We construct a two-period model of revolving credit with asymmetric information and adverse selection. In the second period, lenders exploit an informational advantage respect to their own customers. Those rents stimulate competition for customers in first period. The current lender enjoys relative its competitors determines interest rates, supply, switching behavior. evaluate consequences limi...

In this article, we present a theoretical model to study the ability of banks to influence the consumer’s payment instrument choice. Unlike most two-sided market models where benefits are exogenous, we explicitly consider how consumers’ utility and merchants’ profits increase from additional sales resulting from greater security and access to credit lines. Consumers participate in payment card ...

If the holiday shopping season turns out to be as grim as many forecasters are warning, among the reasons will be a little brain region called the insula. Maxed-out consumers have been heeding the advice to take scissors to their credit cards, since paying with cash controls the eventual cost of a purchase (carrying a credit-card balance can double an item's original price) and limits impulse b...

Using a unique panel data set from a U.K. credit card company, we analyze the interest rate sensitivity of subprime credit card borrowers. In addition to all individual transactions and loan terms, we have access to details of a randomized interest rate experiment conducted by the lender on existing (inframarginal) loans. For the whole sample, we estimate a statistically significant £3.4 reduct...

Are consumers who have filed for personal bankruptcy before excluded from the unsecured credit market? Using a unique data set of credit card mailings, we directly explore the supply of unsecured credit to consumers with the most conspicuous default risk—those with a bankruptcy history. On average, over one-fifth of personal bankruptcy filers receive at least one offer in a given month, with th...

In this paper, we examine how reinstated (i.e., re-aged) credit card accounts are likely to default again. Our sample data reveal that about 22% of the re-aged accounts default again, mostly in the first 24 months after reinstatement. We also find that a FICO score (public information) is a better predictor of a second default, while a payment behavioral score (private information) is a better ...

There is an abundance of temporal and non-temporal data in banking (and other industries), but such temporal activity data can not be used directly with classical machine learning models. In this work, we perform extensive feature extraction from the temporal user activity data in an attempt to predict user visits to different branches and credit card upselling as part of ECML/PKDD Discovery Ch...

For years now, there has been a lot of excitement about using digital cash for purchases of goods and services. In fact, studies in Briton indicate that two out of every three individuals would rather carry one card for every purchase as opposed to carrying cash (9). Additionally, there is tremendous interest in using digital cash for purchases via the World Wide Web instead of other common tra...