DIGITALIZATION OF THE FINANCIAL SECTOR OF ECONOMY. CHALLENGES AND PROSPECTS

UDC 336.144.2:004.9

  • Kryshtanosau Vitaly Bronislavovich – PhD (Economics), post-doctoral student. Belarusian State Technological University (13a, Sverdlova str., 220006, Minsk, Republic of Belarus). E-mail: Krishtanosov@mail.ru

DOI: https://doi.org/10.52065/2520-6877-2021-244-1-17-40

Key words: digitalization of the financial sector, FinTech, financial inclusion, crowdfunding, algorithmic trading, mobile financial services, mobile money, InsurTech.

For citation: Kryshtanosau V. B. Digitalization of the financial sector of economy. Challenges and prospects. Proceedings of BSTU, issue 5, Economics and Management, 2021, no. 1 (244), pp. 17–40 (In Russian). DOI: https://doi.org/10.52065/2520-6877-2021-244-1-17-40.

Abstract

There have been identified the main directions of digitalization of the financial sector of the modern economy, the role of FinTech companies and services, both in theoretical and practical terms, the aproaches to the definition of this concept in the economic literature are given. There have been substantiated the main reasons and factors for the development of this direction of digitalization of the financial sector, including the concept of financial inclusion, the advantages and disadvantages of FinTech, various aproaches to their classification, country and regional features, and an analysis of their trends of development.. There have been presented the crowdfunding vector of FinTech, aproaches to its definition and classification. There have been revealed the advantages of the crowdfunding mechanism, and its role in the modern economy. There have been identified the trends of development of algorithmic trading as the most important direction of digitalization of the financial sector. There has been made a detailed analysis of mobile financial services as one of the fastest growing areas of FinTech, aproaches to their classification, factors stimulating the growth of mobile payments, country and regional features. There have been analyzed the main directions of digitalization of the insurance sector, made well-founded conclusions about the advantages of InsurTech.

Download

References

  1. Schumpeter J. The Theory of Economic Development: An Inquiry Into Profits, Capital, Credit, Interest, and the Business Cycle. Cambridge, MA, Harvard University Press Publ., 1949. 250 p. Available at: https://archive.org/details/in.ernet.dli.2015.187354/page/n1/mode/2up (accessed 20.12.2020).
  2. Goldsmith R. Financial Structure and Development (Study in Comparative Economics). New Haven, CT, Yale University Press Publ., 1969. 561 p.
  3. Levine R., Zervos S. Stock market development and long-run growth. World Bank Economic Review, 1996, 10 (2), pp. 323–339.
  4. Beck T., Chen T., Lin C., Song F. Financial innovation: the bright and the dark sides. J. Bank. Finance, 2016, 72 (1), pp. 28–51.
  5. McKinnon R. Money and Capital in Economic Development. Washington, D. C., Brookings Institution Press Publ., 1973. 184 p.
  6. Shaw E. Financial Deepening in Economic Development. New York, Oxford University Press Publ., 1973. 260 p.
  7. Bygrave W.. Timmons J. Venture capital at the crossroads. Boston, M. A., Harvard Business School Press Publ., 1992. 368 p.
  8. Freeman C., Soete L. The economics of industrial innovation. London, The M. I. T. Press Publ., 1997. 470 p.
  9. Pissarides F. Is lack of funds the main obstacle to growth? EBRD's experience with small- and mediumsized businesses in central and eastern Europe. Journal of Business Venturing, 1999, 14 (5–6), pp. 519–539.
  10. Bernier M., Plouffe M. Financial innovation, economic growth, and the consequences of macro prudential policies. Research in Economics, 2019, 73, pp. 37–173. Available at: https://doi.org/ 10.1016/j.rie.2019.04.003 (accessed 15.12.2020).
  11. Junger M., Mietzner M. Banking goes digital: The adoption of FinTech services by German households. Finance Research Letters, 2019. 8 p. Available at: https://doi.org/10.1016/ j.frl.2019.08.008 (accessed 14.12.2020).
  12. Jaeger P., Lin J., Grimes J., Simmons S. Where is the cloud? Geography, economics, environment, and jurisdiction in cloud computing. First Monday, 2009, 14 (5). Available at: https://firstmonday.org/ ojs/index.php/fm/article/view/2456/2171 (accessed 15.12.2020).
  13. Scardovi C. Digital Transformation in Financial Services. Springer International Publishing AG Publ., 2017. 236 p.
  14. Chen Y., Bellavitis C. Blockchain disruption and decentralized finance: The rise of decentralized business models. Journal of Business Venturing Insights, 2020, 13. 8 p. Available at: https://doi.org/10.1016/j.jbvi.2019.e00151 (accessed: 23.12.2020).
  15. Shim Y., Shin D.-H. Analyzing China’s Fintech Industry from the Perspective of ActorNetwork Theory. Telecommunications Policy, 2016, 40, pp. 37–181. Available at: http://dx.doi.org/ 10.1016/j.telpol.2015.11.005 (accessed: 20.12.2020).
  16. Vives X. Competition and stability in modern banking: A post-crisis perspective. // International Journal of Industrial Organization. 2019. 64. P. 34–69. URL: https://doi.org/10.1016/j.ijindorg.2018.08.011 (дата обращения: 10.12.2020).
  17. Gai K., Qiu M., Sun X. A Survey on FinTech // Journal of Network and Computer Aplication. 2017. 62 p. https://doi.org/10.1016/j.jnca.2017.10.011 (дата обращения: 01.12.2020).
  18. Krishnan K. Building Big Data Aplications. Banking industry aplications and usage. Elsevier Inc., 2020. P. 127–144. URL: https://doi.org/10.1016/B978-0-12-815746-6.00007-7 (дата обращения: 03.12.2020).
  19. Drasch B., Schweizer A., Urbach N. Integrating the «Troublemakers»: A taxonomy for cooperation between banks and fintechs // Journal of Economics and Business. 2018. 17 p. URL: https://doi.org/10.1016/jJeconbus.2018.04.002 (дата обращения: 15.12.2020).
  20. Casanova L., Cornelius P., Dutta S. Banks, Credit Constraints, and the Financial Technology’s Evolving Role // Financing Entrepreneurship and Innovation in Emerging Markets. 2018. Р. 161–184. URL: https://doi.org/10.1016/B978-0-12-804025-6.00007-1 (дата обращения: 30.12.2020).
  21. Dawei L., Anzi H., Gen L. Big Data Technology: Aplication and Cases. Handbook of Blockchain, Digital Finance, and Inclusion. Elsevier Inc. 2018. Vol. 2. P. 66–81. URL: https://doi: 10.1016/B978-0-12-812282-2.00004-8 (дата обращения: 10.12.2020).
  22. Patwardhan A. Peer-To-Peer Lending // Handbook of Blockchain, Digital Finance, and Inclusion. Elsevier, 2018. Vol. 1. P. 390–418. URL: https://doi: 10.1016/B978-0-12-810441-5.00018-X (дата обращения: 09.11.2020).
  23. Arner D., Barberis J., Buckley R. RegTech: Building a Better Financial System // Handbook of Blockchain, Digital Finance, and Inclusion. 2018. Vol. 1. P. 359–373. URL: https://doi:10.1016/B978-0-12-810441-5.00016-6 (дата обращения: 19.11.2020).
  24. World Bank. The global findex database: Measuring financial inclusion and the FinTech revolution. Washington DC: World Bank, 2017. 131 p. URL: http://documents1.worldbank.org/curated/en/332881525873182837/pdf/126033-PUB-PUBLIC-pubdate-4-19-2018.pdf (дата обращения: 15.10.2020).
  25. Koh F., Phoon K. F., Hа C. D. Digital Financial Inclusion in South East Asia // Handbook of Blockchain, Digital Finance, and Inclusion. 2018. Vol. 2. P. 387–403. URL: http://doi: 10.1016/B978-0-12-812282-2.00015-2 (дата обращения: 17.10.2020).
  26. Kabakova O., Plaksenkov E. Analysis of factors affecting financial inclusion: Ecosystem view // Journal of Business Research. 2018. 8 p. URL: https://doi.org/ 10.1016/jJbusres.2018.01.066 (дата обращения: 30.12.2020).
  27. Mushtaq R., Bruneau C. Microfinance, financial inclusion and ICT: Implications for poverty and inequality. Technology in Society. 2019. 59. 18 p. URL: https://doi.org/ 10.10167j.techsoc.2019.101154 (дата обращения: 03.09.2020).
  28. Bruhn M., Love I. The real impact of improved access to finance: evidence from Mexico. J. Finance. 2014. 69 (3). P. 1347–1376.
  29. Sarma M., Pais J. Financial inclusion and development // J. Int. Dev. 2011. 23 (5). Р. 613–628.
  30. Beck T., Demirguc-Kunt A., Levine R. Finance, inequality and the poor // Journal of Economic Growth. 2007. 12 (1). P. 27–49.
  31. Loayza N., Ranciere R. Financial development, financial fragility, and growth // Journal of Money, Credit, and Banking. 2006. 38 (4). P. 1051–1076.
  32. Mehrotra A., Yetman J. Financial inclusion-issues for central banks, 2015. 14 p. URL: https://www.bis.org/publ/qtrpdf/r_qt1503h.pdf (дата обращения: 13.09.2020).
  33. Dabla-Norris M., Ji Y., Townsend R., Unsal D. Identifying constraints to financial inclusion and their impact on GDP and inequality: A structural framework for policy // IMF Working Paper. WP15/22. International Monetary Fund, 2015. 49 p. URL: https://www.imf.org/-/media/Websites/IMF/imported-fulltext-pdf/external/pubs/ft/wp/ 2015/_wp1522.ashx (дата обращения: 14.09.2020).
  34. Buera F., Kaboski J., Shin Y. The macroeconomics of microfinance // NBER Working Paper Series. W17905. National Bureau of Economic Research. 2012. 42 p. URL: https://www.nber.org/system/files/working_papers/w17905/w17905.pdf (дата обращения: 30.12.2020).
  35. Aghion P., Bolton P. A theory of trickle-down growth and development // The Review of Economic Studies. 1997. 64. Issue 2. P. 151–172. URL: https://academic.oup.com/ restud/article-pdf/64/2/151/4491029/64-2-151.pdf (дата обращения: 20.12.2020).
  36. Beck T., Demirguс-Kunt A., Levine R. Finance, inequality and the poor // Journal of Economic Growth. 2007. 12 (1). P. 27–49.
  37. Galor O., Zeira J. Income distribution and macroeconomics // Review of Economic Studies. 1993. 60 (1). P. 35–52.
  38. World Bank Group. Global financial development report 2014: Financial inclusion. Washington DC, 2014. 203 p. URL: http://documents1.worldbank.org/curated/en/225251468330270218/pdf/Global-financialdevelopment-report-2014-financial-inclusion.pdf (дата обращения: 15.10.2020).
  39. Makina D. An overview of financial services access and usage in AFRICA. Elsevier Inc., 2019. 12 p. URL: https://doi.org/10.1016/B978-0-12-814164-9.00001-3 (дата обращения: 15.12.2020).
  40. BIS. Basel Committee on Banking Supervision. Guidance on the aplication of the Core Principles for Effective Banking Supervision to the regulation and supervision of institutions relevant to financial inclusion. September 2016. 48 p. URL: https://www.bis.org/bcbs/ publ/d383.pdf (дата обращения: 27.12.2020).
  41. GPFI. Issues paper: Digital financial inclusion and the implications for customers, regulators, supervisors and standard-setting bodies, 2014. 24 p. URL: https://www.gpfi.org/sites/gpfi/files/documents/Issues%20Paper%20for%20GPFI%20BIS%20Conference%20on%20Digital%20Financial%20Inclusion.pdf (дата обращения: 20.08.2020).
  42. Boamah E., Murshid N. “Techno-market fix”? Decoding wealth through mobile money in the global South // Geoforum. 2019. No. 106. P. 253–262.
  43. Dula C., Lee D., Chuen K. Reshaping the Financial Order // Handbook of Blockchain, Digital Finance, and Inclusion. 2018. Vol. 1. P. 2–18. URL: https://doi: 10.1016/B978-0-12-810441-5.00001-4 (дата обращения: 11.08.2020).
  44. Hill J. Introduction. FinTech and the Remaking of Financial Institutions. 2018. Р. 1–19. URL: https://doi:10.1016/b978-0-12-813497-9.00001-9 (дата обращения: 18.09.2020).
  45. Ramos de Luna I., Liebana-Cabanillas F., Sanchez-Fernandez J., Munoz-Leiva F. Mobile payment is not all the same: The adoption of mobile payment systems depending on the technology applied // Technological Forecasting & Social Change. 2018. 14 p. URL: https://https://doi.org/10.1016/j.techfore.2018.09.018 (дата обращения: 11.11.2020).
  46. Barberis J. The rise of FinTech: Getting Hong Kong to lead the digital financial transition in APAC. Fintech Report. Fintech HK, 2014. 24 p.
  47. Retail CBDCs. The next payments frontier. OMFIF and IBM report. IBM Corporation, USA, 2019. 35 p.
  48. Digital Monetary Institute. The future of payments. 2020. 68 p. URL: https://www.omfif.org/wpcontent/uploads/2020/12/The-Future-of-Payments.pdf (дата обращения: 11.11.2020).
  49. Xu D., Tang S., Guttman D. China’s campaign-style Internet finance governance: Causes, effects, and lessons learned for new information-based aproaches to governance // Computer Law & Security Review. 2019. 35. P. 35–14. URL: https://doi.org/ 10.1016/j.clsr.2018.11.002 (дата обращения: 10.11.2020).
  50. Галдика М. Будущее электронных платежных систем: 5 прогнозов о том, что будет формировать рынок в 2021 году. 07.12.2020. URL: https://belretail.by/article/buduschee-elektronnyih-platejnyihsistem-prognozov-o-tom-chto-budet-formirovat-ryinok-v-godu (дата обращения: 30.12.2020).
  51. The Official Monetary and Financial Institutions Forum. Digital Currencies: A Question of Trust. Report of OMFIF. London, 2020. 23 p.
  52. Wonglimpiyarat J. Challenges and dynamics of FinTech crowd funding: An innovation system aproach // Journal of High Technology Management Research. 2018. 11 p. URL: https://doi.org/10.1016/j.hitech.2018.04.009 (дата обращения: 14.12.2020).
  53. Vismara S. Signaling to overcome inefficiencies in crowdfunding markets. In: Cumming, D., Hornuf, L. (Eds.), Handbook of Crowdfunding. Palgrave, London, 2018. P. 29–56.
  54. Disrupting Finance. FinTech and Strategy in the 21st Century. Edited by Theo Lynn, John G. Mooney, Pierangelo Rosati, Mark Cummins. Palgrave Studies in Digital Business & Enabling Technologies. 2018. 175 p.
  55. Kirby E., Worner S. Crowd-funding: An Infant Industry Growing Fast. Staff Working Paper of the IOSCO Research Department. 2014. No. SWP3/2014. 8 p.
  56. Pierrakis Y., Collins L. Banking on Each Other: Peer-to-Peer Lending to Business: Evidence from Funding Circle (Project Report). London, UK: NESTA, 2013. 43 p.
  57. Gonzalez D. Managing Online Risk. Aps, Mobile, and Social Media Security. Elsevier Inc., 2015. Р. 185–211. URL: https://doi.org/10.1016/B978-0-12-420055-5.12001-8 (дата обращения: 13.12.2020).
  58. Belleflamme P., Lambert T., Schwienbacher A. Crowdfunding: Taping the right crowd // Journal of Business Venturing. 2014. 29 (5). P. 585–609.
  59. Mollick Е. The dynamics of crowdfunding: An exploratory study // Journal of Business Venturing, 2014. 29 (1). P. 1–16.
  60. Morduch J. The microfinance promise // Journal of Economic Literature. 1999. 37 (4). P. 1569–1614.
  61. Haas P., Blohm I., Leimeister J. An empirical taxonomy of crowdfunding intermediaries // International Conference on Information Systems (ICIS). 2014. 18 p.
  62. Boreiko D. SMEs and start-ups financing: from governmental suport to ICOs and token sales, SSRN, 2018. 28 p.
  63. Huang T., Zhao Y. Revolution of securities law in the Internet Age: A review on equity crowd-funding // Computer Law & Security Review: The International Journal of Technology Law and Practice. 2017. 9 p.
  64. European Union, MIFID II – Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending the Insurance Mediation Directive and AIFMD. Article, 2014. 4 (1) (39). P. 384–385.
  65. Concept Release on Equity Market Structure 34-61358, 2010. 45 p. URL: https://www.sec.gov/rules/concept/2010/34-61358.pdf (дата обращения: 27.01.2021).
  66. ASIC-Australian, and Investments Commission. Report 215: Australian equity market structure. 2010. URL: https://www.asic.gov.au/media/1343084/rep-215.pdf (дата обращения: 27.01.2021).
  67. Salami I. Alternative Financing Aproaches and Regulation in Africa. Extending Financial Inclusion in Africa. Elsevier Inc., 2019. P. 279–296. URL: https://doi.org/10.1016/B978-0-12-814164-9.00013-X (дата обращения: 20.01.2021).
  68. Lashitew A., van Tulder R., Liasse Y. Mobile phones for financial inclusion: What explains the diffusion of mobile money innovations? // Research Policy. 48. P. 36–1215. 2019. URL: https://doi.org/10.1016/j.respol.2018.12.010 (дата обращения: 04.09.2020).
  69. Miao M., Jayakar K. Mobile payments in Japan, South Korea and China: Cross-border convergence or divergence of business models? // Telecommunications Policy. 2016. 15 p. URL: http://dx.doi.org/10.1016/j.telpol.2015.11.011 (дата обращения: 05.08.2020).
  70. Schulte P. Mobile Technology: The New Banking Model Connecting Lending to the Social Network // Handbook of Blockchain, Digital Finance, and Inclusion. 2018. Vol. 2. P. 332–329. URL: DOI: 10.1016/B978-0-12-812282-2.00013-9 (дата обращения: 08.05.2020).
  71. Iman N. Is mobile payment still relevant in the fintech era? // Electronic Commerce Research and Aplications. 2018. 30. P. 36–82. URL: https://doi.org/10.10167j.elerap.2018.05.009 (дата обращения: 07.10.2020).
  72. Evans D., Pirchio A. An empirical examination of why mobile money schemes ignite in some developing countries but flounder in most. No. 723, Coase-Sandor Working Paper Series in Law and Economics, School of Law. Chicago, IL: University of Chicago, 2015. 53 p.
  73. World Economic Forum. The Mobile Financial Services Report 2011. Cologny, Switzerland, 2011. 223 p.
  74. Jenkins B. Developing Mobile Money Ecosystems. Technical Report, International Finance Corporation. Washington, DC: World Bank Group, and the Harvard Kennedy School, 2008. 36 p.
  75. Beck T., Pamuk H., Ramrattan R., Uras B. Mobile money, trade credit and economic development: theory and evidence // CentER Discussion Paper. 2015-023. Tilburg University, 2015. 49 p.
  76. Karnouskos S., Fokus F. Mobile Payment: A Journey Through Existing Procedures and Standardization Initiatives // IEEE Communications Surveys & Tutorials, Fourth Quarter. 2004. P. 44–66.
  77. Gutierrez Eva, Choi T. Mobile Money Services Development: The Cases of the Republic of Korea and Uganda // Policy Research Working Paper 6786. The World Bank. February 2014. 21 p.
  78. Thomason J. Blockchain: an accelerator for women and children’s health? // Global Health Journal. 2017. Vol. 1, issue 1. P. 3–10.
  79. Aker J., Mbiti I. Mobile phones and economic development in Africa // J. Econ. Perspect. 2010. 24 (3). P. 207–232.
  80. GSMA. State of the Industry Mobile Financial Services for the Unbanked. Report, 2014. 77 p. URL: https://www.gsma.com/mobilefordevelopment/wp-content/uploads/2015/03/ SOTIR_2014.pdf (дата обращения: 08.11.2020).
  81. Ghezzi A., Renga F., Balocco R., Pescetto P. Mobile payment aplications: Offer state of the Artelor in the Italian market // Info. 2010. 12 (5). P. 3–22.
  82. Okazaki S. What do we know about mobile internet adopters? A cluster analysis // Information Management. 2006. 43 (2). P. 127–146.
  83. Bank of Ghana. Impact of Mobile Money on the Payment System in Ghana: An Econometric Analysis. Payment Systems Department, Bank of Ghana, Accra, Ghana, 2017. 38 p.
  84. Yan T., Schulte P., Lee D., Chuen K. InsurTech and FinTech: Banking and Insurance Enablement // Handbook of Blockchain, Digital Finance, and Inclusion. Elsevier Inc., 2018. Vol. 1. P. 249–281. URL: https://doi: 10.1016/B978-0-12-810441-5.00011-7 (дата обращения: 14.09.2020).
  85. Insurance and Technology Evolution and Revolution in a Digital World // Morgan Stanley and BGG Report. 8 September 2014. 130 p. URL: https://image-src.bcg.com/Images/evolution_revolution_how_insurers_stay_relevant_digital_world_tcm9-165956.pdf (дата обращения: 14.09.2020).
  86. Piskin M., Kus M. Islamic Online P2P Lending Platform. World Conference on Technology, Innovation and Entrepreneurship (WOCTINE) // Procedia Computer Science. 2019. 158. P. 415–419.
  87. Bouveret A., Guillaumie C., Roqueiro C., Winkler C., Nauhaus S. High-frequency trading activity in EU equity markets. ESMA Report on Trends, Risks and Vulnerabilities. 2014. 1. P. 41–47.
29.01.2021