Digital Platforms : Payments and the Provision of Privacy

Digital platforms, such as social media and video streaming sites, often collect large amounts of personal data from their users. In recent years, most platforms also start offering payment services, such as Apple Pay, Amazon Pay, and WeChat Pay. In this paper, we characterize conditions under which digital platforms find it profitable to monetize users' data. We show that platforms' monetization policies are in general socially inefficient. When platforms do not offer payment services, they tend to under-utilize consumers' data, i.e., platforms may not monetize users' data even when it is welfare-improving. However, when platforms offer payment services, they may over-utilize users' data. Competition among platforms may lead to some platforms specializing in data monetization and others in providing privacy. Under certain conditions, a data monopoly as well as platforms specializing in providing payment services may also emerge simultaneously