Ihor Rumyk and Мельниченко Ирина Павловна, Development of innovative business companies and Fintech industry in the digital economy (2023)

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Book chapter from 2023 by Ihor Rumyk and Ivan Melnichenko of KROK University in Kyiv, Ukraine, in a monograph on innovation and financial technology in the digital economy. The authors argue that COVID-19 sped up the move to e-commerce, telemedicine, distance learning and financial technology. They describe digital banks and neobanks as the new business models and the adoption of fintech by traditional banks as the response. The chapter relies on abstraction, comparative and statistical analysis and secondary sources, and says mobile money and internet banking can help low-income households and small businesses.

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“Ihor Rumyk and Мельниченко Ирина Павловна, Development of innovative business companies and Fintech industry in the digital economy (2023).” Original at mono.scnchub.com. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/ihor-rumyk-and-development-of-innovative-business-companies-and-fintec-6a5bd7ecfd/, SHA-256 5deb382b951ec4ff71e23f5a0ba3765cd0eff3064084afa5ebff248a12954510.

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DEVELOPMENT OF INNOVATIVE BUSINESS COMPANIES AND
FINTECH INDUSTRY IN THE DIGITAL ECONOMY

Ihor Rumyk1, Ivan Melnichenko2
1
Doctor of Science (Economics), Professor, Professor of National Economy and Finance Department, KROK
University, Kyiv, Ukraine, e-mail: rumykii@krok.edu.ua, ORCID: https://orcid.org/0000-0003-3943-639X
2
Postgraduate student, KROK University, Kyiv, Ukraine, e-mail: melnichenkoiv@krok.edu.ua, ORCID:
https://orcid.org/0009-0008-6297-6603

Citation: Abstract. The globalization of economic relations and the development
Rumyk, I. Melnichenko, I. (2023). of modern financial technologies require the search for new means of
Development of innovative ensuring national interests, in the market of financial services. In these
business companies and fintech conditions, the question arises of forming a modern innovative financial
industry in the digital economy.
system, taking into account the peculiarities both at the level of business
The development of innovations
and financial technology in the structures and at the level of the state. In this system, the leading place as
digital economy: monograph. OÜ a modern means of service market development belongs to the latest
Scientific Center of Innovative financial services and tools, the implementation of which in all spheres of
Research. 2023. 230 p. PP. 170- business activity demonstrates the importance of the development of the
188, fintech industry. The defining trend in the development of the world
https://doi.org/10.36690/DIFTDE- economy in the 21st century was the spread of information and
2023-170-188 communication technologies, which made it possible to talk about the
formation of the so-called "digital economy" and led to the introduction
of the concepts of "digitalization" or "digitalization" into scientific
circulation. The most extensive application of digital technologies was
reflected in the financial sector, in particular, it made significant changes
in the organization of circulation and trading of financial instruments.
This monograph`s chapter is an The transition to digital technologies in various fields of activity has been
open access monograph distributed significantly accelerated by the COVID-19 pandemic, which has
under the terms and conditions of manifested itself in the sharp growth of e-commerce, increasing the pace
the Creative Commons Attribution of implementation of telemedicine, video conferencing, distance learning
(CC BY-NC 4.0) license and financial technologies. Modern progress in the development of
mobile money, financial and technological services of Internet banking
can bring significant benefits to the population with low incomes and
small businesses, which determines the relevance of research on the
development of innovative business companies and the fintech industry in
the digital economy. The purpose of the work is to study the essence of the
digital economy, financial technologies; analysis of trends in the
development of innovative business companies, as well as determination
of the direction of influence of FinTech innovations on the development of
business structures and the national economy as a whole. The main
research methods were scientific abstraction, logical generalization,
comparative and statistical analyzes, structural-functional and strategic
analysis for substantiation and determination of directions of
development of innovative companies. As a result of research, it will be
established that the current stage of the development of society is
determined by the formation of a new one type of economic system -
digital economy, which is characterized the significant impact of
information technologies on the rates of economic growth and to all
spheres of the economic life of society. Traditional market participants
respond to these changes by switching to innovative business models,
which are an example digital and neobanks, as well as adaptation of
FinTech innovations in traditional ones banking business models by
creating their own FinTech units, development of partnership with
FinTech companies and cooperation with other participant’s market.
Keywords. innovative companies, FinTech, digital economy, business
models, business structures, financial market participants.

170
At the current stage of functioning of economic systems and society, business
structures and financial companies are under the influence of digital technologies, the
dynamic development of which has already led to changes in the management of
most business processes and is one of the main factors of further economic
transformation.
Informatization and digitization of public life covers all aspects of the
functioning of the economy, therefore the transition to the digital economy should be
taken into account in the management system of the national economy, and
information and information and communication technologies should be considered
as important components of ensuring economic growth and economic security.
The modern stage of society's development is determined by the formation of a
new type of economic system - the information economy, which is characterized by
the significant impact of information technologies on the rates of economic growth
and on all spheres of the economic life of society.
In addition to traditional financial services that are implemented using
information and communication technologies, it is worth paying attention to such a
phenomenon in the financial sphere as the development of innovative financial
technologies and relevant financial and technological startups that ensure that
consumers receive a number of financial services online without the involvement of
traditional financial intermediaries.
The defining trend in the development of the world economy in the 21st century
was the spread of information and communication technologies, which made it
possible to talk about the formation of the so-called "digital economy" and led to the
introduction of the concepts of "digitalization" or "digitalization" into scientific
circulation. The most extensive application of digital technologies was reflected in
the financial sector, in particular, it made significant changes in the organization of
circulation and trading of financial instruments.
Digitalization of the economy is considered a fundamental factor of economic
growth, innovation and competitive environment, job creation and social progress in
general [1]. The key factor of the digital economy is digital data, which allows to

171
multiply the volume of processed information, reduce the time for its analysis and
significantly increase its efficiency for the production of technologies, goods and
improving the quality of services.
Digitalization of the economy allows to achieve many positive social and
economic effects. The main economic advantages of the digital economy include
increasing the rate of economic growth, accelerating the development of small and
medium-sized businesses, increasing the efficiency of business processes, and
increasing employment in the information and technology industries. The social
effects of the digitalization of the economy are: increasing the availability of financial
services, reducing the cost of education due to its virtualization, improving the
quality of medical care due to the digitalization of patient data, and reducing the
negative impact on the environment.
Dynamic technological development and the increase in the possibilities of
using information technologies in the market of financial services contributed to the
development of the appropriate category apparatus. One of the most used in this
context is the term "FinTech", which is used by various authors to denote FinTech
innovations, FinTech services, FinTech companies, etc. The multifaceted nature and
different content load of the use of the term "FinTech" has led to significant
differences in the definition of this category in the scientific literature (Table 3.1).
So, the basis of classification of FinTech innovations in most scientific sources
are their division according to the types of financial services they are transform:
payments and transfers; services of infrastructure market participants; investment
management; insurance; loans and savings; build-up capital However, FinTech
innovations are not only changing individual financial products or processes, but also
the financial services market as a whole, which is accompanied the appearance of
new participants on it and the revision of business models of existing ones
participants.
Despite the fact that there was an opportunity to develop the FinTech segment
ensured by wide distribution and use of information and computer technologies, but
they cannot be considered the only factor that gave rise to FinTech. Moreover, it is

172
worth noting that in the financial sphere manifestation of the use of technological
innovations turned out to be one of the most significant, which signals the presence of
additional stimulating factors spread of innovative technologies in the national
financial sector economy. Therefore, it is urgent to carry out a detailed study of the
complex factors that ensured the success of digitization in the financial sphere, and
caused rapid development of FinTech innovations.
Table 3.1. The main approaches to the characterization of the essence of
FinTech
Content of the approach Author (source) Definition of FinTech
FinTech is a technology-enabled innovation in
financial services that can lead to the emergence
Financial Stability
of new business models, applications, processes or
Board [2]
products that have a significant impact on the
FinTech as an innovation provision of financial services.
and business model The essence of FinTech should be defined by the
relationship of two main components: innovations
PwC [3];
that are based on the technologies of the
Kovalenko V. [4]
traditional banking sector; and new models of
providing financial services.
Broadly speaking, FinTech refers to the area of the
financial system of the economy that unites
Pochenchuk H. companies that use the latest developments to
FinTech as an industry
[5] provide better financial services. In a narrower
sense, FinTech is the companies themselves that
belong to this industry.
FinTech is an innovative technology used by
Mazaraki A.,
financial institutions, state administration bodies,
Volosovych S.
trade organizations to meet the needs of
FinTech as a technology [6]; Diakonova I.,
consumers of financial, administrative services
Pavlenko L.,
and goods in the context of the development of the
Kryklii O. [7]
consumer economy.
FinTech are services provided by technology
companies with the help of special software, and
Semenog A., are focused on meeting the financial needs of
FinTech as a service
Tsyrulyk S. [8] customers, offering convenient, efficient,
automatic and transparent online products
compared to classic financial services.

One of the most common approaches is the interpretation of FinTech from the
point of view of a variety of innovations, and in this aspect the concept of FinTech is
closest to the concept of "financial innovations". It is worth noting that unlike
FinTech, financial innovations are not always associated with the adaptation of

173
certain information technologies to the financial services market. FinTech
innovations are always technological innovations. Technological innovations that
ensured the development of FinTech include: distributed access technologies
(blockchain), artificial intelligence, big data analytics (Big Data), application
programming interfaces, cloud technologies, biometrics [5; 9].
FinTech innovations are mostly perceived as a positive phenomenon in the
development of the national economy, because they create new opportunities for
economic development, expand the involvement of households and the business
sector in financial relations, and increase the range of services used by economic
entities. However, from the point of view of traditional financial intermediaries, in
particular banking institutions, FinTech innovations can be considered as disruptive
technologies.
A technology can be defined as a "disruptive technology" if its use is
fundamental to a particular disruptive innovation. The developer of the theory of
disruptive innovation is Clayton Christensen. According to this theory, a disruptive
innovation is an innovation that uses "technology" in management, marketing, and
investment policies that transforms information, labor, capital, and material resources
into products or services of greater value that become the primary purpose of the
company and, as a result, fundamentally changes the established "rules of the game"
in many industries. Thus, certain innovations can shake the position of existing
products, companies or even entire industries [10].
For example, Amazon and Aliexpress changed the way we think about e-
commerce, AirBnb created a more efficient and secure rental market, and Uber
transformed the taxi industry.
In the FinTech banking sector, technologies lead to the destruction of traditional
business models, established models of relations with consumers, lead to the
disappearance of certain types of financial services due to their transfer to the digital
plane or their complete replacement by services offered by FinTech companies.
FinTech companies ensure that consumers receive a number of financial
services online without the involvement of traditional financial intermediaries. Such

174
FinTech companies, as a rule, are not subject to the regulatory influence of the
current regulatory framework, in which the existence and functioning of this type of
intermediaries was not foreseen. Even without replacing traditional financial
intermediaries, FinTech companies pose a challenge to the traditional financial
system and to traditional approaches to managing economic processes in the country
- they change the structure of financial products, ways of ensuring their provision and
receipt by the consumer.
Among the types of banking services that have suffered the most disruptive
impact as a result of FinTech innovations, i.e. their providers are now mainly
FinTech companies, we can first mention payments and transfers, as they belong to
highly profitable areas and are easily amenable to digitalization. In addition, new
business models (crowdfunding platforms, peer-to-peer lending platforms) appeared
and spread in the financial sector, which radically changed the financial services
market of many developed countries.
According to the Capgemini report, the following levels of disruptive influence
of FinTech on financial services are highlighted [11]:
– high level: payments, personal finance management;
– medium: loans, investments;
– low: basic banking services.
The replacement or disappearance of certain services from the portfolio of
banking institutions is caused not only by the emergence of FinTech companies as
competitors to traditional banks, but also by the development of new technologies
that are qualitatively superior to existing approaches in traditional banking.
An example of the implementation of such technologies is the increasing
adaptation of big data processing technologies, the development of better methods of
identification and quantification of risks, the implementation of algorithm-based
investments and the proliferation of platforms for users used to analyze and optimize
their investment portfolios [3].
The spread of blockchain technology and its application to improve various
aspects of the functioning of the financial services market has become a significant

175
destroyer of traditional approaches to the financial sector. The first and main
direction of influence of the blockchain was the development of cryptocurrencies
such as Bitcoin, which radically changed payments and money transfers by
eliminating intermediaries and developing "smart" contracts (smart contracts) [3].
Examples of blockchain as a disruptive technology in the capital market are the
following [12]:
1) blockchain is used for tokenization of assets and contracts, which leads to the
disappearance of the need for custodians and banking services: the underlying assets
are uniquely identified and form a database with the assignment of ownership rights;
2) blockchain is a universal accounting tool: it creates a universal, real-time,
automatically reconciled record of ownership and transactions, taking this function
away from financial intermediaries;
3) blockchain ensures self-fulfillment of smart contracts (automatic settlement
of financial obligations between counterparties), turns the terms of the agreement into
a "financial code" and removes the functions of financial intermediaries in servicing
trade agreements; 4) the blockchain is based on cryptography and is updated by
consensus, it has no central point of failure; 5) blockchain ensures the distribution of
accounting functions, eliminates the need for multiple reconciliations and promotes
the equality of participants: participants mutually agree on updating the database,
everyone works on a copy without connecting to a central source.
The development of the FinTech sector leads to the destruction of established
approaches and business models in other segments of the financial services market as
well due to the emergence of on-demand insurance, peer-to-peer lending and robo-
advisory services. Among FinTech companies, there are those that have experience in
developing financial proposals using blockchain and offer advanced analytical
solutions and provide cyber security services [13].
Therefore, FinTech is a disruptive technology for the financial sector of the
national economy, which leads to a fundamental change in business models,
interaction with clients and financial services themselves. All traditional financial
services segments are experiencing this impact.

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Summing up the analysis of the essence of FinTech, the following key
characteristics can be identified:
1) compared to conventional financial innovations, the result of FinTech
innovations is not only innovative financial products and technologies (processes),
but also new business models of financial intermediaries and market entities -
FinTech companies;
2) FinTech refers to radical innovations ("disruptive technology"), significantly
changes individual financial services and the market of financial services as a whole;
3) information technology, which is often also innovative, is a mandatory basic
concept that forms the basis of FinTech innovation.
Financial technologies, an abbreviated version of fintech (English — "financial
technology" and "FinTech", respectively) represent a relatively new branch of the
world economy and in the economic literature, this term was introduced in the 1990s
together with the emergence of the worldwide Internet. The study of scientific
literature leads to the conclusion that there is no unambiguous interpretation of the
concept of "financial technology" (Table 3.2).
Table 3.2. The essence of the concept of financial technologies
Author Interpretation
This is a new financial industry that uses technology to improve
Schueffel, P. [14]
financial operations
It is an industry consisting of technologies for banking, corporate
finance, capital markets, financial analytics, payments and personal
Papernyk, S. [15]
finance management, which also includes private investments and
private venture investments
Semenog, A., Kryvych, Ya., These are services provided by technology companies using special
Tsyrulyk, S. [16] software and focusing on the financial needs of clients
Tarasyuk, M.,
These are technologies used in the financial industry
Koscheev, O. [17]

After the global financial crisis of 2008, banks of all countries were forced to
adapt to the new world. Regulators have strengthened capital requirements for banks,
introduced new risk management standards and stricter requirements for KYC (Know
Your Customer) and AML (Anti Money Laundering) procedures.
At the same time, technologies and innovations developed rapidly (Figure 3.1).

177
Social networks are spreading rapidly

The Internet has become a common phenomenon

Small and medium-sized businesses began to look for alternative ways to finance their
activities

Labor migration increased and, accordingly, the amount of remittances to relatives
increased

Private investors, who were previously involved in real estate, began to look for new ways
to make money

The Big Five technology companies (Amazon, Facebook, Google, Apple, Microsoft) have
developed innovative products and services that set new standards of quality, speed and
convenience for consumers

Smartphones and mobile applications have appeared and are gaining popularity, even in developing
countries

Figure 3.1. Characteristic features of the development of technologies and
innovations [18]

With the emergence of new technologies, banks' focus on internal processes as a
result of the 2008 crisis and the desire of users to experiment with digital services
became the reasons for the emergence and growth of new FinTech companies.
The largest volume of investments was received by such sectors as: payments,
lending and banking technologies. Other global trends include mobile financial
services, financial and account management, money transfers, robot advisors,
insurance technologies, crowdfunding, P2P lending, blockchain and cryptocurrencies.
Among FinTech companies, their own "Unicorns" have already appeared -
companies worth more than 1 billion dollars. USA [19]. The main directions in which
such startups are rapidly developing their business are (Figure 3.2) [18]:

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Ant Transfer-
Payments Stripe Mozido Klarna
Financial wise

Funding
Lending Kabbage SoFi Lufax Prosper
Circle

Figure 3.2. Examples of rapidly growing startups (cost more 1 billion dollars
USA)

In Ukraine, FinTech is at a nascent stage and includes more than 60 companies
of varying degrees of maturity. In fact, the largest FinTech example in the country
was Privatbank (before nationalization), whose technological services were ahead of
not only the local Ukrainian market, but also the European one. FinTech began to
attract the attention of players in the financial sector of Ukraine only in 2017 after a
number of events and forums dedicated to this topic.
After the financial crisis of 2008-2009, the first players among FinTech startups
began to appear in Ukraine. For the most part, these projects were created in the
direction of payments and transfers. The vast majority of all FinTech startups (58%)
appeared since 2015.
The development of FinTech is actively supported by a number of various
initiatives and measures of the National Bank of Ukraine. The National Bank of
Ukraine envisages a number of initiatives (Figure 3.3).
The results of the study of Ukrainian innovative companies and business
structures are as follows.
Startup founders. The founders are mostly individuals with experience in IT
(65%) and finance (30%), most of whom are fluent in English. It is important to note
that the top management of FinTech providers mainly consists of former bankers
(70%) with experience in large commercial banks, including Privatbank, FUIB,
Raiffeisen Bank Aval, Alfa-Bank and Universal Bank. About 23% of managers left
the business and only 7% – from the IT sector (Figure 3.4).

179
FinTech initiatives of the central
bank FinTech initiatives of the central bank

Cashless economy Transition to ISO20022 standards

Electronic scanning of scanned
Exchange of documents in copies and signature of cash
electronic format using an documents
electronic signature

Storage of documents in electronic
Cancellation of stamps, seals and format
paper copies

Possibility of ordering financial
services online
Remote identification of a person

Increasing the financial literacy of
Protection of the rights of users the population
of financial services

The possibility of using the New rules to encourage licensing of
Bank ID system for remote new players in the payments sector
identification of bank clients

Figure 3.3. FinTech initiatives of the National Bank of Ukraine [18]

Among the important for the sector of non-financial corporations are traditional
services financial intermediaries that have transformed under the influence of
FinTech innovations, such as payments and settlements, lending current activity and
investment. New financial technologies that are worth to take into account in
entrepreneurial activity, there is a blockchain, the development of artificial
intelligence, robo-consultants and big data analytics.
Division of the market into segments.

180
Managers from
IT sector
7%
Managers left the
business
23%

Former bankers
70%

Figure 3.4. The top management of FinTech providers [18]

More than 37% of FinTech providers are engaged in the market segment of
payments between legal entities (B2B) and are aimed at serving small and medium-
sized enterprises (Figure 3.5):

FinTech Market Segmentation

21,5
Simultaneously B2B and B2C (92%
- mass segment, 8% - corporate
customers)
B2C, of which 100% for mass
market
56,0
22,5 B2B (from which solutions for
corporate customers - 62.5%, SMEs
- 37.5%)

Figure 3.5. Market segmentation of financial innovations [18]

Thanks to the development of crowdfunding and peering (p2p, p2b) online
platforms, the level of financial inclusion of business entities is increasing. For many

181
subjects of small and medium-sized businesses, as well as newly created one’s
enterprises that often could not count on receiving a sufficient amount of credit or
acceptable financing conditions from traditional financial institutions intermediaries,
crowdfunding platforms have become an alternative source investment financing, and
peering platforms are an alternative source working capital financing [20].
When using crowdfunding and peering business entities take on additional risks
with online platforms. Also, by posting information on a crowdfunding platform for
receiving investments for an innovative project is the responsibility of the enterprise
informational risk, because his innovative idea can be used by another entity.
Business models. From the point of view of business models, FinTech providers
focus on receiving various commissions, although there are monthly subscription
models. A small number of providers are based on a "freemium" model or a licensing
model (Figure 3.6).

Income of FinTech companies Cost of licenses and
escort Freemium
3% 4%
Subscription
(monthly payments)
Commission for 21%
realized
goods/services/works
48%

Transaction fees
24%

Figure 3.6. Sources of income of FinTech companies [18]

In the current activity of business entities, use is important financial services
related to settlements with counterparties and receiving payments from consumers.
Thanks to the emergence of mobile payments applications, online payment and

182
money transfer services, as well as development the cryptocurrency market, the
operating conditions have been significantly simplified and improved electronic trade
[21]. FinTech innovation has actually enabled businesses to serve online the full
cycle of sales activities, including placement catalog, providing consultations,
receiving an order, receiving payment. Using FinTech payment services allows for
better management working capital of business entities, minimize receivables arrears.
Partnerships. Some of the FinTech providers support partnerships with banks
and international payment systems. This includes platforms for P2P card transactions,
payment cards with multiple company logos, and other payment services. Basically,
these are banks such as FUIB, Oschadbank, Alfa-Bank, Raiffeisen Bank Aval,
TASKOMBANK and international payment systems (Figure 3.7).

Partner banks
FUIB
9%
TASKOMBANK
26% Raiffeisen Bank Aval
12%

Alfa-Bank
14%

Visa, Mastercard
23%
Oschadbank
16%

Figure 3.7. Main partner banks of FinTech companies [18]

In countries with a developed financial system, the distribution of credit
resources between different categories of borrowers is balanced or close to such a
state. In countries with a less developed financial system in distribution credit
resources can be traced to two extremes. On the one hand, borrowers with a higher
credit rating use credit services of banks, and banks, in turn, compete among

183
themselves for this category borrowers, offering them better credit terms. On the
other hand, there is another group of borrowers with very low credit scores.
Borrowers from this group cannot get loans even if they are willing to accept a
higher interest rate. In the category of borrowers from people who are employed
often get a low credit rating unofficially, do not have a credit history and active
deposits in the bank. These categories of borrowers represent a huge potential for
development for peer-to-peer lending market, as they are not covered by banking
lending.
Financing. Although many FinTech companies use their own funds to finance
operations, a significant proportion (49%) seek funding from external investors
(Figure 3.8).

Sources of funding

45%
49%

6%
Own funding (founders)

Funding from profit

Figure 3.8. Sources of funding for FinTech companies [18]

As part of the survey, FinTech providers were asked about what topics they
consider "hot" on the market. FinTech providers are among the "hot" topics identified
the following: electronic banking, automation, biometric identification, machine
learning and artificial intelligence (AI), forecasting and modeling, smart contracts,
chat bots, blockchain, Big Data, digitization of all registers, ISO, IT security, cyber
security and payment security, as well as an interest in open APIs.

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Regarding topics that were "hot" but have become "cold" over the past year,
FinTech providers noted electronic wallets, mobile applications, cash transactions,
mobile technologies, payment cards and Internet acquiring (Table 3.3).
Table 3.3. "Hot" and "Сold" fintech topics [18]
"Hot" fintech topics "Сold" fintech topics
electronic banking automation electronic wallets
biometric identification machine learning mobile apps
artificial intelligence (AI) smart contracts cash transactions
forecasting and modeling chat bots mobile technologies
blockchain & Big Date payment security payment cards
digitization of all registers ISO & IT security Internet acquiring
open APIs cyber security X

The FinTech sector was overlooked by financial authorities for a long time
regulation and supervision, as the priority of regulatory influence was determined
system forming banks and other financial intermediaries. From this point of view,
they are separate financial innovation and FinTech companies were considered to be
significantly unable influence the stability of the economic situation, and therefore do
not need application of special regulatory measures ("too-small-to-care"). In fact, the
development of the FinTech market in recent years has demonstrated exponential, not
linear, growth, which became a real challenge for public administration sector.
In fact, at the current stage, the size of FinTech segment is so large that its
decline or inefficiency is significant will affect the state of the entire financial system
("too-big-to-fail").
Challenges for the development of the FinTech market in Ukraine:
- Legislative and regulatory field;
- A traditional banking sector that is slow to innovate;
- Absence of open ARIs in the banking system;
- FinTech providers' limited access to capital and funding.

185
To date, the methods of consideration and use by the state FinTech innovation in
its activities includes three main areas: reactive regulation, RegTech and proactive
regulation.
Reactive regulation involves legislative development and implementation
regulatory influence of the state on the FinTech segment: in the public sector
requirements for the functioning of new entities - FinTech - are being formed
companies, to new types of FinTech services, conditions for the protection of rights
are provided consumers, investors and other market participants.
The second direction is the use of FinTech in providing public services, ensuring
the functioning of the public sector, proceedings regulatory and supervisory
activities, in particular for carrying out financial monitoring, control of individual
financial operations, national organization payment system, electronic tax
administration, application electronic identification technologies. An important place
in this direction is occupied by RegTech (or Regulatory Technology) - regulatory
technologies that provide compliance of companies and organizations with new
requirements of legislation and their compliance.
The third direction of using FinTech is this proactive regulation, i.e. application
of individual FinTech tools for stimulation of the economy: for example, the use of
peering or crowdfunding financing as an additional source of formation investment
resources of enterprises and the creation of appropriate incentives for them operating
conditions. Proactive norms that allow to form proposals for innovative business exist
in a number of countries around the world: in particular, in USA, Great Britain, Hong
Kong.
So, the current stage of development of the financial services market is
characterized not only by the increase in the level of digitalization, but also by the
technology of financial services, which is manifested in the intensive development of
new information technologies and creating fundamentally new types of financial
services based on them and tools. The biggest transformative impact of FinTech
innovations is on the sector of financial corporations, from which it follows

186
intersectoral transmission of this influence on three other sectors of the national
economy.
The conducted research allows us to make a number of important points
conclusions:
1. Despite the fairly early stage of development of the FinTech industry in
Ukraine, there is significant growth in the industry with the potential to continue this
trend in the future.
2. A strong infrastructure in the form of high mobile and smartphone penetration
combined with a well-educated and technologically literate population will help
accelerate the development of FinTech.
3. Given the existing demand in the market, FinTech solutions that will be
focused on financial inclusion and the mass market have the greatest potential for
growth in the future.
4. The implementation of the "learn by testing" approach or the so-called
"regulatory sandbox" will help the advancement of FinTech. And legislative and
regulatory changes will "catch up" with this development.
5. Continuation of the harmonization of the legal field of Ukraine with the
Directives of the European Union regarding electronic money, remote opening of
accounts, multi-level identification of customers (KYC), PSD2, open ARIs and the
use of third parties as agents may further contribute to the development of the
FinTech industry in Ukraine.

References:
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