World tendencies

I think we should start with a figure that shows the true contagion of innovations on the financial market: 88% of companies which provide services at this market believe that innovational companies influence their activity directly (the research conducted by Ropes & Gray Fintech M&A 2019. It means that almost any company, whatever old it can be on the market, cannot feel itself safe near the “green and young” innovators that are ready to destroy the market basis.

Since x.com (later PayPal) has appeared in the net, the Internet stopped being as it was before, as it started bringing not only the information but also money. Still, let’s not dig the history and better talk about the most important things in the technological industry.

Digital and multichannel banking — at first and foremost, it considers traditional players at the financial market, the banks that are “urged” to expand the boundaries of the comfort zone (and banks are VERY conservative establishments) and provide their services, for example, in messengers. Besides, more banks give access to the client database with the aid of API, which gives new companies a possibility to build their services on the data that is already in the bank industry.

AI is not a fancy word on slides in front of investors anymore, it has become a “workhorse”, and many clients in the finance industry are not even unsuspicious of it. And we aren’t talking about chat-bots that are trying to show their “intelligence” while serving the clients, we are talking about more workaday things such as credit rating or client base segmentation.

Another tendency that should not go unmentioned is blockchain (the technology itself, not cryptocurrencies that are built on its base). Even more, solutions are being made for the finance industry than it is generally believed by a wide audience: transparency, data verification, internal control — these are the processes that become more accessible in the financial sphere thanks to blockchain technology.

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What about Ukraine?

On the world market of financial services Ukraine isn’t presented by bright examples, but the internal market is already disrupted by a team which is now widely known as Fintech Band, and its product Monobank is growing with incredible pace. Despite the fact that Dmitry Dubilet, the co-founder of Fintech Band, left to start the civil service at the Cabinet of Ministers in the civil service, in half of the year, the project has maintained its growth and continues to please with new services (we recommend you to subscribe to the telegram channel of Oleg Gorokhovsky to keep abreast of what is happening atm). This “band” also launched another project on the British market — Koto, it is something similar to Monobank but at the same time, it is completely different.

If we talk about the categorizing of fintech companies, then according to the report about fintech companies which was presented in 2019 by UNIT.city, the largest segment is payments and money transfers, technology and infrastructure is on the second place, and lending facilities takes the 3rd place. We should also mention several segments which are actively developing in Ukraine: online insurance, digitalization of traditional banks and neobanks (“Monobank” can be considered as a neobank).

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One more thing

A quick word about the main players of the fintech market in Ukraine. If we talk about the payment infrastructure, it is presented by a few “monsters”. It is Privat24, which is owned by PrivatBank (from which, by the way, “Fintech band” came from) as well as Wayforpay and Portmone. Before Paypal or Stripe entered the Ukrainian market, these companies were in a comfortable position.

Another segment which is actively developing is considered as “cloud box offices” and systems for POS terminals. Here we can mention Poster POS, POSJam and SkyservicePOS which help businesses to service the clients.

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And what about cryptocurrency?!

If we talk about the development of cryptocurrency in Ukraine, then the only one exchange market is Kuna that is a bridge between cryptocurrencies and hryvnia. It allows both buying cryptocurrency for the national currency and receiving hryvnias for selling cryptocurrency. At the same time, the news has repeatedly claimed about creating or testing an electronic hryvnia both under the auspices of the National Bank and with the participation of other process drivers. At the same time, the basic technology (blockchain / DLT) remains a hot topic for Ukrainian fintech startups. Still, the hype around the term is not the same as it was a few years ago and nobody will create “the alternative Bitcoin” for real. It is important to mention that the blockchain significance assessment for banks and fintech companies is completely different (banks consider technology implementation more critically than fintech companies would love to).

According to the data from world experts, the implementation of the DLT infrastructure to suppliers of the financial services will reduce their expenses in 30–70% in such areas as reporting, compliance and business operations. DLT-solutions give a possibility to increase the transparency, data validation, inner control, decrease the necessity of data correlation, and it also opens infinite possibilities for data exchange.

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Summary

Fintech is definitely a “hot” topic for the Ukrainian market but views on priorities and development of this market and its various participants are different (from minor changes to completely opposite points of view, for instance, the system of remote customer identification is a priority number one for fintech companies but it’s not even in top-10 priorities of banks). At the same time, government bodies have their own interests that, most often, are manifested in the desire to collect as many taxes as possible.