Payment Risk Research Articles

A mixed methods empirical exploration of UK consumer perceptions of trust, risk and usefulness of mobile payments

PurposeThe purpose of this paper is to explore UK consumer perceptions of trust, risk and perceived usefulness of mobile payments through the use of sequential mixed methods.Design/methodology/approachA post-positivist philosophy is used with a social constructionist ontology with a questionnaire as the first survey instrument using an empirical sequential mixed methods approach. Summary quantitative analysis of the questionnaire data is undertaken followed by semi-structured interviews that produce qualitative data on which content analysis is undertaken to assess and explore UK consumer perspectives. The technology acceptance model is used as the underlying framework on which a conceptual model is developed.FindingsUK consumers have significant risk and trust concerns with mobile payments, although these concerns can be overcome when clear consumer benefits are identified whilst bank supported mobile payments have an increased level of trust compared to new market entrants and other established companies. Furthermore, perceived trust positively influences perceived usefulness and mitigates perceived risk, whilst perceived risk negatively influences perceived usefulness. In addition, perceived usefulness significantly and positively influences UK consumer attitude which can lead to adoption.Research limitations/implicationsWhilst 120 completed questionnaire responses are received, only 101 questionnaires are used for analysis. In addition, ten semi-structured interviews are undertaken using a purposeful sample to minimise any imbalance (Oakley, 1981) which increases the reliability of the research findings (Hackley, 2003). This mobile payments research does not have a statistically secure universalisation of the findings, which negates the application of these research findings to other groups and to different social settings (Lincoln and Guba, 1985).Practical implicationsMobile payment organisations will need to focus on identifying the specific benefits of mobile payments to UK consumers as mitigating risk and increasing trust do not compensate for the absence of usefulness.Social implicationsUK consumers indicate a lack of awareness of existing contactless payment guarantees provided by UK banks, although these payment guarantees significantly increase UK consumer trust.Originality/valueBoth quantitative and qualitative empirical data are obtained on UK consumer perspectives of risk, trust and perceived usefulness of mobile payments using sequential mixed methods.

The single farm payment and income risk in Irish farms 2005\u20132013

Agricultural income volatility has become a major hurdle for Irish farmers and policymakers to overcome in their drive to increase investment, production and ultimately income in the sector. This paper studies data from 927 farms in the Teagasc National Farm Survey between 2005 and 2013, the first 9 years of the decoupled subsidy era. The primary income support for European farmers, the single farm payment (SFP), is analysed in the context of its relationship with market income risk, i.e. farm income excluding subsidies. Detrended measures of market income variability are regressed on a large set of control variables. The findings suggest that the amount of SFP received by farmers has a strong and statistically significant relationship with agricultural income volatility.

Risk Analysis in Documentary Letter of Credit Operation

Abstract Documentary Letters of Credit are among most popular methods of payment used in international trade. They function as an irrevocable promise of issuing a bank to pay instead of an applicant buyer to a beneficiary seller under the condition that the beneficiary presents complying documents with terms and conditions of the credit to the bank. One of the reasons for the popularity of the LCs in international trade is shifting the payment risk from an individual buyer to a bank with a much stronger financial standing. However, LC operation in international trade is not free of risk. Despite the fact that two main principles of the Documentary Letter of Credit’s Operation (Principle of independence and principle of strict compliance) facilitate the process of international trade significantly, but still all parties involved in LC operation are supposed to be cautious about the existing risks relevant to their role in LC operation. Current paper tries to use legal principles of documentary credits and risk management theory in order to define existing risks to each party (beneficiary, applicant and bank) in international LC transaction and find an answer to the question of what are exposing risks for involved parties? For this purpose, the paper starts with an explanation of the two main principles of LC operation and moves forward with using the risk management theory to explain existing risks for each party in detail.

Why Do Firms Use Insurance to Fund Worker Health Benefits? The Role of Corporate Finance

AbstractWhen a firm offers health benefits to workers, it exposes the firm to the risk of making payments when workers get sick. A firm can either pay health expenses out of its general assets, keeping the risk inside the firm, or it can purchase insurance, shifting the risk outside the firm. Using data on insurance decisions, we find that smaller firms, firms with more investment opportunities, and firms that face a convex tax schedule are more likely to hedge the risk of health benefit payments. We show how firms trade off the benefits that come from financing and investment characteristics with the costs of regulation when choosing insurance. We provide understanding of how firms’ policy and financial characteristics affect firm outcomes as the Affordable Care Act provisions impacting plan funding continue to evolve.

Study on the Risk of Commercial Banks by the Debt-for-Equity Swap

With China’s economy changing into the new normal, the business environment faced by commercial banks has undergone major changes. The real economy is facing many difficulties. The rising rate of non-performing loans has become a business problem which commercial banks have to face. Therefore, in this kind of condition, The debt-for-equity swap seems to be a good recipe for commercial banks to regain their confidence in management. However, the author thinks that the debt-for-equity swap will bring many risks to commercial banks: Financial risk, Liquidity risk, Cash Payment risk and Moral risk. Therefore, if the debt-for-equity swap will be carried out massively, it is not necessarily a good thing for the commercial Banks. So we need to take a cold look at the debt-for-equity swap.

The Risk of Hipothecary Credic Indexed to Swiss Franc

The idea of crediting and credit repayment is based on an assumption that each payment of the principal reduces the debt balance. This tendency is not followed in case of the hypothecary credit al-lowed and paid out in PLN and indexed to Swiss franc. Here, the balance of principal repaid in PLN is a function of currency exchange rate fluctuations. The situation denies then the idea of credit, according to which “you pay back as much as borrowed”. The cost of credit, calculated as a total of the LIBOR – credit in CHF (WIBOR – credit in PLN) rate and the bank’s margin specified in the contract. The purpose of the paper is to prove that a banking product like this does not meet the standards of crediting, the principal balance being dependent on the unforeseeable direction of changes. The purpose of the paper is to design a model of risk of the hypothecary credit indexed to Swiss franc, to enable the measurement of the loan payment risk. The model design methodology assumes control variables of the risk monitoring process to be included in the model structure. The estimated loan payment risk measures have revealed an upturn in the loan payment risk related to higher PLN/CHF rates and the resultant higher cost of credit accompanied by the loan principal growth. The risk dynamics estimations for the years 2006-2012 support the research thesis – the banking product analysed does not show the characteristics of a loan. Under growing PLN/CHF rates, the loan principal indexation translates into the debt balance escalation.

Comparative Study of Issuing Bank’s Obligations towards Beneficiary of the Letter of Credit under UCP and English Law

Process of international trade is complicated and risky. Risks will be more considerable when times come to deal with receiving/sending payments from/to unknown business partners in remote geographic areas. Employing documentary letters of credit (LC) is one of the ways to reduce payment risk in international business especially when partner’s financial standing is unknown to each other. By using the LC as method of payment, parties will shift payment obligation from buyer as a natural person to the guarantee of bank as a legal person. The process of using LC is complicated and involves different players and relations between them. Amongst all relations in process of LC transaction, relation between issuing bank and beneficiary is the most complicated and least clear from legal stand point. This article tries to shed light on vague aspects of relations between issuing bank and beneficiary by studying obligations of the issuing bank towards beneficiary under the law of documentary letters of credit while comparing provisions of UCP with English Common Law on subject matter. Main objective of paper is providing answer to the question of what is the role of issuing bank in the process of LC transaction and which liabilities does it have towards beneficiary? Article consists of five main parts. Part one will provide an introduction to function and relation among different parties in process of an international LC transaction. Further, it endeavours to tap on principle of autonomy and strict compliance as governing principles of documentary letters of credit. Part two and three will take a comprehensive look at legal basis of relations between issuing bank and beneficiary, as well as bank’s obligations under documentary credit law. Part four will discuss liabilities of issuing banks towards beneficiary and finally part five will touch upon situation in which bank will right to recourse against beneficiary.

Исключения из принципа автономии товарных аккредитивов: сравнительный анализ

Objective: comparative analysis of exceptions to the principle of autonomy of documentary letters of credit.Methods: dialectical method, systemic method, analysis, synthesis, comparison.Results: it is proved that documentary letters of credit are among the most popular methods of payment in international trade which facilitate the process of transaction by replacing risk of payment by applicant buyer with the guarantee of bank. It is proved that operation of documentary letters of credit (LC) is subjected to two globally recognized principles of autonomy (independence) and strict compliance. A rule is identified, according to which courts in different countries started to recognize exceptions to the principle of autonomy in international LC transaction despite their reluctance in interfering in function of autonomy principle. Scientific novelty: the article views the principle of autonomy and recognized exceptions to it in comparative aspect, proves the to recognize exceptions to the principle of autonomy in international LC transaction among common law jurisdictions, lists the exceptions recognized by courts and analyzes the attitude of the courts in other common law jurisdictions. Practical significance: the paper is addressed to researchers and educators, practicing lawyers, graduate and post-graduate students, and everyone interested in the principle of autonomy of documentary letters of credit.

Association Between State Medical Malpractice Environment and Surgical Quality and Cost in the United States.

The US medical malpractice system is designed to deter negligence and encourage quality of care through threat of liability. To examine whether state-level malpractice environment is associated with outcomes and costs of colorectal surgery. Observational study of 116,977 Medicare fee-for-service beneficiaries who underwent colorectal surgery using administrative claims data. State-level malpractice risk was measured using mean general surgery malpractice insurance premiums; paid claims per surgeon; state tort reforms; and a composite measure. Associations between malpractice environment and postoperative outcomes and price-standardized Medicare payments were estimated using hierarchical logistic regression and generalized linear models. thirty-day postoperative mortality; complications (pneumonia, myocardial infarction, venous thromboembolism, acute renal failure, surgical site infection, postoperative sepsis, any complication); readmission; total price-standardized Medicare payments for index hospitalization and 30-day postdischarge episode-of-care. Few associations between measures of state malpractice risk environment and outcomes were identified. However, analyses using the composite measure showed that patients treated in states with greatest malpractice risk were more likely than those in lowest risk states to experience any complication (OR: 1.31; 95% CI: 1.22-1.41), pneumonia (OR: 1.36; 95%: CI, 1.16-1.60), myocardial infarction (OR: 1.44; 95% CI: 1.22-1.70), venous thromboembolism (OR:2.11; 95% CI: 1.70-2.61), acute renal failure (OR: 1.34; 95% CI; 1.22-1.47), and sepsis (OR: 1.38; 95% CI: 1.24-1.53; all P < 0.001). There were no consistent associations between malpractice environment and Medicare payments. There were no consistent associations between state-level malpractice risk and higher quality of care or Medicare payments for colorectal surgery.

Structural Model of Tendency to Use Online Payment Gateway in Online Shopping and Customer Knowledge Management (Case Study: Pasargad Bank)

Tendency to use online payment gateway in online is influenced by individual characteristics such as risk-taking, internet knowledge, online payment knowledge and risk of customer knowledge management tools used in payment gateway and in this study, these factors have been studied simultaneously in form of a model. In online payment, payment gateways are repeated contact point between service institutions such as banks and their customers that institutions can use this opportunity to attract new customers or increase royal customers. In addition to individual characteristics, customers are facing different tools of knowledge management such as shared databases, document repositories and work applications and these tools can have different effects on risk perception and their willingness to do online shopping using internet payment gateways. In this study, structural equation partial least squares statistical method was used. Also questionnaire was used to collect data in the given population, because customer’s members of the Pasargad bank were accustomed online shopping.In summary, risk-taking has negative and significant impact on the risk is perceived of knowledge management tools and internet knowledge was not known as a factor which have a significant negative impact on the perceived risk, but the impact of internet knowledge on preference to use online payment and online payment rather tendency to use internet payment gateway in online shopping was positive and significant. Also, the perceived risk of customer knowledge management tools has negative and significant correlation with tendency to buy using online payment in online shopping by users. On the other hand, the final conclusions of the research carried out in more detail and also practical suggestions for increasing the effectiveness of managers to use knowledge management tools in the payment gateway are presented.

A Machine Learning Framework for Plan Payment Risk Adjustment.

To introduce cross-validation and a nonparametric machine learning framework for plan payment risk adjustment and then assess whether they have the potential to improve risk adjustment. 2011-2012 Truven MarketScan database. We compare the performance of multiple statistical approaches within a broad machine learning framework for estimation of risk adjustment formulas. Total annual expenditure was predicted using age, sex, geography, inpatient diagnoses, and hierarchical condition category variables. The methods included regression, penalized regression, decision trees, neural networks, and an ensemble super learner, all in concert with screening algorithms that reduce the set of variables considered. The performance of these methods was compared based on cross-validated R2 . Our results indicate that a simplified risk adjustment formula selected via this nonparametric framework maintains much of the efficiency of a traditional larger formula. The ensemble approach also outperformed classical regression and all other algorithms studied. The implementation of cross-validated machine learning techniques provides novel insight into risk adjustment estimation, possibly allowing for a simplified formula, thereby reducing incentives for increased coding intensity as well as the ability of insurers to "game" the system with aggressive diagnostic upcoding.

CEO Overconfidence and the Cost of Private Debt: Evidences from Bank Loan Contracting

This paper studies whether banks charge higher or lower interest rates on loans to firms with overconfident CEOs. It establishes a theoretical model to show the relationship between the loan rate and overconfidence of the borrowing firm’s CEO. It also conducts empirical analyses to test the predictions of the model. As predicted in the model, with a hedge against the downside risk of the loan payments, banks favor firms with overconfident CEOs such that these firms enjoy lower loan rates and higher loan approval rates, especially when firms have rich firm-specific growth opportunities or during prosperous periods. Furthermore, there is evidence showing that firms with overconfident CEOs bring more future business opportunities to banks than other firms. Hence, this paper implies that banks may prefer high-risk borrowers if the future benefits from doing businesses with these borrowers are sufficiently high.

Payments Banks: A New Dimension to Boost Financial Inclusion

The unbanked segment of India is exposed to the risk of unsecured payment and remittances. The irony of this situation is that this segment is not even capable of bearing the risk. People from small villages and remote areas are moving towards towns for better employment opportunities and striving hard to sustain their livelihoods. Most of the individuals in this segment are depending upon informal channels to transferring their money to their families located in remote areas. Therefore, a need was identified to cater to the banking requirements of this segment such as small businesses, low-income households, and other unorganized sector entities. The Reserve Bank of India (RBI) has taken various steps for achieving the objective of financial inclusion and introduced Payment Banks recently to reach out to the unbanked areas. This paper tries to educating the central bank's regulations/framework of payment banks as a new dimension to boost the financial inclusion in India.

SIRC: A Secure Incentive Scheme for Reliable Cooperative Downloading in Highway VANETs

In this paper, we propose a secure incentive scheme to achieve fair and reliable cooperative (SIRC) downloading in highway vehicular ad hoc networks (VANETs). SIRC can stimulate vehicle users to help download-and-forward packets for each other and consists of cooperative downloading and forwarding phase. During the cooperative downloading phase, SIRC utilizes “virtual checks” associated with the designated verifier signature to ensure fair and secure cooperation. Meanwhile, to minimize the payment risk of the client vehicle, partial prepayment strategy is adopted, i.e., the vehicles involved in downloading packets can only obtain part of the check before the client vehicle confirms the packet reception. During the cooperative forwarding phase, a profit-sharing model associated with an aggregating Camenisch–Lysyanskaya (CL) signature can stimulate cooperation and reduce the authentication overhead. In addition, we develop a reputation system to encourage cooperation and punish malicious vehicles. The aggregating CL signature and the symmetric cryptosystem are applied to resist various attacks, including injection/removing attack, free riding attack, submission refusal attack, and denial of service attacks. Extensive simulation results are given to show that the proposed SIRC can achieve a high download success rate and low average download delay with moderate cryptographic computation and communication overhead.

The role of risk in e-retailers’ adoption of payment methods: evidence for transition economies

We use logit analysis to exploit a self-collected dataset on the payment and delivery options offered by the vast majority of B2C websites in five Central Asian transition economies. Specifically, we conduct a supply-side test of (elements of) the Transaction Context Model, which highlights the role of perceived risk. Our results confirm that e-retailers in sectors with higher average transaction values are more likely to adopt `pay in advance' instruments--such as debit cards--that have a lower payment risk for the seller. We also find that merchants who offer higher-risk delivery options are more prone to also adopt higher-risk payment instruments (such as credit cards). Our control variables also yield interesting results. In particular, in line with the network externalities theory, we find evidence that the offline penetration of a payment instrument positively affects online merchant adoption.

Critical risk factors affecting the implementation of PPP waste-to-energy projects in China

Since 2003, Mainland China has been promoting the public–private partnership (PPP) procurement model in the waste-to-energy incineration sector to reduce the waste burying rate and improve environmental quality. Five critical risk factors (CRFs) that affect the construction and operation of waste-to-energy incineration projects have been identified from real-life risk events of 14 PPP waste-to-energy incineration plants through content analysis. These risk factors are insufficient waste supply, disposal of non-licensed waste, environmental risk, payment risk, and lack of supporting infrastructure. A recently completed PPP waste-to-energy incineration plant, the Shanghai Tianma project, was investigated to learn from the effective management of CRFs. First-hand data about the Shanghai Tianma project was collected, with a focus on project negotiation and concession agreement. Lessons learned about risk management were acquired. This paper presents a detailed study of the contractual structure, risk sharing scheme, risk response measures to CRFs, and project transfer of a PPP project. The study results will provide governments with management implications to prepare equitable concession agreements and benefit private investors by effectively mitigating and managing risks in future PPP waste-to-energy incineration projects.

Comment on “Risk Preferences Are Not Time Preferences”: On the Elicitation of Time Preference under Conditions of Risk

Andreoni and Sprenger (2012a, b) report evidence that distinct utility functions govern choices under certainty and risk. I investigate the robustness of this result to the experimental design. I find that the effect disappears completely when a multiple price list instrument is used instead of a convex time budget design. Alternatively, the effect is reduced by half when sooner and later payment risks are realized using a single lottery instead of two independent lotteries. The result is thus at least partially driven by intertemporal diversification, supporting an explanation in terms of concavity of the intertemporal, and not only atemporal, utility function. (JEL C91, D81, D91)

Single-Call Mechanisms

Truthfulness is fragile and demanding. It is oftentimes harder to guarantee truthfulness when solving a problem than it is to solve the problem itself. Even worse, truthfulness can be utterly destroyed by small uncertainties in a mechanism’s outcome. One obstacle is that truthful payments depend on outcomes other than the one realized, such as the lengths of non-shortest-paths in a shortest-path auction. Single-call mechanisms are a powerful tool that circumvents this obstacle: they implicitly charge truthful payments, guaranteeing truthfulness in expectation using only the outcome realized by the mechanism. The cost of such truthfulness is a trade-off between the expected quality of the outcome and the risk of large payments. We study two of the most general domains for truthful mechanisms and largely settle when and to what extent single-call mechanisms are possible. The first single-call construction was discovered by Babaioff et al. [2010] in single-parameter domains. They give a transformation that turns any monotone, single-parameter allocation rule into a truthful-in-expectation single-call mechanism. Our first result is a natural complement to Babaioff et al. [2010]: we give a new transformation that produces a single-call VCG mechanism from any allocation rule for which VCG payments are truthful. Second, in both the single-parameter and VCG settings, we precisely characterize the possible transformations, showing that a wide variety of transformations are possible but that all take a very simple form. Finally, we study the inherent trade-off between the expected quality of the outcome and the risk of large payments. We show that our construction and that of Babaioff et al. [2010] simultaneously optimize a variety of metrics in their respective domains. Our study is motivated by settings where uncertainty in a mechanism renders other known techniques untruthful, and we offer a variety of examples where such uncertainty can arise. In particular, we analyze pay-per-click advertising auctions, where the truthfulness of the standard VCG-based auction is easily broken when the auctioneer’s estimated click-through-rates are imprecise.

Cost of surgery and catastrophic expenditure in people admitted to hospital for injuries: estimates from a cohort study in Vietnam

BackgroundLittle is known of the effect that surgery has on out-of-pocket health-care expenditure or on catastrophic health payments in low-income settings. Our study aims to estimate the surgery cost paid out-of-pocket by injury patients admitted to a provincial hospital in Vietnam and the risk of catastrophic expenditure at 12 months after discharge. MethodsWe conducted a prospective cohort study in a provincial hospital in Vietnam. Participants were patients admitted to hospital due to injuries, aged 18 years or older, had a current residential address in the province (Thai Binh province), and consented to participate in the study. We collected data during hospital stay and at 1 month, 2 months, 4 months, and 12 months after discharge. Out-of-pocket costs incurred by injured people and their caregivers associated with care and treatment were collected. These covered all direct expenses incurred during hospital stay (surgery, emergency department, diagnostic examinations, medication, equipment, transportation, hospital stay, and others—eg, meals for both participants and their caretakers) and during follow-up (ongoing health checks, medication, meals, and transportation to outpatient clinic). Cost data were collected from the hospital bill and collected during face-to-face interviews with participants and their caretakers. The main outcome variables were surgery during hospital stay, total out-of-pocket payment, and catastrophic expenditure, defined as the out-of-pocket payment exceeding 40% of non-subsistence spending, by 12-month follow-up. Modified Poisson regression was used to determine the association between surgery and the risk of catastrophic expenditure. FindingsOf 892 participants recruited during admissions to hospital, surgery was undertaken in 634 participants, including 354 minor (40%) and 280 major (31%) surgeries. The mean costs of major and minor surgery were US$129 (SD 90) or 30·0% of the total medical care costs during hospital stays and US$68 (SD 41) or 33·6%, respectively. By 12 month follow-up, mean total direct out-of-pocket costs was US$625 (SD 603). Of 732 participants, 432 (59%) faced catastrophic expenditure. Specifically, this was 84% among those with major surgery, 47% with minor surgery, and 48% with no surgery. Compared with those with no surgery, the adjusted risk of catastrophic expenditure was only significantly higher for those had major surgery (RR 1·45 [95% CI 1·24–1·69]). InterpretationCosts of surgery create substantial financial burden for people admitted to hospital for injuries in Vietnam; although major surgery accounting for around 30% of total medical costs it is strongly associated with risk of catastrophic health payments. Although injury prevention efforts need greater investment, there is also a need to reform health-care insurance mechanisms to minimise the impact of out-of-pocket costs. FundingAtlantic Philanthropies.

Assessing the economic burden of illness for tuberculosis patients in Benin: determinants and consequences of catastrophic health expenditures and inequities.

To inform policy-making, we measured the risk, causes and consequences of catastrophic expenditures for tuberculosis and investigated potential inequities. Between August 2008 and February 2009, a cross-sectional study was conducted among all (245) smear-positive pulmonary tuberculosis patients of six health districts from southern Benin. A standardised survey questionnaire covered the period of time elapsing from onset of tuberculosis symptoms to completion of treatment. Total direct cost exceeding the conventional 10% threshold of annual income was defined as catastrophic and used as principal outcome in a multivariable logistic regression. A sensitivity analysis was performed while varying the thresholds. A pure gradient of direct costs of tuberculosis in relation to income was observed. Incidence (78.1%) and intensity (14.8%) of catastrophic expenditure were high; varying thresholds was insensitive to the intensity. Incurring catastrophic expenditure was independently associated with lower- and middle-income quintiles (adjusted odd ratio (aOR) = 36.2, 95% CI [12.3-106.3] and aOR = 6.4 [2.8-14.6]), adverse pre-diagnosis stage (aOR = 5.4 [2.2-13.3]) and less education (aOR = 4.1[1.9-8.7]). Households incurred important days lost due to TB, indebtedness (37.1%), dissaving (51.0%) and other coping strategies (52.7%). Catastrophic direct costs and substantial indirect and coping costs may persist under the 'free' tuberculosis diagnosis and treatment strategy, as well as inequities in financial hardship.