Capital Market Development: China and Asia Seminar Series – On the Rise of Payment Firms

COLLABORATING ORGANIZERS

Payment firms have experienced an exceptional growth over the past decade, with payment firms’ market capitalization now exceeding the combined market capitalization of all banks in the U.S. The authors show that stock returns of payment firms are strongly correlated with stock returns of ECommerce firms. Using three million observations at an online retailer, the authors provide micro-level evidence on the importance of payment firms for E-commerce purchases. When a customer’s preferred payment type is not seamlessly available, approximately a quarter of customers abandon the purchase instead of switching to a different payment type. The authors document this strong clientele effect both for credit cards, PayPal, as well as Buy-Now-Pay-Later (BNPL) products. The authors results suggest that – although E-Commerce firms have access to many payment types – each payment firm has a significant bargaining power vis-à-vis E-Commerce firms.

About the Seminar Series

Financial market development goes hand-in-hand with economic growth. The development of China’s capital markets in terms of size, regulations, capability, and efficiency has been impressive. China may now even lead globally in some dimensions, notably e-payments systems. Yet, China’s capital markets are still a work-in-progress facing both generic and unique challenges. Other Asian capital markets have even greater uneven development. Some in advanced Asian economies have acquired globally acclaimed reputation and capabilities while various regulatory and structural weaknesses dwarf others. Corporations and investors have been inclined to arbitrage cross-border regulatory and developmental gaps; so the very uneven status of capital markets across Asia is a policy issue for the governments in the entire region and perhaps globally. Analyzing the positive and negative lessons in the functioning of Asia’s capital markets, and identifying reforms and applications of technology that could further improve Asian capital markets’ allocation efficiency, financial inclusion, and forewarning against reforms that might cause problems can benefit practitioners, policymakers and researchers, and can contribute significantly to overall prosperity.

The ABFER and the University of Chicago’s Becker Friedman Institute China (BFI-China), in collaboration with National University of Singapore (NUS) Business School, Shanghai Advanced Institute of Finance (SAIF), The Chinese University of Hong Kong (CUHK) Department of Economics, CUHK-Shenzhen and Tsinghua University PBC School of Finance (Tsinghua PBCSF), hope to provide a virtual network to benefit researchers, policymakers, and practitioners from Asia and beyond.