In May the annual meeting and business forum of the European Bank for Reconstruction and Development was held on the shore of the Dead Sea, in Jordan. An international organization, which finances and supports initiatives in developing countries, including Ukraine, holds such meetings every year to discuss issues and prospects of young democracies. This year, the financial technology topic was one of the most popular and interesting. Having listened to other countries’ experience, we were able to draw some interesting parallels.
Vice President of Tencent, the largest Chinese technology company, said that in China all payments – from shopping in a supermarket to donating to a street musician – are made through mobile phones using QR codes. It is worth mentioning that most of such transactions are available only to clients of AliPay, UnionPay and other Chinese systems. In China, even in very remote villages it is impossible to do anything without a telephone – there are 753 million mobile Internet users in the country, which gives access to finance to the widest community. And this is despite the fact that Facebook, Youtube, Google, Twitter, WhatsApp and other Western services are banned.
FinTech solutions are applied not only in an innovative environment, but are also a part of mass market. For example, for more than two thousand years there has been a New Year tradition in China to present red envelopes with money to friends and relatives. Several years ago, WeChat held a “Red envelope” campaign, and millions of people were able to send electronic money instead of cash. During the year, more than 400 million users, individually and in group chat rooms, made cash transfers for CNY 32 billion. In the meantime, one can spend half a day in any metropolis in Ukraine looking for an operating ATM, since there is simply no card payment option. Let alone QR codes.
Minister of Finance of Lithuania shared an interesting experience – they created a secure FinTech system without banks at the state level. Country’s central bank allowed non-bank companies to conduct transactions with Central Bank’s money. Means the platformization of economy with online platforms, which replace the entire traditional industries and create new ones. This suggests that it is necessary to create holistic approaches to the access to finance and protection of personal data at state and legislative levels.
However, despite technological changes in this area, the legislative component of FinTech needs to be separately controlled. Companies must independently promote legislative initiatives in their industry, since only they know the market and rules of the game. When discussing FinTech, the talks usually about final consumer, but there is an important point for the states: if a country wants to develop faster, it is necessary to create alternative systems for banks that are less regulated and more innovative. It is important to acquire a chaos management skill in the issue of managing a banking system with the advent of financial technologies at state level.
Speed, security, simplicity – these are the principles of successful FinTech solutions according to Andre Kuusvek, former Director of the EBRD in Ukraine. They must also be the basis of state policy on new technologies. With which, frankly, we have problems. At best, the state simply ignores technology: for example, the National Bank persistently refuses to give any definition of crypto-currency and express a clear position on the issue of its exchange and other transactions. On the one hand, this inhibits the civilized development of crypto business, on the other hand – everything which is not forbidden is allowed.
Another common state tactic: to ban and suppress everything new and unclear. However, FinTech, among others, successfully copes with any bans, inventing more and more ways to skirt any restrictions.
Modern top management understands that FinTech is not just consonance of letters, it stimulates the development of industry, boosts the introduction of innovations. New technologies are not an enemy, but an opportunity to change towards the client.
As to issue of regulating crypto-currencies, smart contracts and other FinTech manifestations, it is absolutely necessary to develop common, transparent and understandable rules of the game for everyone. It is also obvious that the adjustment instruments must change along with the entire industry, be flexible and up-to-date. After all, it’s strange to try to drive a self-driving car using bridle reins, isn’t it?