DIGITALIZATION AS A STRENGTHENING FACTOR OF THE FINANCIAL MARKET'S ROLE IN UKRAINIAN FINANCIAL SYSTEM

Abstract

This article explores the role of digitalization in revitalizing Ukraine’s financial market. Currently, the domestic financial market is characterized by numerous imbalances, including institutional and spatial disparities that significantly reduce its functionality. Over recent years, Ukraine’s financial market has primarily evolved into a mechanism for servicing public debt. This shift has occurred while the gap between the corporate sector's capital needs and the financial market's ability to meet them has only widened. The study argues that the existing state of Ukraine's financial market substantially undermines its role in the financial system and diminishes its importance in the country’s post-war reconstruction context. It is determined that overcoming the negative impact of institutional and spatial imbalances can be achieved, among other means, through digitalizing the financial market, particularly by the widespread implementation of modern financial technologies. At the current stage of development, banks have become the key drivers of FinTech advancement in Ukraine. The banking sector’s strong financial potential enables significant investments in digital technologies. In contrast, other financial institutions largely ignore the opportunities provided by digitalization in the financial market. Noticeable progress is observed in financial and insurance companies, which can be attributed to the limited interest of major non-banking financial institutions in attracting and utilizing household savings. However, the active “technologization” of the financial market is controversial, requiring state policy to consider the potential negative impacts of digital technology expansion. Digitalization also introduces significant risks for financial market participants, including the potential for digital technologies to be used for various manipulations. The experience of microfinance organizations operating in Ukraine strongly supports this claim. Given the current level of financial literacy in Ukraine, the risks associated with financial market digitalization have increased significantly. The study emphasizes that the state must develop fundamentally new regulatory mechanisms for Ukraine’s financial market that take into account its ongoing digital transformation.