Table Of ContentContributions to Finance and Accounting
Darko B. Vukovic
Moinak Maiti
Elena M. Grigorieva Editors
Digitalization
and the Future
of Financial
Services
Innovation and Impact of Digital
Finance
Contributions to Finance and Accounting
The book series ‘Contributions to Finance and Accounting’ features the latest
researchfromresearchareaslikefinancialmanagement,investment,capitalmarkets,
financial institutions, FinTech and financial innovation, accounting methods and
standards, reporting, and corporate governance, among others. Books published in
this series areprimarily monographs and edited volumes that presentnew research
results, both theoretical and empirical, on a clearly defined topic. All books are
publishedinprintanddigitalformatsanddisseminatedglobally.
(cid:129) (cid:129)
Darko B. Vukovic Moinak Maiti
Elena M. Grigorieva
Editors
Digitalization and the Future
of Financial Services
Innovation and Impact of Digital Finance
Editors
DarkoB.Vukovic MoinakMaiti
InternationalLaboratoryforFinanceand St.PetersburgSchoolofEconomicsand
FinancialMarkets,FacultyofEconomics Management
Peoples’FriendshipUniversityofRussia NationalResearchUniversityHigherSchoolof
(RUDNUniversity) Economics
Moscow,Russia St.Petersburg,Russia
GeographicalInstitute“JovanCvijic”
SASA
Belgrade,Serbia
ElenaM.Grigorieva
InternationalLaboratoryforFinanceand
FinancialMarkets
Peoples’FriendshipUniversityofRussia
Moscow,Russia
ISSN2730-6038 ISSN2730-6046 (electronic)
ContributionstoFinanceandAccounting
ISBN978-3-031-11544-8 ISBN978-3-031-11545-5 (eBook)
https://doi.org/10.1007/978-3-031-11545-5
©TheEditor(s)(ifapplicable)andTheAuthor(s),underexclusivelicensetoSpringerNatureSwitzerland
AG2022
Thisworkissubjecttocopyright.AllrightsaresolelyandexclusivelylicensedbythePublisher,whether
thewholeorpartofthematerialisconcerned,specificallytherightsoftranslation,reprinting,reuseof
illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and
transmission or information storage and retrieval, electronic adaptation, computer software, or by
similarordissimilarmethodologynowknownorhereafterdeveloped.
Theuseofgeneraldescriptivenames,registerednames,trademarks,servicemarks,etc.inthispublication
doesnotimply,evenintheabsenceofaspecificstatement,thatsuchnamesareexemptfromtherelevant
protectivelawsandregulationsandthereforefreeforgeneraluse.
The publisher, the authors, and the editorsare safeto assume that the adviceand informationin this
bookarebelievedtobetrueandaccurateatthedateofpublication.Neitherthepublishernortheauthorsor
theeditorsgiveawarranty,expressedorimplied,withrespecttothematerialcontainedhereinorforany
errorsoromissionsthatmayhavebeenmade.Thepublisherremainsneutralwithregardtojurisdictional
claimsinpublishedmapsandinstitutionalaffiliations.
ThisSpringerimprintispublishedbytheregisteredcompanySpringerNatureSwitzerlandAG
Theregisteredcompanyaddressis:Gewerbestrasse11,6330Cham,Switzerland
For ours
Damian and Sofia Vuković, Junior Maiti, and
Evgeniya Grigorieva
Preface
The motive to edit the book Digitalization and the Future of Financial Services
cameoutfromourlastdecadeofpublishingindifferentissuesoffinance,method-
ologies,andmachinelearningsinfinance.Inthelasttenyears,muchhaschangedin
both academic and practical world in finance. The new areas of financial research
haveemerged,suchascryptomarketsandcurrencies,newfinancialservices,andthe
most recently, high market turbulence caused by various crises, including the
COVID-19 pandemic. The global academic community follows all new trends
and, through numerous studies, contributes to the development of new theories
andliterature.Machinelearningtechniquesareessentialtodayasamethodofstudies
indigitalfinance,increasinglysubstitutingclassicaleconometricmodels.
The same trends exist in practice. Companies and individuals are less going to
bankstousealmostallfinancialservices.Practically,anyservicecanbedonefrom
homeoroffice,whetheronetradesonthefinancialmarket,opensdepositaccounts,
performs various transactions, concludes an insurance contract, or performs any
otherfinancialservice.Moreover,onedoesnotevenneedacomputer/laptoptouse
theseservices,acellphoneisenough.Softwaresolutionsandapplicationsontoday’s
cell phones allow the user to perform all services from anywhere and anytime. On
top of all this, the COVID-19 pandemic came at the beginning of 2020, which
further transformed financial services to “online,” digital, “distantly.” Lockdowns
aroundtheworldandphysicaldistancingbetweenpeoplehaveacceleratedtheuseof
digitalfinancialservices.
Withallthisinmind,we aimtoedit andpresentthebookthat collectschapters
which extend our understanding on how digitalization and the future of financial
servicescanbehelpfulindifferentbusinesscircumstancesinmanycross-functional
financial areas. The authors of the chapters contribute to this, through presenting
differentcases,literaturereviewing,applyingmostrecentmethods,andgivingtheir
valuableopinions.Wewouldliketoacknowledgeeveryauthorandco-authorofthis
effort for their contribution and an exceptional initiative to successfully complete
vii
viii Preface
this book. Finally, the editors Darko Vukovic and Elena M. Grigorieva have been
supported by the RUDN University Strategic Academic Leadership Program, for
theirwork.
Moscow,Russia DarkoB.Vukovic
St.Petersburg,Russia MoinakMaiti
Moscow,Russia ElenaM.Grigorieva
May23,2022
Introduction
Inthelasttwodecades,thedigitalizationofproductsandservicesinfinancehasbeen
characterized by great developmentsin the theory and practical implications inthe
fieldoffinance.Withtheadventofnewfinancialtechnologies,financialinstitutions
haveofferednewinfrastructures,products,andserviceswiththepurposeofincreas-
ing the efficiency of its business and strengthening its competitiveness. However,
this process also influences financial flows and stability, with both positive and
negative influences. The new financial paradigm has started the race of financial
institutionstocreateandofferthemostdiverseservicesandproducts.Thisprocessis
the driver of knowledge and innovation in digital finance, resulting in the constant
developmentandemergenceofnewtechnologies.Themorefinancialproductsand
services are based on blockchains and Internet of Things, where cryptocurrencies
havebecomethemainstayoffinancialtechnologydevelopment.
Amongthemostsignificanttechnologicaladvancesisthedevelopmentofartifi-
cialintelligence,whichisoftenusedtodayintheanalysisoffinancialtimeseries,as
well as the prediction of various financial phenomena. This also contributes to the
theoretical development of new models, such as kernel-based models or advanced
neural networks models, which are used in predictions of financial time series
(among many machine learning models). Financial markets and institutions have
adaptedtothevariouschallengesoftechnology-drivenchangesinfinancialservices.
This process creates digital environment on financial markets, regulated by policy
makers and central banks with the purpose of sustainable financial stability and
existenceofeffectivetransmissionmechanisms.
TherecentlyongoingCOVID-19pandemichasforcedtheproductsandservices
infinancefordigitaltransformation.Physicaldistancing,closingstateborders,and
fearofinfectionencourageallstakeholderstousedigitalfinanceastheonlypossible
solutionintheirbusiness.Eventhoughtheterm“digitaltransformation”appearsto
be simple, it has several implications in practice. It is important to understand the
impactofdigitaltransformationontheproductsandservicesinfinance,holistically.
Ithasadirectconnectionwiththetransitionoftheproductsandservicesinfinancein
businessprocess.Hence,atthismomenttheglobalproductsandservicesinfinance
ix
x Introduction
are adopting and leveraging heavily on new technologies to achieve the cost and
operating efficiencies. On the one hand, digital transformation brings bunches of
opportunities,butontheotherhand,itisathreatfortheglobalproductsandservices
infinance.WiththisabovebackgroundtheeditededitionoftheDigitalizationand
theFutureofFinancialServices:InnovationandImpactofDigitalFinanceisbuilt
up. The edited collection has a total of 11 chapters covering various aspects of the
presentthemeandcontributingauthorsrepresentingwidegeographies.
Chapter1talksabouthowthedifferentaspectsoffinancialinclusionarepromot-
ing economic growth in the global context. The chapter concludes that more work
remainstobedonetoincreasefinancialinclusionworldwide.Chapter2dealswith
thetaleoffintech-basedinnovationsinthedevelopmentofoveralleconomicactivity
andsocialcircumstances.Thechaptersimprintthatthemodernfinancialworldisata
crossroads and financial innovation has led to alter the financial structure, as
digitizationknowsnobordersandcompetitionisatthegloballevel.Theadventof
new technologies and the evolution of business models have led to a significant
transformationofthefintechsectorinrecentyears.
Inthisregard,Chap.3highlightedthecrucialrolesofcentralbanksandregula-
torybodiesintheworldofFinTech’s.Mostimportantly,thechapteremphasizedthat
revolutioninthefintechspaceimprovedfinancialinclusionandloweredtransaction
costs.Butontheotherhand,itraisesseveralissuesrelatedtoinformationsecurity,
databreaches,cyber-attacks,andthreattofinancialstability,amongothers.Keeping
these in mind Chap. 3 identified several challenges faced by the regulators in
regulating fintech companies. The chapter concludes that there is an immediate
needformorestudiesontheregulatoryaspectsoffintech’s.
Chapter 4 details the dematerialization of money in the age of the COVID-19
pandemic. The chapter underlined that over the years money was turned into fiat
money, scriptural money, electronic money, and recently digital money
(cryptocurrency). The chapter also showed that the growing trend toward the use
of cryptocurrencies has been reversed with the emergence of the COVID-19 pan-
demic.Chapter5discussestheinternationalfinancialmarketsoperationsintheage
ofdigitalization.Itbringsthedetaileddiscussiononelectronictradingsystemstothe
high-frequencyalgorithmictrading.
Chapter 6 sheds light on the importance of Bitcoin as an alternative asset class
amid global financial turmoil and provides practical guidance for investors in
developing investment portfolio development. Chapter 7 covers the overall impact
ofdigitalizationontheglobalBFSIssectorinitially.Thenitnarrowsdownitsfocus
totheimpactof“RegTech”and“SupTech”onachievingfinancialstability.
Chapter8dealswithsomeoftheemergingtechnologies,namelyAI,blockchain,
and IoT that are significantly used by the BFSIs organizations nowadays. This
chapter delves into the basic understanding of each of the triads and how they
complementeachother’sdrawbacksinpossiblyrevolutionizingtheentirefinancial
domain. Chapter 9 brings an interesting discussion on the role of digital financial
inclusion in promoting economic growth and freedom. It illustrated how digital
financial services through the proliferation and penetration of information and
communications technology (ICT) lead to financial freedom and financial
