UK Partner
Jianan Lu, research fellow, Faculty of Business and Law
Ukraine Partner
Olena Kovalova, associate professor, Audit Department, Odesa Polytechnic National University
Co-Investigators
Svіtlana Filyppova, professor, director of Institute of Economics and Management Odesa Polytechnic National University
Oleksandr Malin,professor Audit Department, Odesa Polytechnic National University
Alexis Stenfors, reader, Faculty of Business and Law
Konstantinos Vergos, senior lecturer, Faculty of Business and Law
Michail Filippidis, title lecturer, Faculty of Business and Law
Jocelyn Zhang, senior teaching Faculty of Business and Law
Project objectives
We want to investigate the mechanisms from which financial technologies (Fintech) facilitate Ukraine’s economic development and welfare when taking the period of Russia's invasion as the observing window.The war witnessed a collapse of the whole system for specific regions of Ukraine, including the financial system. This external shock for local citizens may lingeringly affect their adoption or preference for financial services. Therefore, using fintech may provide a lens for nurturing economic recovery after social trauma, while timely and proper policy implementation is essential to promote development.
We will first discuss the extent to which the citizens from the war-affected regions could continue to use financial services in the form of fintech or traditional banking and the obstacles they had in using these services. Second, by comparing them with the citizens from non-affected (or directly affected) regions, we would try to argue the mechanisms that explain the performance of the Ukrainian economy under the prism of a stable or turbulent economic environment as well as increasing geopolitical uncertainty arising from the ongoing war. This method is similar to the well-known approach of “Difference in Differences (DiD)”. Consequently, we would provide policy implications based on the fieldwork research, which would be collaborated with partners from Odesa University.
It is important to mention, that financial market in Europe is a place where people are used to work with fintech. People are passive participants in this market (buyers and sellers of FT technology and services). There isn’t such practice in Ukraine because there is no such market and (there is only a segment of the corporate sector - commodity markets), there are no individuals in the role of buyers.
Ukraine face a task of a qualitative leap through an innovative breakthrough through the creation of a digital space that has been created and provides 3 basic parameters: 1) a digital identity confirmation; 2) the ability to perform actions protected by a digital signature; 3) a guaranteed and state-provided information security system. To ensure the growth of public interest in fintech, it is necessary to conduct training and education from an early age, including information about possible risks. This is a task for the post-war period. It is also important to develop the financial literacy course. The state should create a space for the development of financial markets and the formation of competent interest and motivation among the general population (financial inclusion).
Project goals
The project would focus on three perspectives: household finance, the operation of financial institutions, and financial markets. In addition, we propose to study three geographical regions: Odesa, Mykolayiv and Kherson (oblast or city), as they were recently affected or are being affected by the war.
Our first research question is about fintech adoption at a household level, with a possible focus on cryptocurrency and/or mortgage lending and the housing market. We would need help from partners in Odesa University to collect survey data regarding citizens from the three regions. The information would include displaced/non-displaced citizens, their degrees of access to fintech (before/after the war), occupation, income sources and demographic information. The empirical analysis will be based on the use of banking systems and fintech compared to the same technologies in 2022 and 2021 in war-affected and non-affected but comparable regions. A more specific focus would be on the effect of the new options for investment, credit and payments in the mortgage system, as a result of the conflict, on decision-making, leverage and housing prices. With uncertainties from the ongoing conflict, there would be an expected adjustment in household sentiment, which could result in different behaviours towards traditional financial tools and Fintech. The adoption of Fintech in mortgage finance may provide households in Ukraine with more efficient lending or investing channels in a challenging economic environment. Therefore, this study aims at revealing the level of household confidence and how they adjust demand towards the application of technologies in the evolutional investment, credit and payment process through the adoption of Fintech. Our second research question is about Fintech and financial institutions. We propose to focus on the impact on the traditional banking sector and new, disruptive players that may have emerged in recent years and the vacuum that may have been created in the financial and banking sectors due to the conflict.
From a more general perspective, this project, based on the study in Ukraine, provides evidence for broader perspectives and other countries (i.e., the UK).
For example, how could volatile (stable) financial markets and low (high) households’ sentiment respond to fintech in magnitude? It should be mentioned that favourable responses that guarantee macroeconomic stability may highlight the ability of residents to adjust rapidly to external shocks (i.e., war, energy crisis, pandemic).
Therefore, with partners from Odesa University, this project attempts to identify whether economic welfare driven by economic or geopolitical developments with a particular focus on households’ trends, financial institutions, and financial markets operations may be influenced by fintech. By taking Ukraine as the sample region to conduct fieldwork to collect first-hand data. By answering such questions, we expect to open new avenues in the attention of practitioners, policymakers, and market participants and further the research community, which may previously have remained unanswered.
Role of each Partner
Jianan and Olena would be responsible to the whole project and each research questions. In the meantime, each partner would cooperatively handle tasks in the area they expertise in.
1, Jianan, Olena and Oleksandr would lead a "randomized control trial" in Ukraine to identify the characteristics of the use of financial services in the form of Fintech or traditional banking by a certain group of consumers – citizens from regions affected by the war in order to compare with the parameters of residents of the region not directly affected by hostilities.
2, Jianan, Jocelyn and Svіtlana would work together to identify the level of household confidence in the use of technology in the evolutionary investment, credit and payment process through the introduction of Fintech, it is advisable to use the field research method, which will allow obtaining opinions from direct consumers of financial services.
3, Konstantinos, Michail and Olena would evaluate the significance of certain properties of a financial service, vulnerable areas and can help to improve the properties of a financial service. There is an urgent need in Ukraine that is connected with a primary financial literacy course for schools, vocational schools, universities (12 years and older).
4, Alexis, Michail and Oleksandr would analyse structural shifts and structural-functional relationships. The method of scientific abstraction will be used to substantiate the directions for monitoring the impact of Fintech on financial markets at the macro level; analysis of structural shifts and structural-functional relationships, certain modifications of the principles of analysis and forecasting of structural changes in the economy can be used.
Timing
Project Start Date: 20 th March 2023
Project End Date: 30 th August 2023
Expected results
1. An array of data collected on the basis of the developed questionnaire based on scientific field research (together with Partners from the UK); Collection of first-hand data during the “randomized control trial (RCT)” fieldwork. This would be using 2 focus groups from 3 regions in Ukraine (minimum 100 respondents in each group).
2. Preparation of one to two policy brieves of the development of "embedded banking financial technologies" (DIGITAL Fintech). It would be prepared by the end of project.
3. Preparation of the scientific article to one academic Journal (ABS 4* or 3*, such as the “Regional Studies”; “World Development”). This would start during the project. However, considering the time, we expect to finalise the academic paper after the end of project.
4. If further funding awarded in future (i.e., £10k). We would go deeper into the fieldwork, and make this first-period of project as the “baseline”, and then make the period of Sep2023-Sep2024 as “Endline” to make the RCT more arguable and the impact of Fintech on the Ukraine’s economic recovery moreinsightful. In this case, we would consider top-journal in the field as the target for the academic output (i.e., “Research Policy”, “Journal of Development Economics”).
