Kim Cramer, London School of Economics and Political Science
Nishant Vats, Washington University in St. Louis
Nirupama Kulkarni, Centre for Advanced Financial Research and Learning (CAFRAL)
Pulak Ghosh, Indian Insitute of Management-Bangalore
Abstract: What role can Fintech play in climate change adaptation in developing countries? Combining the census of formal loans in India with weather shock data, we demonstrate that Fintechs step in as credit providers in the aftermath of climate events. Their response is both rapid and economically meaningful. Fintechs especially help the vulnerable: they issue credit to borrowers who have a low to medium credit score or are new to formal credit. Default rates of Fintech lenders’ loan portfolios do not show any economically meaningful increase. Thus, while Fintech lenders play a critical role in climate change adaptation, climate risk does not shift toward the balance sheets of Fintech lenders. We examine what allows Fintechs to show a stronger response than other lenders and find that a lower regulatory burden is unlikely to drive the result. Instead, we document that advanced technology and alternative data enable Fintechs to promptly react to climate disruptions and identify underserved segments not reached by traditional banks. Broadly, our findings indicate that technology and alternative data-based lending are effective at managing fluctuations in credit demand due to climate disruptions, particularly benefiting individuals who are financially marginalized or excluded.
Discussant: Rebecca De Simone, London Business School
Felix Martini, Frankfurt School of Finance and Management gGmbH
Manju Puri, Duke University
Abstract: We analyze the effect of a major central bank digital currency (CBDC) – the digital euro – on the payment industry to find remarkably heterogeneous effects. Stock prices of U.S. payment firms decrease, while stock prices of European payment firms increase in response to positive announcements on the digital euro. Bank stocks do not react. We estimate a loss in market capitalization of USD 127 billion for U.S. payment firms, vis-a-vis a gain of USD 23 billion for European payment firms. Our results emphasize the medium-of-exchange function of CBDCs and point to a novel geopolitical dimension of CBDCs: enhanced autonomy in payments.
Discussant: Sergey Sarkisyan, Ohio State University
Abstract: Web3 and DeFi are widely advocated as innovations for greater financial inclusion and democratization. We assemble (and share) the most comprehensive dataset to date about the largest Web3 ecosystem and use one of the largest-scale computing in the economics literature to investigate the claim. We document Ethereum's network structure, time trends, and distributions of transactions, mining, and ownership. Mining income and Ether ownership are concentrated in a few nodes, even after excluding exchange and mining pool wallets, with inequalities more exacerbated than observed in the real economy. Network activities are dominated by large transactions, shifting from peer-to-peer to user-DApps/DeFi interactions, and from Ether-based to ERC-20-token-based. High percentage transaction fees, congestion-induced gas-price fluctuation, suboptimal reserve setting, and large return volatility of tokens disproportionally harm small, unsophisticated, and new nodes, with high failure rates hurting all users. Finally, we present causal evidence that prominent programs such as EIP-1559 base-fee burning mechanism and OmiseGo airdrop promote inclusion and equality through monetary redistribution.
Discussant: Anastassia Fedyk, University of California-Berkeley
