Russia’s full-scale invasion has caused huge economic losses to Ukraine. But all wars come to an end, and after victory, Ukraine will have a chance to open a new chapter in its economic history – specifically, by large-scale reconstruction and embarking on the road to prosperity.
The economic recovery process will be vigorous. In this process, IT innovations and financial technologies will be just as important as the reconstruction of the infrastructure and industry, given that IT was the only sector of the Ukrainian economy that showed steady growth in the first year after the war was launched.
Accordingly, exports of IT services in 2022 amounted to $7.34 billion, an increase of 5.4% as compared to the figure of the previous year (data from the National Bank of Ukraine). Staffing increases are another result of the demand for IT services and products. Specifically, the number of IT specialists in Ukraine grew by 8% in 2023.
Year after year, Ukraine steadily exhibits a high level of technological expertise and creates innovative digital products. Particularly, such Ukrainian digital services as Diya, Ring Ukraine, Grammarly, etc. have gained worldwide recognition.
And in the future, Ukraine’s innovative potential will only increase. I am convinced that the Fintech sector, which, by the way, was able to rebound to almost 80% of its pre-war sales by the end of 2022 (according to UAFIC data), will be a major contributor to this dynamics.
Why the WealthTech trend is growing
FinTech is currently considered as one of the most promising areas for investment worldwide. From 2015 to 2021, this market grew by an average of 18% per year. McKinsey estimates that as of July 2023, the market capitalization of the global public-only FinTech reached $550 billion.
Online payments, digital banking, blockchain and digital currencies are the most actively developing areas. And recently, WealthTech or Wealth Management, in other words, asset management, has been gaining increasingly more attention.
This field has emerged as one of the major trends in the investment world, because it involves the automation of the investing process through technical innovations, such as artificial intelligence.
WealthTech platforms use digital brokers and robotic advisers to communicate with clients, and personalized reports on the profitability of investment strategies are generated in user accounts.
Additionally, tools for risk mitigation and transaction analysis are available. In summary, thanks to digital solutions retail investors now have more access to this market which is primarily controlled by financial giants.
It is worth noting that Revolut, Wise, Monzo, Straling, N26 and other global fintech projects are already demonstrating a high level of interest in WealthTech.
These companies are making investments in Asset Management expanding the functionality of their products and adding asset management features to them. The global WealthTech market was generally valued at $9.7 billion last year.
By 2028, it is anticipated to reach $37.7 billion.
As for Ukraine, Wealth Management accounts for 6% of Ukraine’s fintech market share (according to UAFIC data). InsureTech, incidentally, has a comparable figure. The only sectors with a higher share are Payments/Money Transfer, Technology and Infrastructure, Personal and consumer lending, LegalTech.
Investors can tap into this promising market by purchasing a ready business in the WealthTech sector or by buying shares of companies that operate in this field.
Businesses that invest in FinTech typically receive a return of 90 to 100% within 3-5 years. The FinTech market demonstrates a 153% increase in capitalization between the last crisis in 2020 to the end of 2021. Currently, WealthTech has a 5 times growth potential, according to various estimates.
Why it will be advantageous
Ukraine has every chance to develop into an effective platform for creating an ecosystem of innovations, financial technologies and entrepreneurship.
Firstly, it has tremendous human potential. The war has made Ukrainians even stronger. People accept challenges of any complexity and overcome force majeure with ease. This is a nation of a strong sense of self and fortitude. This human potential is a true gem for an investor.
Secondly, Ukrainians have a strong technological culture and deep expertise in innovations. There are many talented IT professionals here who create their own products and also provide outsourcing services.
Similar to the IT market, Ukraine has every opportunity to boost the analytics market. Here, there is room for education to foster a robust community of analysts and good potential for creating a professional analytics hub.
Ukrainian professionals can make a superior analytical product for both local and global companies.
Thirdly, Ukraine already has a well-established technical infrastructure with potential for further progress. Nowadays, 53% of the Ukrainian IT market is made up of outsourcing and outstaffing companies, while 40% is made up of product companies.
Therefore, the development of technological services utilizing Ukraine’s staff and intellectual potential is an attractive history for an investor. For example, a robust back office of IT professionals and analysts, project managers and product owners, lawyers, and HR specialists may be established here to develop a WealthTech product.
A Ukrainian IT and operations team with competent management will ensure a high-quality product. Point processes related to AML, KYC, and marketing (as required for scaling) can be implemented straight in the local markets where the product will be introduced.
With this approach, an investor will be able to optimize its operating costs, receive an ultimate high-quality service, and build a strong case for its portfolio.
By making investments in FinTech- and WealthTech projects in Ukraine right now (while the niche is still unoccupied), an entrepreneur can seize the best income opportunities in the future.
Besides, investing in the economy of the country that risks the life of its people to uphold European values and the global democratic order is a good image move for an international investor.
