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We study a model of financial intermediation, payment choice, and privacy in the digital economy. Cash preserves anonymity but cannot be used for more efficient online transactions. By contrast, bank deposits can be used online but do not preserve anonymity. Banks use the information contained...
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. The nature of complementarities between data and payments determines the introduction of payments. When data help to … provide better payments (data-driven payments), platforms have too little incentives to adopt. When payments generate … additional data (payments-driven data), platforms may adopt payments inefficiently. …
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