This paper studies the desirability of programmable payments where transfers are automatically executed conditional upon preset objective criteria. We do so by studying optimal payment arrangements in a framework that captures a wide range of economic relationships between two parties. Our framework stacks the cards in favor of programmable payments by considering an environment without legal recourse. The results show that the optimal payment arrangements for long-term economic relationships consist predominantly of simple direct payments. Direct payments increase the surplus by avoiding the liquidity cost of locking-up funds from the moment where the payer commits the funds in a programmable payment until the moment where the conditions are satisfied to release those funds to the payee. Programmable payments will be desirable, and may in fact be the only viable payment arrangement, in situations where economic relationships are of a short duration. Our results identify a limit to the growth in the demand for payments as their cost decreases: While the number of feasible trading relationships will increase, existing trading relationships will optimally rely on fewer payments.

Stablecoins - a category of crypto-assets designed to keep their value stable - have grown rapidly since 2020. The largest stablecoins hold short-term dollar-denominated assets to manage their peg against the dollar. This paper documents one implication of this pegging mechanism for the short-term funding markets. To this aim, we identify changes in the stablecoin demand for commercial papers (CP) by tracking the stablecoin tokens in circulation and by exploiting cross-sectional and time-varying heterogeneity in reserve assets policy of the main stablecoin issuers. We show that CP issuers catered to the additional demand from stablecoins by issuing more, highlighting a new connection between crypto-assets and conventional markets.

We show that by lending to merchants and monitoring them, an e-commerce platform can price-discriminate between merchants with high and low financial constraints: the platform offers credit priced below market rates and designed to select merchants with lower capital or collateral while simultaneously increasing the platform's access fees. The credit market then becomes endogenously segmented with banks focusing on less financially constrained borrowers. Lending by the platform expands with its monitoring efficiency but can arise even when the platform is less efficient than banks at monitoring. Platform credit benefits more financially constrained merchants as well as buyers, but can hurt less financially constrained merchants if cross-side network effects with buyers are too small. The platform's propensity to offer credit and the financial inclusion of more constrained merchants depends on the platform's market power in its core business.