Американский Научный Журнал DEVELOPMENT OF PUBLIC MANAGEMENT MECHANISMS IN THE CONTEXT OF IMPLEMENTATION OF WORLD PRACTICE OF FINTECH PRODUCTS IN UKRAINE (57-63)

American Scientific Journal № ( 40 ) / 2020 57

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DEVELOPMENT OF PUBLIC MANAGEMENT MECHANISMS IN THE CONTEXT OF
IMPLEMENTATION OF WORLD PRACTICE OF FINTECH PRODUCTS IN UKRAINE

Podolchak Nazar
Lukashevska Ulyana
Lviv Polytechnic National Universi ty

ROZW ÓJ MECHANIZM ÓW ZARZ ĄDZANIA PUBLICZNEGO W KONTEK ŚCIE REALIZACJI
PRAKTYKI ŚWIAT OWEJ PRODUKT ÓW FINTECH NA UKRAINIE

Abstarct . The article theoretically summarizes the development of public management mechanisms in the
context of the introduction of wo rld practice of fintech products in Ukraine. On the basis of analysis, generalization
and systematization of scientific sources the tendencies of development of fintech are covered.
Fintech is the basis of various financial services, in particular, such as money transfers, settlements, payment
for goods and services, accumulation of funds needed to start a business etc. Fintech is a tool that helps companies,
business owners and consume rs better manage their financial transactions, processes and lives, usin g specialized
software and algorithms that are installed on computers, tablets, smartphones and other multimedia devices.
With the development of fintech and the growth of its influenc e, the necessity for regula tory supervision by
the state increases , sens itive financial data need s protection. However, such supervision should not hinder the
development of fintech and the achievement of consumer needs.
Ukrainian society is open to the in troduction of fintech. The NBU is promoting many important initiatives.
But, unfortunately, many issues need s the legislation change s in the Verkhovna Rada. Ukrainian legislation
regarding the collection, storage and processing of personal data of clients is similar to the GDPR norms used in
most European countries. However, t echnology is evolving rapidly, and quite often, almost always, the state does
not have time to make the necessary adjustments.
Despite the significant potential of Ukraine in the field of fintech today, it is necessary: - to develop a system
of regulations on the fintech field; - to clearly identify state institutions that will be responsible for the development
of fintech; - to create relevant departments in leading ministries; - to fo rm a strategy and program of cooperation
with financial investors.

58 American Scientific Journal № ( 40 ) / 2020
Artyku ł teoretycznie podsumowuje rozw ój mechanizm ów zarz ądzania publicznego w kontek ście
wprowadzenia światowej praktyki produkt ów fintech na Ukrainie . Na podstawie analizy , uog ólnienia i
systematyzacji źródeł naukowych uwzgl ędniono tendencje rozwoju fintechu .
Fintech stanowi podstaw ę różnych usług finansowych , w szczeg ólno ści takich jak przekazy pieni ężne,
rozliczenia , płatno ści za towary i usługi , gromadzenie środk ów na rozpocz ęcie dzia łalno ści gospodarczej i wiele
innych . Fintech to narz ędzie , które pomaga firmom , właścicielom firm i ko nsumentom lepiej zarz ądza ć ich
transakcjami finansowymi , procesami i życiem , wykorzystuj ąc specjalistyczne oprogramowanie i algorytmy
instalowane na komputerach , tabletach , smar tfonach i innych urz ądzeniach multimedialnych .
Wraz z rozwojem fintech i wzrost em jego wpływu rośnie potrzeba nadzoru regulacyjnego ze strony państwa,
wrażliwe dane finansowe wymagają ochrony. Taki nadzór nie powinien jednak utrudniać rozwoju fintechu i
zaspokajania potrzeb konsumentów.
Społeczeństwo ukraińskie jest otwarte na wprow adzenie fintechu. NBU promuje wiele ważnych inicjatyw.
Ale niestety wiele kwestii opiera się na potrzebie zmiany przepisów w Radzie Najwyższej. Ukraińskie przepisy
dotyczące gro madzenia, przechowywania i przetwarzania danych osobowych klientów są podobne d o norm
RODO stosowanych w większości krajów europejskich. Jednak technologia ewoluuje szybko i dość często, prawie
zawsze, państwo nie ma czasu na dokonanie niezbędnych dostosow ań.
Pomimo znacznego potencjału Ukrainy w dziedzinie fintech, konieczne jest: - opracowanie systemu regulacji
w dziedzinie fintech; - jasno określić instytucje państwowe, które będą odpowiedzialne za rozwój fintech; -
stworzyć odpowiednie departamenty w w iodących ministerstwach; - opracowanie strategii i programu współpracy
z inwest orami finansowymi.
Key words : fintech products, public administration, technology, regulatory supervision, market, strategy.
Słowa kluczowe : produkty fintech, administracja publiczna, technologia, nadzór regulacyjny, rynek,
strategia.

Formulation of the problem. The term "fin tech"
is an abbreviation of the term "financial technology",
which refers to the u se of innovative technologies in the
financial sector and IT in order to improve the
functioning of banking and financial institutions.
Fintech began to evolve at the same ti me as the
Internet in the late 1990s.
Fintech is used to describe technologies aim ed at
improving and automating the delivery and use of
financial services. In essence, fintech is a tool that helps
companies, business owners, and consumers better
manage th eir financial transactions, processes, and
lives using specialized software and al gorithms
installed on computers, tablets, smartphones, and other
multimedia devices.
Fintech is the basis of various financial services,
in particular, such as money transfer s, settlements,
payment for goods and services, accumulation of funds
to start a b usiness and more.
Analysis of recent research and publications.
Being a relatively new phenomenon both in the field of
development of the world financial market and in terms
of transformation processes in the economy of Ukraine,
the activities of fintech c ompanies are studied in the
works of G. Pochenchuk [1,2], N. Panteleeva [3], S.
Volosovych [4]. , A. Shklyar [5] and others.
Selection of previously unsolved parts of the
ove rall problem. The introduction of modern world
fintech practices in Ukraine requir es a balanced state
approach - the development of a Strategy for the
development of the financial sector of Ukraine, the
formation of appropriate mechanisms for public
manage ment of this process.
The purpose of the article. Given the current
positive trend s in the expansion of credit, banking, non -
cash money, the introduction of cryptocurrencies, and,
at the same time, threats of military, terrorist,
informational nature, anti -corruption policy, and a
number of other factors - objectively there is a need to
ensure the formation and proper functioning of public
mechanisms for managing the implementation of world
practices of fintech products in Ukraine.
Presenting main material. With the development
of fintech and the growth of its influence, the need for
reg ulatory supervision by the state is growing, sensitive
financial data need protection. However, such
supervision should not hinder the development of
fintech and the achievem ent of consumer needs. In
many markets, regulators take an active approach to
over seeing the development of fintech, helping to
increase the number of regulatory "greenhouses" that
give startups the freedom to develop products and
services, ensure their fi nancial development [2]. Such a
practice would be appropriate, it would allow to
disseminate the experience of implementing such
measures, which in turn would improve risk
management in the field of fintech in particular and
economic growth in general.
The re are many areas of implementation of fintech
development in Ukraine. Fintechs th at seek to innovate
in a dynamic market space must not only ensure the
development of clear and powerful algorithms, they
must also be or at least try to become experts in tr ading
strategies. The ability to create powerful algorithms
must be combined with a deep understanding of the
rules governing the financial trading process.
There is no doubt that the increase in the speed of
supercomputers will be used to establish rapid - almost
instantaneous - automated trading. This created the
preconditions for Hig h Frequency Trading (HFT),
where an entrepreneur can make a trading decision in a
second, at best, HFT platforms equipped with
sophisticated algorithms can analyze multiple m arkets
simultaneously and make a trading dec ision per
millionth of a second.
The u ltimate goal of every entrepreneur is the
ability to anticipate changes in market forces before
they occur. Because the amount of data that passes

American Scientific Journal № ( 40 ) / 2020 59

through the Internet reache s the zetabyte every day,
reliable solutions remain unattainable. Although
entrepr eneurs may not be able to reliably predict market
trends, advances in data analytics help them improve
their chances.
The technology that drives data analytics is
diverse, wh ich means more opportunities to implement
innovative fintech. Among the technologi es that
contribute to data analysis is Artificial I ntelligence
(AI), preliminary data analysis - Exploratory data
analysis (EDA), Qualitative data analysis (QDA),
predictive analysis and data mining [6].
Ukrainian society is open to the introduction of
fin tech: According to The FinTech Index from ING
Bank, among 73 countries, Ukraine is among those who
have created a favorable startup ecosystem and
infrastructure. In Ukraine, the market of financial
services is relatively young, the consumer is more open
to innovation, even compared to other European
countries.
The National Bank of Ukraine ( NBU ) is
promoting many important initiatives. But,
unfortunately, many issues rest on th e need to change
the legislation in the Verkhovna Rada (Parliament of
Ukraine) . Th e development of fintech is facilitated by
funding, which is gaining momentum. New players are
entering the market, venture funds are actively
involved. We also need to devel op a culture of
investing within Ukraine.
FinTech has significant value for the ex pansion of
financial services and products in new areas and among
various segments of the population. Due to the fact that
this sector is not yet oversaturated, fintech start ups are
dictating new rules of the game.
At the end of September 2019, the Law of Ukraine
"On Amendments to Certain Legislative Acts of
Ukraine on the Protection of Consumers of Financial
Services" [7] was adopted, which settled the most
important issues i n relations between citizens and
financial institutions and eliminated gaps and
inconsistencies in the protection of financial services. .
Adoption of the new requirements of regulators will
strengthen public confidence in the financial sector,
create effe ctive mechanisms to protect their rights and
interests, provide better information to consumers
about financial services offered and provided to them.
The analytics data market is ready to use up to $
40 billion. US until 2023, included in the financial
sector of trade. One of the most important opportunities
for the development of fint ech is the development of
business operations.
Investment firms are essentially subject to the
same challenges as any other firm. Improving internal
processes, increasing ope rational efficiency and
making better business decisions is a common need for
all.
As investment companies become more data -
driven, the domestic need for powerful tools to
optimize business operations will grow in the long run.
One of the determining facto rs in the development of
the modern financial system is the introduction of
financ ial technologies and the activities of fintech
firms. Focusing on the non -banking segment and the
use of modern digital channels will not only quickly
increase the involvemen t of the population in the
financial sector, but also quickly scale the business o f
fintech companies in Ukraine.
Today, a significant number of companies use
high -tech solutions in their work, those who do not, lose
their customers every day, and hence pr ofits.
Today, signs of financial and technical companies
are found everywhere. Inv estors and business owners
seek to improve the quality of their products and
minimize costs. As a result of the use of high -tech tools
in the field of lending, there is a pro duct that allows you
to get a cash loan without the need to collect a large
number of documents and certificates - developed a
separate market for microcredit.
If you manage to identify customer needs that can
be qualitatively met cheaper than others do - this can be
a significant motivator for starting a business, company
and selling g oods or services. But not everything is so
simple for fintech companies. The financial product of
online lending does not quite comply with the legal
framework in most countr ies, due to the relatively new
method of lending. Currently, investing in such a
product is quite a risky business.
First of all, it is necessary to decide in which
markets the project will be promoted - exclusively in
Ukraine, or at the same time abroad. For example,
working with EU citizens will require a fintech product
to comply wit h the General Data Protection
Regulations (GDPR). [8]
Ukrainian legislation regarding the collection,
storage and processing of personal data of clients is
similar to the GDP R norms used in most European
countries. Improving the quality of providing qualif ied
electronic services, increasing the level of trust in them
and promoting them by central authorities is one of the
priorities of the Ministry of Digital Transformation of
Ukraine.
It is important to note that only 4 out of 22 (18.2%)
qualified trust se rvice providers use international
electronic signature algorithms, all others work
according to national algorithms (Fig. 1).

60 American Scientific Journal № ( 40 ) / 2020
Fig.1. Number of qualified trust service provi ders

The Ministry of Digital Transformation of
Ukraine facilitates the gradual tr ansfer of all data
centers to international algorithms.
The use of international algorithms for electronic
keys will expand the capabilities of the Ukrainian
electronic signa ture, for example, in the future it will
create an opportunity in Ukraine to recog nize
documents of other states, and other states to recognize
Ukrainian documents sealed with electronic seal or
signature (Fig. 2)

Fig.2. Number of qualified electronic s ignature certificates

The Ministry of Digital Transformation continues
to create c onditions for the full launch and development
of the virtual assets (VA) m arket in Ukraine. In early
2020 a working group has been set up in the Ministry
to develop regulatio ns on the implementation of virtual
assets.
The working group includes representat ives of
more than 20 governmental and non -governmental
organizations that have the potential to influence the
VA market. Among them are the Ministry of Finance,
the National Bank of Ukraine, the State Tax Service,
the Ukrainian Association of Fintech and I nnovative
Companies, etc. The working group will be headed by
the Deputy Minister of Digital Transformation for IT
Development and the head of the Blockchain4Ukraine
inter -factional association.
It is worth analyzing what is hindering the
development of th e Ukrainian virtual asset market
today. The lack of a legal framework forces local
market participants to remain "in the shadows" or
operate through foreign jurisdictions, hi nders
innovation and creates conditions for abuse and fraud.
Leading international companies operating in VA
and related technologies cannot operate and invest in
Ukraine's economy.
The relevant law on virtual assets should clearly
define:
- legal status a nd classification of VA

American Scientific Journal № ( 40 ) / 2020 61

- requirements for the release and circulation of
certain categories of VA
- VA market participants and relevant financial
monitoring criteria
- issues of state regulation and counteraction to
abuse
The relevant legal framework allo ws you to run
the market "in white", which will lead to:
- increase in the number of business entities
operating in Ukraine with the use of VA;
- increase in investments in the innovation sector
and budget revenues;
- counteraction to legalization (launder ing) of
proceeds from crime;
- obtaining comprehensive and objective
statistical i nformation on the VA market in Ukraine.
All this will be a prerequisite for achieving the
ultimate goal - the successful introduction of digital
technologies, launch and deve lopment of the Ukrainian
VA market, the creation of new products and values.
Today , one of the examples of financial products
that are ahead of time and regulatory aspects - are
cryptocurrencies. Just 10 years ago, cryptocurrencies
were not taken seriously and they occupied a small
share of the global financial market. Recently, this
product has become the main competitor of VISA and
Master Card payment systems. Millions of people
around the world watch this product every day.
Ukrainian regulators do not re cognize virtual
coins as money, but have developed a concept for
regulating crypto currencies. Therefore, it should be
understood that if there are no rules and laws for an
innovative product now, the state may introduce them
in the future.
In Ukraine, cont actless payment services using
smartphones and other devices that support NFC
tech nology are becoming increasingly popular.
Tokenization services allow you to use the details of
payment cards (including only with a magnetic stripe)
for contactless payments on this technology. At the
same time, every ninth active payment card in Ukraine
is contactless - 4.0 million. This is 44.3% more than last
year [9].
Resolution of the Board of the National Bank o f
Ukraine № 391 of 18.06.2015 approved the
Comprehensive Program for the Development of the
Financial Sector of Ukraine until 2020, which ini tiated
the actual creation of a financial system capable of
sustainable economic development through effective
redi stribution of financial resources in the economy a
full -fledged market competitive environment in line
with EU standards.
The program provide d for the implementation of a
number of interrelated measures aimed at
comprehensive reform of the financial sector . The
Program is based on the following basic principles:
- regulatory approximation of Ukraine's financial
services to EU rules and regulati ons;
- liberalization of financial markets and
acquisition of the internal market regime with the EU
in the field o f financial services;
- balance of economic interests through the
formation of a competitive market environment;
- independence and efficienc y of regulators,
supervision based on risk assessment;
- transparency and high standards of information
disclosure by financial sector participants and
regulators;
- responsibility and trust between financial sector
participants and regulators;
- integrity of the financial system, comprehensive
protection of the rights of creditors, consumers and
investors.
In early 20 20. financial market regulators
(National Bank of Ukraine, National Securities and
Stock Market Commission, National Commission for
State Reg ulation of Financial Services Markets) The
Ministry of Finance of Ukraine and the Individual
Deposit Guarantee Fund have approved the Strategy for
the Development of the Financial Sector of Ukraine
until 2025 [10 ].
The purpose of the Strategy (Fig. 3) is to ensure
further reform and development of the financial sector
of Ukraine in accordance with leading internationa l
practices and implementation of measures provided for
in the Association Agreement between Ukraine and the
EU and other international oblig ations of Ukraine. It
will take the place of the Comprehensive Financial
Sector Development Program until 2020, whi ch has
identified priority regulatory reforms over the past five
years.
The strategy envisages the development of the
financial sector in fiv e main areas: - strengthening
financial stability; - promoting macroeconomic
development and economic growth; - dev elopment of
financial markets; - expansion of financial inclusion; -
introduction of innovations in the financial sector.
The strategy envisa ges reforms in all segments of
the financial sector: in the banking market, in the sector
of non -banking financial institutions, in the capital
markets. The implementation of the Strategy will make
it possible to create a transparent, competitive, stable
and high -tech financial sector in five years. Under such
conditions, it will become a driver of sustainable and
incl usive development of Ukraine's economy and
contribute to improving the welfare of citizens through
the effective accumulation and redistribut ion of
financial resources in the economy.

62 American Scientific Journal № ( 40 ) / 2020
Fig.3. Strategy in the context of FinTech deve lopment model

In our opinion, the Fintech development model
(Fig. 3) should include the realization of the interests of
all stakeholders: fi ntech companies, consumers, public
authorities, higher education institutions.
Conclusions
Summarizing the above, i t should be noted that
despite the significant potential of Ukraine in the field
of fintech today:
- the system of normative -legal acts conce rning
fintech sphere is not developed;
- state institutions responsible for fintech
development are not clearly def ined, relevant
departments in leading ministries are not established;
- the lack of a legal framework forces local market
participants to rem ain "in the shadows" or operate
through foreign jurisdictions, hinders innovation and
creates conditions for abuse and fraud.
- it is not possible to counteract the legalization
(laundering) of proceeds from crime;
- leading international companies operati ng with
relevant technologies cannot conduct their activities
and invest in the economy of Ukraine;
- the inability of the full functioning of the e -
payments market, which today is a priority for the
Ukrainian financial business;
- lack of a sufficiently n ecessary level of financial
literacy of the population in matters of fintech;
- the lack of clear regulatory tools to ensure easy
access to services is a significant problem;
- Lack of strategy and program of cooperation
with fintech financial investors on the volume of access
to the financial services market with simultaneous
regul ation of limits / limitation of their capabilities.

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