more useful than the others.

Cash Use Across Countries and the Demand for Central Bank Digital Currency

The level and trend in cash use in a country will influence the demand for central bank digital currency (CBDC). While access to digital currency will be more convenient than traveling to an ATM, it only makes CBDC like a bank debit card—not better. Demand for digital currency will thus be weak in countries where cash use is already very low, due to a preference for cash substitutes (cards, electronic money, mobile phone payments). Where cash use is very high, demand should be stronger, due to a lack of cash substitutes. As the demand for CBDC is tied to the current level of cash use, we estimate the level and trend in cash use for 11 countries using four different measures. A tentative forecast of cash use is also made. After showing that declining cash use is largely associated with demographic change, we tie the level of cash use to the likely demand for CBDC in different countries. In this process, we suggest that one measure of cash use is more useful than the others. If cash is important for monetary policy, payment instrument competition, or as an alternative payment instrument in the event of operational problems with privately supplied payment methods, the introduction of CBDC may best be introduced before cash substitutes become so ubiquitous that the viability of CBDC could be in doubt.

The effects of taxing bank transactions on bank credit and industrial growth: Evidence from Latin America

This paper studies the bank credit and industry growth effects stemming from the introduction of a tax on bank debits. Using a sample of Latin American countries that implemented this tax at different times between 1986 and 2005, I exploit a key channel through which this levy affects the supply of credit: it creates a strong incentive to shift away from holding deposits and into using cash and other quasi-currencies. I find that taxing bank transactions has a significant negative effect on economic growth, mainly by reducing the growth prospects of industries that are more susceptible to financing frictions.

Financial Incentives for Promoting Participation in a School-Based Parenting Program in Low-Income Communities

Although financial incentives are a well-accepted strategy for raising parent participation rates in prevention studies, they are rarely employed in practice due to concerns about their ethics, sustainability, and public acceptability. We sought to address these common concerns in the context of a larger prevention study using financial incentives to boost parent participation in a group-based parenting program implemented in an urban school district. We examined the extent to which the financial incentives delivered via bank debit cards ($15 for attending weekly group sessions, $5 for completing weekly practice assignments) motivated parents to enroll in the program and were associated with higher attendance and practice completion but poorer participation quality in group sessions, and how parents used the extra cash. Over 3 years, 67.4% (n = 372) of eligible families enrolled in a parenting program called the Chicago Parent Program. Most parents were African American (68%) or Latinx (24%); 67% reported annual household incomes < $20,000. Although 71.2% of parents reported that the financial incentives motivated their enrollment, the most important motivators pertained to wanting to be a better parent. Parents citing incentives as motivating their enrollment had higher attendance than those who did not (p = .01). Quality of parent participation was high and unrelated to whether financial incentives motivated enrollment. Parents reported using the extra cash to purchase items for their children (92%) and groceries (56%). Results suggest that financial incentives targeting low-income families of young children may improve parent participation rates without diminishing their intrinsic motivation to improve their parenting.

Cash Use Across Countries and the Demand for Central Bank Digital Currency

The level and trend in cash use in a country will influence the demand for central bank digital currency (CBDC). While access to digital currency will be more convenient than traveling to an ATM, it only makes CBDC like a bank debit card-not better. Demand for digital currency will thus be weak in countries where cash use is already very low, due to a preference for cash substitutes (cards, electronic money, mobile phone payments). Where cash use is very high, demand should be stronger, due to a lack of cash substitutes. As the demand for CBDC is tied to the current level of cash use, we estimate the level and trend in cash use for 11 countries using four different measures. A tentative forecast of cash use is also made. After showing that declining cash use is largely associated with demographic change, we tie the level of cash use to the likely demand for CBDC in different countries. In this process, we suggest that one measure of cash use is more useful than the others. If cash is important for monetary policy, payment instrument competition, or as an alternative payment instrument in the event of operational problems with privately supplied payment methods, the introduction of CBDC may best be introduced before cash substitutes become so ubiquitous that the viability of CBDC could be in doubt.

A General Equilibrium Analysis of Bank Debit Taxes

Taxes on bank debit transactions have been used as an easy way to collect substantial revenue, especially during economic crisis. The existing literature has found evidence of distortionary effects of this policy on money demand and interest rates, even if the tax is charged at very low rates. Instead of studying these monetary topics, this paper develops a general equilibrium model with no money and no nominal rigidities to explain the effects of bank debit taxes on real resources allocation, welfare, and revenue. The study demonstrates that bank debit taxes reduce the size of the financial system and increase deadweight loss. The model also shows that under certain plausible situations, these levies reduce the size of the sector that manufactures high-value goods.

Bank Account Debit (BAD) Taxes, Bank Lending and Industrial Growth: Evidence from Latin America

This paper studies the bank credit supply and industry growth effects stemming from the introduction of a tax on bank debits. Using a sample of Latin American countries that implemented this tax at different times between 1986 and 2005, I exploit a key channel through which this levy affects the supply of credit: it creates a strong incentive to shift away from holding deposits and into using cash and other quasi-currencies. I find that taxing bank transactions has a significant negative effect on economic growth, mainly by reducing the growth prospects of industries that are more susceptible to financing frictions.

Financial transaction tax and banking margins: An empirical note for Colombia

Taxes on financial transactions have been especially controversial because of their potential effects on banking disintermediation. A modality of such taxes (Bank Debit Tax, BDT) was introduced in Colombia since the late nineties. Using monthly panel data from 1996 to 2014 for the major depository institutions, this paper provides evidence on the effects of the BDT on bank intermediation spread. For the total sample (thirteen banks), results suggest that nowadays the hypothetical elimination of the BDT would reduce spreads in 60 basis points, i.e. from 7.7% to levels close to 7.1%. The results do not provide clear evidence of differential impacts by bank size. Additional instruments of the financial repression as well as other determinants of banking spreads confirm the expected effects.

Preferences for Banking and Payment Services Among Low- and Moderate-Income Households

This paper characterizes the features of an account-based payment card--including bank debit cards, prepaid debit cards, and payroll cards--that elicit a high take-rate among low- and moderate-income (LMI) households, particularly those without bank accounts. We apply marketing research techniques, specifically choice modeling, to identify the design of a specific financial services product for LMI households, who often face difficulties maintaining standard bank accounts but need banking services. After monthly cost, we find that, on average, non-monetary features of a payment card, such as the availability of federal protection and the type of card, are factors LMI consumers weigh most heavily when choosing among differently designed payment cards. We estimate a high take-rate for a well-designed payment card that is decreasing in its cost. The sensitivity of the take-rate with respect to cost varies by income and bank account ownership. These results can guide private and public sector initiatives to expand the range of financial services available to LMI households.

Who uses bank debit cards?

Who uses bank debit cards?

A Principal Components Test of Bank Debits as a Local Economic Indicator

A Principal Components Test of Bank Debits as a Local Economic Indicator

G. Garvy, The Development of Bank Debits and Clearings and their Use in Economic Analysis. Washington, Board of Governors of the Federal Reserve System, 1952, VIII p. 175 p., $ 1.5.

G. Garvy, The Development of Bank Debits and Clearings and their Use in Economic Analysis. Washington, Board of Governors of the Federal Reserve System, 1952, VIII p. 175 p., $ 1.5.

The Development of Bank Debits and Clearings and Their Use in Economic Analysis.

The Development of Bank Debits and Clearings and Their Use in Economic Analysis.

Timing of Recovery from Major Depressions

DURING the current depression, many studies have been made concerning the action of general business during periods of depression and the subsequent recoveries. Practically all of these studies have had two common characteristics. Most of them have shown the differences between various depressions, and practically all of them have made very complete use of the extremely valuable tool hindsight. When studying a business depression and the subsequent recovery and the corresponding movement of stock prices, it is not difficult to look back on the upturn and feel sure that the low point has been passed, but it is extremely difficult to determine at the time whether an upturn is a false start which will be followed by further declines or whether it represents the beginning of real recovery. It is the purpose of this study to examine certain factors, the action and relationship of which have shown amazing similarity at the bottom of depressions, and to derive from this similarity certain indications and evidence which would have been useful during past depressions in differentiating between false starts and the actual beginning of cyclical recovery. Obviously, it is dangerous to expect the future to follow exactly the pattern of the past. Nevertheless, forecasting is necessary in investment and business operations, and the evidence of the past presented in this study may be helpful in formulating such a forecast when the assistance of hindsight is not available. Further, this study shows the relationship between business activity and the movement of security prices and indicates, as might be expected, that the stock market anticipates the course of business activity. The study covers the period from I878 to the present, during which time there were nine recoveries from major depressions. The characteristics of each recovery have been analyzed in detail and the results presented. The evidence that a cyclical upturn in business activity had begun was provided in each of these depressions by a certain definite relationship among three significant measures of business. THREE MEASURES OF BUSINESS ACTIVITY The variables used in this study are commodity prices, business activity, and bank clearings. The movement of commodity prices has been measured by Mr. Carl Snyder's Wholesale Commodity Price Index from I875 to I9I3, and from the latter year to the present time by the Bureau of Labor Statistics Wholesale Commodity Price Index. Business activity has been measured by the American Telephone and Telegraph Company's Index from I878 to I924 and by the Annalist Index of Business Activity from the year I929 to the present. Clearings have been measured by the Clearings Index of Business compiled by Mr. Carl Snyder. The American Telephone and Telegraph index is primarily a measure of productive activity. Prior to April I922, it included bank clearings and debits to individual accounts, but since that time these series have been dropped.' The clearings index gives another picture of business activity and the volume of trade. In the United States, according to Snyder's estimate, 8o per cent or more of all kinds of payments in the exchange of goods, property, and services are made by means of bank checks. This process of payment is peculiarly sensitive to changes in every phase of business and reflects the whole trade of the country and weights it automatically according to the pecuniary importance of the factors involved.2 Since I9I9, the index has been based upon debits to individual accounts, an accurate index of payments by bank checks. Prior to that time, the compilation of checks going through the country's clearing houses was used. Bank debits are larger than

Member Bank Reserves and Bank Debits

Member Bank Reserves and Bank Debits

Review of the Third Quarter of 1932

GENERAL business, after a nearly horizontal drift from June to July, resumed its downward course during the third quarter (Chart I, p. I65). Money rates, which had by June already canceled most of the violent advance incident to the I93I gold panic, declined in each month of the quarter. Speculation, following a very small drop during June, rose sharply in July and August and was only moderately reduced in September. VOLUME OF BUSINESS Adjusted data for bank debits in selected cities outside New York, our measure of the aggregate dollar volume of business, reached a new low level at the end of the quarter. The decline for July was negligible, but both August and September brought moderately large reductions. The check tax may have caused part of the third quarter drop in debits, but this effect is not measurable.

Outside Bank Debits Corrected for Seasonal Variation: Monthly and Weekly, 1919-31

T HIS article presents a revision of our weekly and monthly series for bank debits outside New York City, I9g9 to date. The revised series have been adjusted for seasonal influences, but the problem of the determination and elimination of secular trend has been reserved for consideration in a later article.' The monthly series corrected for seasonal variation, I9I9-3 i,is given in Table i and Chart i; the corresponding weekly series, in Chart 2.

Seasonal Variations in Selected Series of Weekly Data

THERE has already been published in this REVIEW an analysis of the seasonal variations in weekly figures for outside bank debits.' In presenting the results of that study a special method for determining and eliminating seasonal variations as they appear in weekly data was developed. The following paragraphs apply that method, in full or in part, to four weekly series; in addition, a revised and improved analysis pertaining to outside bank debits is in course of preparation, and will be presented in a forthcoming issue of this REVIEW.