I am often asked why Ukrainian fintech is so developed and successful. I will say the key thing is the people. But it’s not just that. There is a range of factors, future directions of movement, and challenges.
Even before the Russian full-scale invasion, Ukrainian fintech proved that it is part of the world market. Back in the 2000s, the development of the country’s card infrastructure began. At first, we covered the country with POS terminals and ATMs, then there were European-level innovations—for example, SMS banking. In 2010, a fintech focused on convenience and service: better internet banking, appropriate e-commerce purchases, and utility payment aggregators. As a result, Ukraine became a world leader in the implementation of Apple Pay and Google Pay.
Entrepreneurship, technology, quality of service
Several factors contributed to the rapid development of fintech. The first is “genetics”. Here, as in sports, it is impossible to achieve high results without the necessary “basic settings”. By this I mean natural Ukrainian entrepreneurship and a creative way of looking at things; it is also worth mentioning high-quality technical education.
The second is the desire to forget quickly the Soviet bureaucracy and develop business freely. This is one of the incentives that pushed independent entrepreneurs in the late 1990s and early 2000s to build their own companies and focus on customer-first values.
The third is time. We had less time for transformations, reforms, and changes. And there was a habit of working overtime. So, what the world has been doing for decades, we had to do dynamically in a year or two. This has led to the creation of highly motivated teams of strong experts and the growth of fintech expertise in general.
All of these features and the desire to make the service better contributed to the emergence of the last and main factor—the rapid use of modern technologies by Ukrainian fintech or even the creation of its own know-how. This became crucial for success. Thanks to it, we went five times faster and currently compete with both the US and Europe.
At the same time, we must pay tribute to the state’s focus on digitisation and service. In Ukraine, there is a well-known example of the Ministry of Digital Transformation, which sought to provide high-quality digital state services, and they succeeded. And it also helps financial institutions, for example, in rapid customer onboarding.
What is the current situation, and what can we expect in the near future?
The full-scale war and global uncertainty have reduced the level of investment in the industry. However, they did not affect the number of players of Ukrainian fintech—it survived one hundred percent. No company went bankrupt or ceased to exist. Even more—Ukrainian fintech companies have started European expansion: every fifth company is already expanding and every eighth is planning to do so.
But I will be a mild sceptic. I will allow myself an unpopular opinion among my colleagues—the discussions regarding the introduction of new technologies are somewhat exaggerated. Because the innovations that everyone is actively talking about now are not innovations at all.
For example, artificial intelligence (AI)—the financial market in Ukraine has been working with it for 20 years. In credit processes, scoring uses self-learning networks. Similarly, it is used in “anti-fraud” models. Most of the support chats of large companies have long been switched to bots. Onboarding and video verification processes also work on AI. Yes, AI became popular last year when ChatGPT came out. Since the world has started talking about AI, investments will likely come into this niche. However, artificial intelligence has not become and will not become a technological breakthrough or revolution, its implementation in life and business is a gradual, evolutionary process. A similar story was with Web3 technology, scrum methodology, and discussion of open banking in Ukraine.
But the main thing is that finance and banking always follow consumer behaviour. When the internet appeared, banking with browser-based “internet banking”, fintech, and e-commerce with online stores immediately followed. Then came the era of smartphones—banking started working in applications, and payment cards migrated there. It is difficult to predict what will happen after the smartphone, but the key idea is that fintech is always following the changing global trends in user behaviour.
Challenges for the future
When we talk about the future, it is worth talking not only about technology, but also about consumer behaviour, geopolitical factors, and regulation. The whole scope of challenges with which the entire financial community must work is related to this. But the first problem that arises is education and anti-fraud. I mean the lack of financial literacy, the high level of fraud, and the problem of confidentiality of personal data.
The second challenge is security because traditionally cybersecurity and physical security remain a major threat.
Thirdly, for the Ukrainian market, the issue of entering international markets will become more and more relevant. At the same time, this should be considered both as the next stage of development and as a trend, because many Ukrainians remain abroad due to the war. Therefore, part of the challenges are related to adaptation to work abroad.
The fourth thing I want to pay attention to is improving the service using the customer experience. Market players will listen more to customers, not only use leading technologies but also analyse big data for greater personalisation.
Photo by Jonas Leupe on Unsplash
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