“Fintech platforms in SME’s financing: EU experience and ways of their application in Ukraine”

The main aim of the given research is to develop an appropriate approach for creation of information FinTech platform with the EU standards compliance mainly for SMEs in order to support innovativeness of SMEs, improve their access to finance and simplify different financial processes. The authors defined the main features of FinTech platforms underlining types of FinTech, its participants and the most influential factors. The main trends of FinTech platforms development in the EU countries, such as the level of investment, impact of EU FinTech platforms on the global scale, features of investments into B2B FinTech, were determined. It was considered that in Ukraine, some positive changes in legislation were adopted, but the challenges like lack of finance, slow adoption of innovations in the financial market, not sufficient clarity of legislation remain among the main constraints for further development of FinTech platforms in Ukraine. The conducted analysis on the level of FinTech types performance by Ukrainian platforms showed only the great share of digital payments and money transfers, while other modern innovative FinTech instruments should not be underestimated for proper FinTech application in Ukraine. For this purpose, the authors have developed the Information Platform on Support for SMEs’ Innovations that consolidates interests of both SMEs and scientists. To determine both the SMEs’ opinion about the necessity of a particular Internet platform for them and the types of services that could be provided by the sme-sci.com platform, the authors conducted a survey in which 374 medium-sized and 380 small businesses took part. The results of the survey that are presented in the article confirm the necessity of the Information Platform on Support for SMEs’ Innovations and demand for it from the SMEs. Finally, the result of the research proves that such a unique informational platform as sme-sci. com that will serve as an interactive field for exchanging ideas and information of both representatives of scientific and business world is of great importance.


INTRODUCTION
FinTech as a whole drastically transformed the financial services making every aspect of them easier, more accessible and faster to perform.Such spheres as banking, mobile payments, money transfers and asset management might only benefit from using innovation technologies that could simplify the access to finance and digital finance system for business, SMEs in particular.But some factors depending on legislation system in different countries, the level of Internet penetration, ICT infrastructure, especially in rural areas, can become simultaneously as merits, as well as drawbacks, due to the level of their availability and development.
In the conditions of reduction of banks' lending capacity, high interest rates and the low likelihood to obtain credit for start-ups, it is essential for SMEs to use FinTech platforms in order to get faster and cheaper access to finance, simplify different financial processes by their digitalization and improve usage of e-money.Taking into consideration that Ukrainian SMEs face all the mentioned challenges and risks of being underfunded, it is crucial to develop FinTech platforms aimed at improving conditions for doing business.

LITERATURE REVIEW
Our previous research was related to information and communication platform as a complex approach for solving information asymmetry problems, where we convinced that such types of platforms play an important role in solving informational asymmetry problems.A great deal of other research into FinTech platforms has focused on its regulation.For instance, Arner, Barberis, Buckley (2015) analyzed the FinTech platform development and found out that its history goes back more than 150 years.It should be admitted that this is the deepest analysis on FinTech platforms performance and, in their opinion, it can be divided into three periods.The current period has started after 2008 and it runs on till present.The authors of this paper tend to consider FinTech as a union of financial industries and IT technologies because of innovations movement.Whereas, financial regulators are afraid of risks, which they can take about FinTech platforms development.However, the scientists are convinced that it is not the time of launching the FinTech regulation.
Later, the team of the mentioned authors Arner, Barberis, Buckley (2016) described the reasons of 4regulatory reconceptualization in financial markets.Changing approaches to bank lending has caused regulative problems.Their RegTech concept is directed towards the facilitation of financial regulation.They are sure that using their concept will allow to save up expenditure related with regulation.The peculiarity of offered concept is laying not only in digitalization manual processes, but also in reducing risks caused by enabling realtime operations.Fenwick, McCahery, Vermeulen (2017) relate increasing popularity of SMEs FinTech platforms to shrinking of SMEs lending by banks.At the same time, after studying policies of financial regulators, they make a point that central banks designed a set of instruments to stimulate SMEs' lending.
Moreover, Vasant and Roger (2016) are concerned that FinTech platforms increase access to finance for SMEs.
It was also proved in working papers of Haddad and Hornuf (2016) that the better is financial system, the lower is the number of FinTech start-ups in a country.It is believed that in these countries, financial systems have a lot of disadvantages, therefore, FinTech platforms try to adjust this gap.
As Caytas (2016) mentions in her paper, FinTech platforms are capable of identifying the risks of operations, but in her research, she focuses only on payment systems and banks' being rather afraid of losing payment leadership in this market.Some scientists (Jaksic & Maricnc, 2015) tried to predict the future of banking services in the context of FinTech development.They insist on banks shouldn't stop doing banking.Instead, banks need to adjust themselves to consumers' new preferences for IT-driven products and use IT developments to reconfigure or even reinvent relationship banking.The authors suggest that government regulation and attempts to control FinTech platforms give banks additional possibility to adjust.
In the SWIFT Institute working paper, prepared by Mainelli and Milne (2016), the role of blockchain at the securities transaction lifecycle is considered.
There is also one more gripping paper of Dorfleitner, Hornuf, Schmitt, and Weber (2015) about FinTech market in Germany.The scientists assessed it and made the forecast for the years 2020, 2025, and 2035.Moreover, in this paper, it is revealed the connection between development of crowdfunding and SMEs' growth.Dong He et al. (2017) consider FinTech as accelerating process.In their opinion, FinTech platforms are able to change financial sector and the profile of its services.They admit that obstacles to entry are reduced, however, opportunities for competition for financial intermediaries are shrunk as well.Mills and McCarthy (2016) made a research on innovation and technology and the implications for regulation of small business lending.The authors are also convinced that there is a sharp need to regulate FinTech platforms due to the growing amounts of raising capital.
Research of group with a head Antoniuk (2017) was devoted to the barriers for SMEs on the way to 4th Industrial Revolution, where FinTech platforms were considered as a part on innovation environment.
Sloboda, Dunas, Limański (2018) considered FinTech in bank retail.They viewed the obstacles and the perspectives of FinTech movement in Ukraine and tried to predict its future.
Not only academicians pay attention to FinTech platforms development issues.Different consulting companies, international organizations, etc., which are occupied with SMEs' funding problems make research on it.For instance, Stockholm FinTech Report (2018) overviewed the FinTech sector in the biggest Stockholm region.There the authors consider FinTech platform as ecosystem talent flow regulation.Another report (2015) prepared by World Economic Forum proves that FinTech platforms are capable of making shifts in small business finance.In EY's report (2017), it is possible to meet such definition of FinTech: "organizations combining innovative business models and technology to enable, enhance and disrupt financial services".Besides, EY researchers revealed, that numbers of Fintech users are increasing.At OECD discussion paper (2018) there is also strong background of Fintech facilitation of access to finance for SMEs.

METHODS AND RESEARCH QUESTIONS
The main goal of the given research is to develop an appropriate approach for creation of information FinTech platform with the EU standards compliance mainly for SMEs in order to support

Essence and parameters of FinTech platforms
FinTech has mainly transformed the traditional way financial services are produced and delivered through implementation of new technologies, which includes a variety of products, applications, processes and business models.
The term FinTech is often used for companies providing or facilitating financial services by using a technology, which allows to provide products and services directly to end users, often via online and mobile channels.
The features of FinTech system, including financial market players, the main FinTech trends and factors influencing FinTech development, are presented in Figure 1.Though, the great attention should be paid to FinTech trends, in particular to consumer/business lending and equity funding because of their great share according to estimations of Silicon Valley Bank.
1 According to the State Statistic Service of Ukraine at the beginning of 2017, there were 305,9 thousand SMEs in Ukraine, including 14,8 thousand (4.84%) of medium sized businesses, 291,9 thousand (95%) of small businesses.The large business share was 0.16%.
The most widespread areas for implementing innovation technologies in financial sector include online banking, online payment and transfer services, peer-to-peer lending, personal investment advice and services.
Taking into consideration that in many cases, SMEs have lack of funding, such FinTech instruments as shown in Figure 1 could become the way of access to finance regarding solving such problems and challenges like more cash, improved working capital management, and more stable and secure funding.

Fintech development in EU countries
In March 2018, the European Commission adopted an action plan on FinTech (Fenwick, McCahery, Vermeulen, 2017) in order to develop financial sector with more competitive and innovative features.The action plan sets out 19 steps that the Commission intends to take to achieve such main goals as: • enable innovative business models to scale up at the EU level; • support the uptake of new technologies such as blockchain, artificial intelligence and cloud services in the financial sector; • increase cybersecurity and the integrity of the financial system.
According to European Comission, the main aim of the mentioned initiatives is to strengthen the efficiency of convergence through technological innovation usage and wide capacity of the EU financial sector by implementation of new technologies in its activity (USAID, 2018).
For confirmation of the development of the European FinTech sector not only on legislative basis (an action plan on FinTech), but also simultaneously on economic one, it is reasonable to analyze the level of investment (Figure 2).
The overall trend from Figure 2 proves the increasing interest of investors to FinTech sector total capital of which was raised from less than USD 1 bln to USD 2 bln (250% growth rate).
The analyzed tendency also correlates with the number of deals, which increased more than 20 times in 2017 in comparison with 2010.
This significant growth can be explained by the ongoing interest from entrepreneurs, investors, accelerators and consumers to FinTech companies and services.For estimating the most developed FinTech sectors, it is essential to analyze the territorial distribution of FinTech companies and the level of investments according to FinTech sector (Figures 3, 4).
Analyzing Figure 3, it can be observed that such regions as North-America, Europe and Asia-Pacific are among leaders in FinTech sector, while Middle East and North Africa and South America have percentage of FinTech companies less than 3 %.sectors for investment also has the great importance (Figure 4).
In Figure 4, the subsectors that were the most attractive for investments were payments, lending and banking technology.Other areas of global interest included mobile financial services, financial and account management, remittances and money transfer, robo advisors, insurance technologies, crowdfunding, P2P lending, blockchain and crypto-currency.
According to the classification of FinTech growth forum, investment in FinTech platforms should be divided into 2 groups: B2B FinTech and B2B FinTech with investment more than USD 20 mln, the level of funding for which is shown in Figure 5.
Figure 5 shows the level of investment into European B2B FinTech companies, which had increased since 2015 to 2017 attracting USD 948 mln.For 20+ mln investment into FinTech companies, the % of total investment into B2B has almost doubled since 2015, from 26% to 49% in 2017.

Trends of FinTech platforms development in Ukraine
All considered trends confirm that dynamics of FinTech has raised significantly over the past years in Europe that is why Ukrainian financial market could be transformed through new technologies.
One of the conditions for FinTech development is Internet penetration.In 2017, in Ukraine, access to Internet is affordable for the majority of population and its level has raised to 63% by 2017 compared to the level of 2008.
The other important factor for FinTech is the existence of electronic identification system, but, in Ukraine, it is only expected to launch a Know Your Customer (KYC) process in one bank due to the issue of a National Bank ID, which would be relevant for any other Ukrainian banks.The system of electronic passport has only recently started to operate and not the majority of population in Ukraine have received them yet.This can be considered as the obstacle for further FinTech development.
Besides, in rural areas, the coverage of physical infrastructure for digital payment performance is not sufficient and existing legal and regulatory procedures do not encourage their promotion.
But some positive changes in legislation were implemented among which the following should be underlined: • authorization by electronic signature in invoice and/or contract performance; • possibility to use the simplified taxation of services provided by individual IT entrepreneurs in Ukraine (5 % of income per quarter); • restrictions from the National Bank of Ukraine (NBU) on dividend repatriation (up to USD 5,000,000 per legal entity per year); • first steps from the NBU for the adoption of EU directives, in particular PSD2 Directive into the local legislative process; • approval of "Electronic Trust Services Law" in order to launch an electronic identification and trust services for electronic transactions in the internal market;  • announcement by mobile operator in Ukraine "Kyivstar" about launching Mobile ID service aimed at identifying the client and using his digital signature to access electronic services and document circulation by mobile phone.
Lack of finance for Ukrainian start-ups is also among the weaknesses for FinTech development, but high standards of education, especially in mathematics science and IT sphere, can eliminate the mentioned risks.
The FinTech providers in Ukraine are mainly presented in such spheres as in Figure 6.
Figure 6 shows the low level of FinTech sector development in Ukraine because of the great share of digital payments and money transfers, while other subsectors do not sufficiently function.It is mainly connected with the fact that more than 60% of the FinTech start-ups were run within the last three years.
According to the survey of USAID (FinTech Action plan: For a more competitive and innovative European financial sector, 2018), the prior sectors for FinTech development in Ukraine are digital banking, automation, biometric identification, machine learning, AI, forecasting and modeling,  1, it can be seen that most platforms are no more than 10 years old, and most Ukrainian platforms were created no more than 5 years ago.All of these platforms are functioning to support private entrepreneurs and SMEs with finding finance resources for their business idea implementation.But any of them is aimed at consolidating the interests of both SMEs and scientists.Ukrainian science is suffering from lack of funding, but it rarely collaborates with the business entities mostly because of lack of exchange of information between them.On the one hand, innovations hardly could be developed without science and scientific activity.On the other hand, even having developed some innovative idea or a project, scholars and scientists suffer from lack of business soul and entrepreneur gut feeling.Therefore, the development of some unique informational platform that will serve as an interactive field for exchanging ideas and information of both representatives of scientific and business world are of great importance.

Information Platform on Support for SME Innovation as an example of FinTech application in Ukraine
As a result of implementation of the young scholars' research project "The new paradigm of financial support of innovations in small and medium enterprises" (it is funded by the Ministry of Science of Ukraine), the Information Platform on Support for SME Innovation (sme-sci.com)was developed.This platform is aimed at consolidating the interests of both SMEs and scientists and 2 Internet platforms for SME: the necessity and ways of development (Google Forms questionnaire): forms/d/15pmt-6ostKmxmz2w-j2h6H5JOjOWwEN3hvm5dIrMjC8/edit?ts=5ae74049 fostering their activity to meet the needs of consumers.Here scientists can offer their projects for SMEs, and SMEs can make their orders from scientists.
To determine the demand for the Internet platform services, the questionnaires were developed and a survey was conducted.Key goals of the survey were to determine both the SMEs' opinion about the necessity of a particular Internet platform for them and the types of services that could be provided by the sme-sci.complatform.The authors had developed such types of questionnaires: • formal interactive (for direct delivery of the questionnaires to the representatives of SMEs through their electronic mailboxes or through participating in the survey online through Google Forms); • formal personalized (structured individual interviews of the SME's representatives (participants in thematic business forums, conferences, symposiums, seminars held from June to December 2017) with the same well-prepared list of questions (the questionnaire can be found by the link 2 ).
The results of the survey disclosed that 81% of respondents (or 611 representatives of SMEs) use supporting business Internet platforms and websites on a regular basis.Most of them (or 70% of respondents) are certain that Internet platforms of supporting business contribute to increase of business performance (Figure 7).On the other hand, 30% of respondents consider that available Internet platforms either require additional and not always justifiable costs or even do not support doing business, since often provide distorted information.
Those legal entities who use Internet platform in everyday business claimed that they help them to find up-to-date information about the main trends of business development in various industries (49% of respondents) and both create opportunities to get acquainted with the results of latest market researches, which is important for SMEs' business development, and to promote their products through Internet platforms (Figure 8).Moreover, one third of respondents are sure that such platforms make searching information about their competitors easier and also teach them how to use other business tools.Besides that, legal enti-ties claim on lack of information about last amendments to the legislation, innovations in business, some educational and business events or trainings and about real investors on currently available business platforms and Internet resources.In the to SMEs' viewpoint, Internet platforms that support business Despite the lack of some relevant information for SMEs, 45% of respondents (or more than 300 representatives of SMEs) have found experts who they were in need of, but 16% of SMEs were not so lucky and didn't find appropriate external expert through Internet platforms.At the same time, near 40% of respondents neither have used Internet platforms for finding experts at all nor had a need in such external experts for their business (Figure 9).
All the abovementioned results of the survey show that most SMEs use Internet resources and Internet platforms to improve their business performance, but most of the platforms do not include all necessary information for them and they need to spend a lot of time surfing the Internet in searching information or experts valuable for them.Such time-consuming activity does not create possibilities for R&D activity and self-development.Nevertheless, near 60% of respondents said that their business projects involve R&D and near 14% are sure that, in the nearest future, their business projects would involve R&D activity (Figure 10).Moreover, near 70% of respondents confirmed that they need now or will need in the nearest future to involve scholars and scientists into development and implementation of their business projects and ideas.
As can be seen from Figure 10, no more than 30% of respondents said that they are not going to develop some innovative projects in the nearest future and, therefore, they will not have a need to involve scholars and scientists.But we can't say that this is a negative tendency, because it is impossible that all the SMEs being engaged in risky and expensive innovations and R&D.
Finally, we can say that the results of the survey confirmed the necessity of development of the Information Platform on Support for SME Innovation and demand for it from SMEs.Are your business projects involve R&D?

Figure 6 .
Figure 6.FinTech categories performed by Ukrainian companies

Figure 7 .
Figure 7. Structural indicators of respondents' answers on questions that determine the role of Internet platforms in their business performance

Figure 8 .
Figure 8.The respondents' answers to questions that determine the importance of information presented by the Internet platforms (multiple choice)

Figure 9 .
Figure 9.The respondents' answers on question that determine the possibility to find external support with the help of the Internet platforms (number of SMEs who answered)

Figure 10 .
Figure10.The structure of the respondents' answers to questions that determine the business's need to collaborate with scientists Investment Management and Financial Innovations,Volume 15, Issue 3, 2018collect the data (more than 6 months) and the costs on research were provided by project's budget, there was the main limitation -Ukrainian SMEs were quite passive in participation in the survey.Nevertheless, among respondents who actually took part in the survey there are 374 medium-sized and 380 small businesses from different branches and regions of Ukraine.Sample reliability was calculated using the Sample Size Calculator for Confidence at 5% interval and Confidence at 95% level1.The data were processed using table processor MS Excel.
Within the survey, 2,140 questionnaires were sent from which 753 fully completed questionnaires were received (or 35% of sent questionnaires).Despite that fact that there was enough time to There were analyzed secondary data with content analysis method on SMEs trends development, use of FinTech instruments and platforms and state of FinTech in different EU countries in order to reveal the examples of successful FinTech platform implementation.Cross-cultural analysis was used for assessment of FinTech platforms level development in different EU countries.For qualitative analysis, the gathered data were categorized and then packed with NVIVO software.It enabled to classify existing FinTech platforms, to determine the main problems and expectations of their users.
Theoretical approaches to Fintech platform basics Investment Management and Financial Innovations, Volume 15, Issue 3, 2018 capital for start-ups and opportunity to fund for potential investors (examples are SumUp, iZettle, Jusp, SetPay, etc.).

Table 1 .
Types of crowdfunding platforms for SMEs