How digital technologies are rapidly changing financial market

Author : Olexandr Honcharov

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One of the main drivers of the growth of Ukrainian economy are market-based private investments, which are now managed more efficiently by digital and telecommunication technologies
14:30, 5 September 2017

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Digital and telecommunication technologies are those areas where we have seen tremendous progress in the last 10-15 years, and, of course, these industries are rapidly changing our world - especially in those sectors of the economy where they are actively used. And, of course, the financial market is one of the key sectors for such innovations and a place where these technologies are widely used.

So what happens in our financial market? I think many entrepreneurs and experts will agree with me that after the crisis of 2008-2009, commercial banks quickly began to lose their leading role in crediting of Ukrainian enterprises and companies. But the throne is never vacant, and their role was gradually transferred to asset management companies. Therefore, today it is already possible to talk about quite large asset managers who directly credit the real sector of the Ukrainian economy. One can speak of a growing bond market in the national currency and an increase in the issuance of securities of corporate and unit investment funds.

Undoubtedly, first of all because of the many bankruptcies, the bank deposit function is unlikely to be fulfilled for us now. That is why in recent years, the revival of interest in CIFs and mutual funds began in our country. First of all, this interest increased from those financially wealthy officials, who quickly accumulated a serious amount of risk capital. And this, as we learned from their e-declarations, means tens of billions in foreign currency and hundreds of billions of hryvnia.

True, if the financial instruments of corporate and unit investment funds in Ukraine actually "stopped" at the stage of 2008-2009, now (including through digital technologies), serious competition for bank deposits from their side has appeared. Both domestic and foreign investors are now actively carrying money to the Ukrainian market of joint investment. In turn, management companies are beginning to deploy competent PR-campaigns, and Volodymyr Groysman's Cabinet is trying to create a stability interval.

In a word, life does not stand still. There is a change in the structure of our financial market (if we talk about market processes directly and the impact of digital and telecommunications technologies on them). Of course, there are many difficulties and still unresolved problems here, but in general this process is rather fast and coordinated. So, asset management companies, firstly, actively develop an agent network with the help of their reliable partners, using, among other things, the Internet. This agency scheme significantly reduces the cost of promoting the services and products of management companies.

Secondly, AMC increase its own sales of services and financial instruments. Still, rich clients are used to working with very professional investment advisers. Therefore here you cannot work without your agency network. And, thirdly, what has become a technological breakthrough in the industry in the financial market is online sales. Now, for example, anyone with his gadget can be registered in the management company from any place and city and become an owner of shares in the CIF or investment certificates of the mutual fund. This procedure can take no more than 10-15 minutes.

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Thus, now we see such an economic conjuncture, in which not for commercial banks, but for managing companies it will be much easier to increase their investment business. In this regard, it becomes logical that shareholders of bankrupt banks began to initiate the creation of asset management companies with a range of various investment funds. Yes, and acting lending institutions actively began to develop affiliated with them AMC. After all, high-paid officials continue to demand high-quality investment services, respectively, management companies will grow significantly faster than banks.

And yet there is still distrust and ignorance, that is, lack of financial literacy, still remain our main problems for the development of this industry in the Ukrainian financial market. We compared the situation with international analogues and concluded that the process of obtaining knowledge by our citizens about asset management companies with CIFs and mutual funds is at the level of 6-8% of the potential target audience - investors. In the West it is a little more than 50%, and according to our Chinese colleagues, their level reaches 60%.

It turns out that for the most of the potential investors in Ukraine, these services of AMC are not in demand because they know little about them. In addition, almost no one tells about them in the Ukrainian market. And as we know, demand creates proposals. And if before there was no interest in learning something new in the sphere of investment services, as  deposit rates were high and there were a lot of banks, but now a lot has changed not for the better and the competitive field makes us look for different alternatives. Plus, there appeared more convenient and transparent digital and telecommunication technologies, and these new solutions began to promote the active development of this industry in the financial market.

Previously, five years ago, it was not so easy to convey information to a potential client. It was necessary to spend 30-40 minutes, in order to personally explain to the investor the specifics of the contractual relations of the parties. Now there are other more advanced forms of information transfer, at last you can count and read everything on the AMC website without leaving the apartment. It's hard to believe, but you can make a deal in two clicks. Plus, Big Data and the analysis of the client's needs themselves are more specific and precise, for example, one investor needs moderate conservative decisions, another is ready for high risks, etc. And this is already a risk-profiling, i.e. with the help of the latest technology, an understanding is formed – what to offer for this or that client.

And another very important modern trend is new forms of Digital Marketing in the financial market with the use of social networks, commercials on the Internet with information on investment products, investment decisions, and so on. But the most important thing here for the fast and high-quality work of AMC in the modern information environment is the access to the public platform of the electronic exchange, which also significantly reduced the costs for customers and expedited the execution of transactions. A qualitative turnaround is quickly approaching in more efficient management of AMC regards individual pension capital on the basis of the database.

Thus, one of the main drivers of the growth of Ukrainian economy is market-based private investments, which are more efficiently managed by AMC digital and telecommunication technologies.

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