The Ukrainian Association of Fintech and Innovative Companies and the international payment system NovaPay (Nova Poshta) have prepared a report Fintech in Figures – 2023.
The level of investment in the first half of 2022 decreased slightly compared to the record-breaking year of 2021. This is mainly due to the number of deals, as the lag in terms of the amount is smaller than in 2021 ($108 billion for 6 months of 2022 vs. $227 billion for the whole of 2021).
This is due to global uncertainty, including the war in Ukraine, high inflation, the fall of major markets and the collapse of high-risk assets, and the disruption of supply chains.
As the uncertainty is not yet over, the Ukrainian Association of Fintech and Innovation Companies expects an even more dramatic drop in investment activity in the second half of 2022 and in 2023, given experts’ forecasts of recession, including in the United States.
The increase in the cost of capital that has occurred and may continue will lead to selectivity among investors in investing in projects (especially in the riskiest venture capital investments) and acquiring assets, as investors will try to increase profits, including by reducing risks.
E-commerce
Unlike the stock market and M&A, global E-commerce, as one of the drivers of the FinTech sector in general, has been growing steadily over the past five years, outpacing global GDP growth (by an average of 17% annually versus 5%). At the same time, the share of global E-commerce in global GDP is also growing (from 4.5% in 2017 to 6.3% in 2021 and 9.0% in 2024).
Moreover, crisis phenomena such as wars and epidemics encourage people who remain at risk to continue to use online shopping and online payments more. At the same time, high inflation around the world indicates high consumer spending, which, according to experts, will not slow down the growth of E-commerce.
More than 70% of E-commerce sales are made on marketplaces, and one of the growth drivers is cross-border E-commerce, which has already reached 20%. Large non-bank acquiring platforms are playing an increasingly important role in the development of cashless payments.
Overall, E-commerce in Ukraine is developing in the context of the global environment. Even despite the war, its growth rate continues to outpace that of GDP (by an average of 16% annually versus 4%).
In 2022, despite the war, the amount of transactions is growing, and the number of transactions is at the level of pre-war 2021. A significant difference is that the share of E-commerce in Ukraine’s GDP is twice as high as the global average (growing from 11% in 2017 to an actual 13% in 2021 and even a projected 24% in 2024).
This year, E-commerce continues to grow, albeit slowly, against a sharp drop in GDP, which significantly increases the ratio of E-commerce to GDP.
Remittances
In 2021, the global remittance market exceeded $1.8 trillion. We divide it into: local P2P (Person-to-Person (P2P) transfers, transfers, transactions within each country) – ~60% of the volume and international transfers (crossboard, remittances) – ~40% of the volume. Both segments are growing.
In Ukraine, P2P transfers are mostly card-to-card bank transfers (Privatbank, Monobank) with an average annual growth of 57%. Incoming international transfers were growing dynamically before the war; in 2022, experts predict a decline of 8% to $12.9 billion.
Open Finance
It can be said that most of the financial world is already working in this framework. The number of transactions via OpenAPI is growing rapidly, but it is not yet a threat to other transactional tools. However, the Association predicts that this will happen in the coming years.
It is important that these methods can change the business models of banks, because now is the time to decide on a strategy for how the financial institution will monetize it. In Ukraine, although the relevant law came into force this year, the nearest practical activities may not be before 2024-2025.
Cryptocurrencies / Blockchain
A promising technology, but today and in the medium term, the segment has a limited impact on the payment ecosystem. According to experts, it makes sense to continue monitoring and possibly use already prepared solutions.
The main threats and opportunities are associated with the E-Commerce and Remittances segments and the building of ecosystems around them. This can be both an opportunity to increase business and a threat of losing existing transactional business if you are not active enough in these segments.
