The Ukrainian fintech boom has occurred in the last 5 years. The regulation of the industry, the number of participants and the attitude of the population to fintech solutions have changed significantly during this time. Some events had a positive impact, some weren’t that positive. I would like to discuss what and how influenced it.
Lets begin with the strengths of Ukrainian fintech
Development. The IT industry in Ukraine is already a traditional source of pride. The volume of exports of IT services in 2019 increased by 30% and amounted to $ 4.17 billion. These indicators put the country in the first place in Europe in terms of IT services export and exceeded the export indicators of many strategic sectors of the Ukrainian economy. The number of IT specialists is growing by almost 20% annually. Ukrainian representatives of the sphere are in-demand both in domestic and international companies (25% of Ukrainian developers are representatives of global companies). The offices of the world’s IT giants are located in Ukraine: Microsoft, Siemens, Samsung, etc. There are prerequisites that even in the “catastrophic” 2020, positive growth rates will remain, new companies, products and jobs will continue to appear.
Constantly growing demand. The Ukrainian audience is incredibly cheerful and interested in everything new. It responds quickly and gives feedback on various fintech services and products. Users became especially active with the start of the pandemic. The new consumer demand not only served as a driver for fintech development, but also significantly transformed the banking sector, having accelerated the development of digital solutions and greatly added flexibility. The active demand is the greatest motivation to create a high-quality new product or radically change an old and highly-demanded one in order to preserve the business.
Government initiatives. Today the NBU is actively involved in the improvement of the fintech ecosystem, in the development of infrastructure for cashless payments and the access to digital services. The goal is to build an innovative financial market through the creating a functioning regulatory sandbox, the increasing financial literacy and the inclusion of the population and business, etc. In addition, national legislation is being adapted to EU standards — for example, PSD2, GDPR. And, of course, it’s necessary to remember the new rules of financial monitoring and the introduction of remote identification and authentication methods.
Weaknesses of the Ukrainian fintech sector
Lack of a well-organized fintech ecosystem. Although Ukraine is now actively moving towards its establishment, we don’t have a harmonious fintech ecosystem. Unfortunately, we face today an insufficient level of financial literacy of the population, the former popularity of payment kiosks, the lack of high-speed Internet coverage in some regions, low investment attractiveness for foreign investors, etc. Therefore, the talent pool and a large national market resolve issues.
Lack of flexible regulation in some spheres. The issue of regulation isn’t simple in this area. The very desire to make the users’ lives easier and services more convenient in use isn’t enough — in this field, the service providers must always remember about the safety of customer funds, high-quality control and transparent system. In parallel with the facilitation of some procedures — identification of bank customers, others have been made more complicated — opening an electronic wallet.
Large percentage of the shadow economy in the SMEs sector. It’s necessary for the reduction of the level of the “black” economy to stimulate SMEs to use and promote non-cash payment methods. To this end, the NBU plans to negotiate with the market participants the ways to reduce the cost of non-cash transactions, reduce the cost of cash register for business and the further development of payment transactions recorder software, as well as methods to stimulate SMEs to switch to all kinds of cashless payment methods. As for 2020, 38% of SMEs conduct non-cash transactions.
The Ukrainian fintech market is demonstrating fairly good results. At the same time, we certainly have a lot to pursue and improve, which all market participants together with the regulators are working at. Working through and considering our weaknesses, we find solutions, move forward and try to achieve perfection