Does the russian war impact on financial inclusion in Ukraine?

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Does the russian war impact on financial inclusion in Ukraine?

Yevheniia Polishchuk

Doctor of Science in Economics, Professor, Professor at Corporate Finance and Controlling Department

Kyiv National Economic University named by Vadym Hetman (Kyiv, Ukraine) Center for Ukrainian Research Studies at SGH, SGH Warsaw School of Economics (Poland)

Yana Valko

3rd year student of the Corporate Finance major Kyiv National Economic University named by Vadym Hetman

Oleksii Zaiets

Graduate Student of the Department of Finance, Banking and Insurance Chernihiv Polytechnic National University (Chernihiv, Ukraine)

Does the russian war impact on financial inclusion in Ukraine?

The article analyses the impact of the russian war on financial inclusion in Ukraine. It discusses legislation changes related to consumer protection and financial stability that support the continuity of financial services. Efforts to support financial inclusion and financial sector resilience are highlighted, as well as the role of digital payments in measuring financial inclusion. It is found that the war has slowed but not destroyed progress in financial inclusion, given the moderate market growth after 2022. The article emphasizes the importance of adapting the financial sector to wartime conditions and offers a comprehensive view of Ukraine's financial reality during the war.

Key words: financial inclusion; digital payments; digital economy; financial behaviour.

Євгенія Анатоліївна Поліщук доктор економічних наук, професор, професор кафедри корпоративних фінансів і контролінгу

Київський національний економічний університет імені Вадима Гетьмана (Київ, Україна) Центр Українських Студій у SGH Варшавської Школи Економіки (Польща)

Яна Ігорівна Валько

студентка 3-го курсу ОПП "Корпоративні фінанси"

Київський національний економічний університет імені Вадима Гетьмана (Київ, Україна)

Олексій Володимирович Заєць

аспірант кафедри фінансів, банківської справи та страхування Національний університет "Чернігівська політехніка" (Чернігів, Україна)

ЧИ РОСІЙСЬКА ВІЙНА ЧИНИТЬ ВПЛИВ НА ФІНАНСОВУ ІНКЛЮЗІЮ В УКРАЇНІ?

У статті представлено комплексний огляд фінтех-ландшафту, розглянуто сутність та ключові характеристики фінтех, етапи його розвитку його регуляторного поля, інноваційні технології, що формують ринкову поведінку, а також поточний стан ринку фінтех-технологій. Розкрито питання фінансової інклюзії в контексті військового стану в Україні. Досліджено вплив повномасштабного вторгнення Росії на можливість українців користуватись фінансовими послугами. Визначено, що виклики, з якими стикається Україна, включають захист прав споживачів, фінансову стабільність та безпеку даних. Розглянуто закони і постанови, запроваджені органами державної влади для забезпечення безперервності надання фінансових послуг під час війни. На основі огляду літератури та аналізу нормативно-правової бази в статті висвітлено зусилля, спрямовані на підтримку фінансової інклюзії в умовах війни, а також звертається увага на виклики та стійкість фінансового сектору України. Підкреслюється роль показників цифрових платежів у непрямому вимірюванні фінансової доступності, що включає сегментацію користувачів, зміну вартості транзакцій, рівень проникнення та середню вартість транзакцій. У дослідженні відзначається помірне зростання ринкових тенденцій після подій 2022 року. З'ясовано, що російське повномасштабне вторгнення на територію України дійсно вплинуло на фінансову інклюзію в Україні, сповільнивши прогрес, але не знищивши стійкість сектору. Сприятливе регуляторне середовище відіграло вирішальну роль у цій стійкості, допомагаючи країні долати перешкоди та рухатися до відновлення і зростання сектору цифрових платежів. Підкреслено важливість розуміння індивідуального доступу до фінансових послуг та здатності фінансового сектору адаптуватися до цифрових обмежень у воєнний час, що дає повноцінне уявлення про фінансову ситуацію в Україні.

Ключові слова: фінансова інклюзія; цифрові платежі; цифрова економіка; фінансова поведінка.

Problem. Financial inclusion is an important indicator of the development of not only the financial market, but also the access to finance of individuals in the broadest sense of the word. Various types of crises affect financial inclusion,

i. e. disrupting access to financial resources, limiting the ability to pay for goods and services. The war in Ukraine also affected financial inclusion: shelling of energy infrastructure and telecommunications facilities affected the speed of money transfers. Financial inclusion has a close correlation with the poverty level of the population and the ability to meet their financial needs. Ukraine is technologically ready to carry out digital money transfers, at the same time, there are still problems related to the protection of the rights of consumers of financial services, financial stability, money laundering, and data protection. The main problem lays in the frames of impact of russian war in Ukraine on financial inclusion and digital payment in Ukraine.

Literature review. Literature review. Kniazieva and Maryna (2023) explored fintech solutions for information and analytical support in decision-making of financial institutions [4]. Obushny (2020) studied the specifics of DAO systems as economic cooperation in digital environment [6]. Vergelyuk (2023) evaluated fintech from the side of investment opportunity [14]. There are a plethora of research articles devoted to financial inclusion and sustainable development (Polishchuk & Ishchuk [7], 2022; Rybina [12], 2024; Lyvadar&Novosad [5], 2024; Vovchenko [15], 2022), financial literacy (Chubka, Lyvadar and No- vakivska [2], 2022; Vynnyk, 2021 [16]; Timoshenko, Gnydiuk, Marshuk [13], 2024; Borysova, 2021 [1]). Chverko and Kravchenko (2022) consider financial instruments for social inclusion of internally displaced people [3]. As it seen, there are few papers related to the financial inclusion and russian war in Ukraine.

There is a need to study what the impact on the war on the progress of financial inclusion in Ukraine. Moreover, it's important to study how the regulation measures affect the indicators of financial inclusion and digital payment during the war time. This will help to understand the problems related to the access to finance of individuals, and the resilience of the financial sector with limited digital payments. fintech innovative market

The aim of the article is to study how the war impacted the financial inclusion and digital payments in Ukraine and to identify the future trends of digital payments in Ukraine.

The research questions are the next:

1) Is the regulatory landscape supportive for financial inclusion in Ukraine?

2) How digital payments development is reflecting on financial inclusion?

3) What's the impact of russian war In Ukraine on financial inclusion?

Methods. The main method of identifying the changes in financial inclusion is descriptive statistics on how digital payments indicators have been changed. There are the following digital payments (users by segment), digital payments (transaction value change by segment), digital payments (transaction value by segment), digital payments (penetration rate by segment), digital payments (average transaction value per user). Three segments of digital payments have been considered: digital commerce, digital remittances, mobile POS payments.

Results. For reaching the main goal of the article it has been decided to explore the latest changes in legislation field in Ukraine to understand why certain regulatory documents have been adopted and what was the impact on support financial inclusion and develop digital payments in Ukraine.

In table 1 below, recent regulatory documents have been analysed on area of regulation, policy response, regulation focus.

Table 1Regulation measures to support financial inclusion and develop digital payments in Ukraine

Source: based on [8; 9; 10; 11].

As it is shown at Table XX, there were regulation measures adopted for supporting and modernizing digital payments. For instance, the Law of Ukraine "On Payment Services" was a pre-war law established a comprehensive framework for payment services in Ukraine, including licensing requirements, anti-money laundering (AML) and know-your-customer (KYC) procedures, and consumer protection measures. While not directly linked to the war, it provides the foundation for wartime adjustments. The next is a Law of Ukraine "On Virtual Assets" just before the war, created a new regulatory framework for cryptocurrencies in

Ukraine. It introduced registration requirements for cryptocurrency exchanges and service providers, as well as reporting obligations aimed at combating money laundering and protecting consumers. Decree of the National Bank of Ukraine No. 70 "On the Peculiarities of Payment Services During Martial Law" a wartime decree temporarily adjusted existing payment service regulations to ensure financial stability and facilitate access to essential services. Key measures included limits on cash withdrawals, simplified account opening procedures, and extended deadlines for certain obligations. Law of Ukraine No. 2260-IX "On Amendments to Certain Legislative Acts of Ukraine Regarding the Peculiarities of Activity of the Financial Sector under Martial Law" introduced broader adjustments for the financial sector, including banking services, during the war. It aimed to support individuals and businesses by enabling simplified debt restructuring, loan holidays, and other measures to mitigate financial hardship. Additionally, it focused on data security and consumer protection during this challenging period.

Indirect measurement methods are more prevalent, including indicators of digital payments. The digital payments indicators reflect the financial inclusion of individuals. In this research such indicators have been selected for further research: digital payments (users by segment), digital payments (transaction value change by segment), digital payments (transaction value by segment), digital payments (penetration rate by segment), digital payments (average transaction value per user).

Fig. 1. Digital payments (users by segment) (million users)

Based on Digital Payments: market data & analysis.

Fig. 1. provides data on the number of users in three segments of digital payments from 2017 to 2028. The segments are digital commerce, digital remittances, and mobile POS payments. Digital commerce shows a consistent and strong growth trend, indicating increasing adoption and usage. Digital remittances remains largely unchanged, indicating a stable but very small user base. Mobil e POS payments experiences significant variability, with periods of rapid growth followed by sharp declines and gradual recovery, reflecting possibly external factors or changing user preferences.

Fig. 2. Digital payments (transaction value change by segment), %

Based on Digital Payments: market data & analysis.

Figure 2 represents the changes in transaction value for different digital payment segments in Ukraine from 2018 to 2028. Digital Commerce and digital remittances show moderate and consistent growth, with digital Commerce experiencing more significant fluctuations. Mobile POS payments exhibit the most volatility, with a dramatic peak in 2018 and subsequent stabilization. Overall, the digital commerce and mobile POS payments segments show notable variability, while digital remittances remain relatively stable.

Fig. 3. Digital payments (transaction value by segment), USD

Based on Digital Payments: market data & analysis.

Figure 3 demonstrates that 2021 and 2022 mark significant volatility, with digital commerce and digital remittances experiencing considerable shifts. Post- 2022 Recovery: after the dips in 2022, all sectors show a recovery trend, especially in Mobile POS Payments, which continues its steep growth trajectory.

All three sectors demonstrate substantial long-term growth, reflecting increasing adoption and expansion of digital payment technologies globally.

Figure 4 shows the changes of penetration rate by the same segments.

Fig. 4. Digital payments (penetration rate by the same segments), %

Based on Digital Payments: market data & analysis.

It can be observed consistent growth in digital commerce, indicating increasing adoption and usage over the years. Despite slight increases, digital remittances maintain a very low penetration rate, suggesting limited usage or adoption in Ukraine. The mobile POS payments segment shows volatility, particularly with a significant drop in 2022. However, the overall trend is positive, with growth resuming after the dip.

The next figure (Figure 5) describes the changes of the average transaction value per user. It can be seen volatility in digital commerce and remittances. Both segments show notable fluctuations, with digital commerce recovering from a steep decline in 2022 and digital remittances experiencing a significant drop around the same period.

Fig. 5. Digital payments (average transaction value per user), USD Based on Digital Payments: market data & analysis.

Stable Growth in Mobile POS Payments: The mobile POS segment shows a robust and steady increase in transaction value per user, reflecting growing usage and higher transaction amounts over time.

Conclusions

The purpose of the study was to understand the impact of russion war in Ukraine on financial inclusion and to identify the future trends of digital payments development as indicators of the financial inclusion.

Answering the research questions, it was revealed that legislation measures were both for a need of the market development and to adopt digital payment system to the wartime. Both were related to the increasing of financial inclusion but in pre-war period adoption of those legislation acts was for increasing financial inclusion and strengthening markets. However, in wartime those regulatory measures were focused on keeping the access to finance of migrants and financial stability on the national level.

Analysing trends of digital payments (users by segment, transaction value change by segment, transaction value by segment, penetration rate by segment, average transaction value per user), it was revealed that 2022 became for all these indicators such that it stopped the pace of development. At the same time, At the same time, it can be seen that 2023 showed a recovery and moderate growth is also predicted in all segments of digital payments.

Therefore, russian war in Ukraine had an impact on digital payments indicators, which negatively affected indicators of financial inclusion, at the same time, the financial sector showed resilience to such shocks, as evidenced by the growth of digital payments in all segments. Such stability was also supported by regulatory documents of the National Bank of Ukraine.

References