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https://doi.org/10.29013/ESR-21-11.12-64-66
Gamsakhurdia Tamar, PhD in Economic Sciences, Professor, School of Business and Management Grigol Robakidze University, Georgia E-mail: [email protected] Kadagidze Lamara, PhD in Education, Professor, School of Humanities and Social Sciences Grigol Robakidze University, Georgia E-mail: [email protected]
NEW FINANCIAL TECHNOLOGIES FACING SYSTEMIC ECONOMIC SHOCK
Abstract. Before the pandemic spread, it was obvious Fintech would play a crucial role in financial services in the future, but the process was undoubtedly accelerated by the crisis caused by the COVID-19. The study revealed technology companies profoundly invade into the value chain of financial services on a yearly basis while creating new market structures in developing countries where banking services are inadequate. The procedure has become a significant background for overcoming the pandemic setback. Implementation of investments in digital infrastructure has to be of initial importance on a contemporary stage, thus contributing to the improvement of the interaction of digital and non-digital economies for the population with less income comprising of self-employed households and representatives of SME in Georgian reality.
Keywords: Fintech, Digital Banking, RIA Banking, Artificial Intelligence (AI), Financing Platforms, Cloud Services, Financial Engagement.
Urgency: A study of the impact ofArtificial Intel- As the industry being developed, Fintech, is the
ligence on Asymmetric Information Theory indicates sphere of interest and a case ofthe point is investors of
that AI used by financial technology (Fintech) reduces the field. According to CB Insights, it generated $13.4
the degree of information asymmetry and therefore the billion in the first quarter of2021. Meanwhile, the San
market in which these agents are used is more efficient Francisco-based trading app Robinhood has just filed
compared to the one where they are not applied [1]. for an IPO, and given the demand for shares, it esti-
The COVID-19 outbreak has accelerated the shift mates the company could fetch up to $40 billion [3]. to digital services and exacerbated global tensions Research Method: The desk research method
since competing market economies, as well as rival was implemented in the process involving the re-
countries, the United States and China, began tight- view and analysis of all academic sources and official
ening restrictions on access to technology and finance reports related to the research topic. Additionally,
destroying their supply chains. At the end of 2020, a secondary research method and the observation
China made technological self-confidence a priority methods were carried out, the latter including new
of the 14th Five-Year Plan [2]. financial technology-based monitoring of the activi-
NEW FINANCIAL TECHNOLOGIES FACING SYSTEMIC ECONOMIC SHOCK
ties of banks and SMB companies in the context of the global financial crisis and the emergency caused by the pandemic.
Some Assessments of Financial Innovations and Crisis: New financial technologies increase financial engagement and expand access to financial services employing technological advances. They reduce the risks and information gaps associated with digital financial services and improved risk assessment capabilities in the service area with disad-vantaged households and small and medium-sized businesses (SMEs).
Digital banking companies serve specific sectors and demographics through b 2 c, b 265 b loans to individuals, households and SMEs that do not have access to banking services. Fintech not only improves the diversity and efficiency of financial services, but also increases financial engagement. Digital financial solutions can meet about 40% of the demand for payment services and about 20% of the loan needs of poor households and small businesses in Asia [4]. It should also be noted that there are no comprehensive global studies on fintech and financial inclusion, which partly reflect the limited access to country data. Some studies have examined the role of Fintech in promoting access to credit - an important dimension of financial inclusion that is often cited as a major constraint on business, especially for small and medium-sized businesses [5].
The COVID-19 outbreak creates opportunities for financial expansion to further enlarge Fintech's role in economically progressing states. By providing financial services to vulnerable groups, Fintech promotes not only inclusive growth, but also the economic sustainability ofpoor and small and medium-sized businesses in times of economic turmoil.
Surveys in numerous countries in March and April 2020 revealed that 50% of small and medium-sized businesses in Asia, at this time, had less than 1 month of cash reserves [6]. ADB surveys in April and May exposed that 64% ofmicro, small and medium-sized enterprises (MSMEs) surveyed in the People's Republic
of China admitted they could not survive bankruptcy for more than three months due to a lack of cash flow. 70% of small and medium-sized businesses in the Republic of Korea feared that they would find themselves in a similar situation within 6 months [7]. Bankruptcy claims rose 56% in the U.S. in 2008 from the year before the global financial crisis.
The abovementioned displays intensive introduction of new technologies in banking is criticl in Georgia today. The process makes them more resilient in times of systemic crisis and increases financial stability.
Obviously, the tempo of inculcating Fintech in economically emergent nations such as Georgia may not be as rapid as in the USA or other Asian countries, however, it is significant to learn how involved Georgian banks are in the intensive process of Fintech introduction. That is why, we analyzed the state of the Fintech market in Georgia.
The largest market segment in the Georgian banking sector is digital payments, with a total transaction value of $444 million in 2021. The average transaction cost per customer in the alternative lending segment is expected to be $7760 by the end of 2021. In the digital payments segment, the number of customers is estimated to reach 2.07 million by 2025. The digital investment segment is supposed to show a 40.8% increase in revenue in 2022 [8].
Under the supervision of the National Bank of Georgia, Fintech representatives collaborate with some banks on a trial basis to provide new, digital banking services [9] and integrate digital payments, microfinance and robotic advisor services into existing bank accounts.
Conclusion: Prior to the pandemic, it was clear that FinTech would potentially play a pivotal role in financial services, but the COVID-19 crisis factually triggered the process, eventually becoming a substantial tool for various states to beat the outbreak. undoubtedly accelerated this process and became an important tool for many countries to avoid a crisis situation. The origin of FinTech in 2007-2009 is linked to the chaos caused by the Global Financial
Crisis (GFC). Uncertainty brings innovation and in the footsteps of the GFC, FinTech has attracted significant investment and launched a financial services revolution. COVID-19 represents another opportunity for this technological advancement.
While financial innovation promotes financial inclusiveness, it also exacerbates regulatory issues such as cybersecurity, other aspects of technical vulnerabilities, data management, and privacy. At a broader level, regulators need to strike the right balance between introducing innovative technologies that benefit the MSB on the one hand for the poor,
and monitoring and managing innovation-related risks on the other.
Identified the accelerated pace of innovation in the fintech sector, which is likely to spread even more around the world as it becomes more digital after COVID-19, regulatory capacity needs to be strengthened to keep pace with change.
Finally, at the present stage, a particular focus should be assigned on investments in digital infrastructure to improve the interaction of digital and non-digital economies for the low-income population, which includes self-employed households and SME representatives in Georgia.
References:
1. Marwala T. and Hurwitz E. Artificial Intelligence and Asymmetric Information Theory. University of Johannesburg. URL: https://arxiv.org/ftp/arxiv/papers/1510/1510.02867.pdf
2. IMF working paper. Technological and Economic Decoupling in the Cyber Era by Daniel Garcia-Macia and Rishi Goyal. WP/20/257. Technological and Economic Decoupling in the Cyber Era. URL: https://www.imf.orgwpiea2020257-print-pdf
3. Alyssa Schroer. 58 Fintech Companies and Startups to Keep in Your Back Pocket. URL: https://builtin. com/fintech/fintech-companies-startups-to-know
4. Fintech to Enable Development, Investment, Financial Inclusion, and Sustainability -Conference Highlights. ASIAN DEVELOPMENT BANK, 2021. URL: https://www.adb.org/publications/fintech-development-investment-financial-inclusion
5. Ayyagari Meghana, Demirguc-Kunt Asli, Maksimovic, Vojislav. 2017. World Bank Group, Washington, D C. © World Bank. URL: https:// https://documents1.worldbank.org/curated/en/860711510585220714/ pdf/WPS8241.pdf.
6. Asia small and medium-sized enterprise monitor 2020 Volume II-COVID-19 Impact on Micro, Small, and Medium-Sized Enterprises in Developing Asia. No. 20. URL: https://www.adb.org/sites/default/ files/publication/650251/asia-sme-monitor-2020-volume-2.pdf
7. Vandenberg P. Why have bankruptcies fallen during the pandemic? By URL: https://blogs.adb.org/ru/ node/8166
8. Digital market. Fintech. Georgia. URL: https://www.statista.com/outlook/dmo/fintech/georgia
9. Regulation lab. URL: https://nbg.gov.ge/page/%E1%83%A0%E1%83%94%E1%83%90%E1%83%9A %E1%83%A3%E1%83%A0-%E1%83%92%E1%83%90%E1%83%A0%E1%83%94%E1%83%9B%E1% 83%9D%E1%83%A8%E1%83%98-%E1%83%A2%E1%83%94%E1%83%A1%E1%83%A2%E1%83%9 8%E1%83%A0%E1%83%94%E1%83%91%E1%83% Open banking. Create innovative digital services with Bank of Georgia. URL: https://bankofgeorgia.ge/en/business/digital-bank/api-services
