The biggest impact of technology on financial services worldwide has probably been on retail payments. New nonbank players have improved coverage with transaction accounts and offer microloans and consumer credit. Competition, helped by modern regulation and 'sandbox' programs, has lowered fees and increased the speed of financial transfers. New intermediaries aggregate demand from smaller businesses and individuals for cross border payments and currency exchange, and offer attractive rates. The Bank of England, the Bank of Lithuania and The Hong Kong Monetary Authority have allowed nonbanks to hold settlement accounts with them. International card payment systems moved into b2b payments and invested into national payment schemes. Mobile only banks emerged, and online payment service providers expanded into consumer credit. There is even an emerging alternative to correspondent banking based on sourcing of on-demand liquidity through marketable digital assets, instead of holding prefunded accounts. Ukraine, in contrast, still needs a retail payment system accessible by a smartphone application at low cost to people and small merchants. Similarly, Ukraine does not have sufficient alternative cross-border payment channels.

Retail lending has also been impacted. Algorithms do credit scoring, sourcing data automatically from third-party systems and incorporating data on behavior. Increased requirements for regulatory compliance has meant improved and streamlined monitoring and reporting. The next step will be the personalization of financial products, allowing loan repayments on an individual schedule and adjusting interest rates based on a more complete individual risk profile. Customer experience is the modern mantra. Sales are supported by data analysis and careful processes are built around targeting, engaging and retaining customers. New consumer interfaces have also emerged in retail lending: p2p lending platforms not only connect investors and borrowers, but also partner with large liquidity providers for whom they are a new origination tool. Financial service marketplaces are making it easier for people to choose a better and cheaper service, and banks are eager to become personal finance hubs that aggregate financial products, and concentrate on developing closer ties to clients.

Central bank digital currencies are being evaluated as a new monetary instrument. Private cryptocurrencies are a new type of financial asset and value transfer system. Blockchain technology has gained ground in value transfer systems that function without a central hub.

How does Ukraine relate to the digital transformation of financial services? In Ukraine, FinTech advances have been modest. The best-developed subsectors are card payments and software product developers for the financial industry. Monobank has been the biggest news in the market in the past few years, thanks to its convenient services and 'cool' ethos. Cryptocurrency exists but is still undefined in the law and unregulated. The slower pace of FinTech development in Ukraine, compared to global trends, is explained by factors that impede all sectors of the Ukrainian economy: lack of investment and capital; outdated regulation and slowness to modernize it; resistance to innovation; low personal incomes and distrust in financial institutions .

FST and EY have surveyed Ukrainian FinTechs and banks about their views of the market. A condensed version of the larger study is given here. FST also interviewed four people actively involved in innovation in Ukrainian financial services (a regulator and three entrepreneurs). Their views are presented here.

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