WORK IN PROGRESS

WORKING PAPERS

This article examines how the issuance of a Digital Currency by a non-bank operator impacts competition between banks in a cashless society. I analyze how the fee charged for the digital currency impacts the interest rates on loans and the fees charged by banks to depositors for paying by card and opening an account in a bank. I derive the conditions under which consumers use the digital currency to pay.

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3673958

'Bank-Platform Competition in the Credit Market', with Sara Biancini (Thema, Université de Cergy-Pontoise), in revision for publication.

Abstract:

The paper analyzes the equilibrium on the credit market when a bank and a platform compete to offer credit to borrowers. The platform does not manage deposit accounts, but acts as an intermediary between the borrower and the investor, offering a risky contract such that the investor is only reimbursed if the borrower is successful. We first characterize the optimal contracts proposed by the platform, depending on the two-sided structure of the market. Then, we study the impact of bank-platform competition on the average risk of bank loans and the relative level of interest rates.

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3446694

'Cyber Security and Cloud Outsourcing of Payments', with Noé Ciet (Université Paris Panthéon Assas).

Abstract:

We study the incentives of competing banks to outsource their payment services to a common infrastructure, managed by a private third-party provider (TPP). The TPP provider stores depositors' information in the cloud and offers compatibility services, but is exposed to cyber risk. In the first-best benchmark, the regulator chooses to build a common payment infrastructure when the marginal social benefits are higher than the marginal social costs, and chooses the welfare-maximizing levels of security investment for all players. If the market is unregulated, without cyber risk, banks outsource excessively to the TPP compared to the first-best because network effects soften competition for deposits. However, we show that cyber risk and the costs of security may reduce banks' incentives to join the third-party infrastructure, which may result in an inefficiently low level of interoperability of their payment systems. We examine how the liability regime for cyber incidents may improve the players' investment in security. We show that increasing the TPP's liability towards depositors has a higher impact on payment system security than increasing its liability towards banks. We discuss how several regulatory options impact the security and compatibility of banks' payment systems: supervision of outsourcing agreements, shared responsibility model, public provision of payment services.

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3402994