Ideas for a regulatory definition of FinTech

Purpose: The aim of the paper is to develop the approach to a legal definition of FinTech. Design/Methodology/Approach: In this paper we evolve possible approaches of FinTech legal definition, investigate existing approaches at the international level and examine the policies applied at the national levels. Document analysis, as a form of qualitative research, was used in this study. Findings: We found that in most countries the legislation does not specifically address fintech companies, and the legal framework equally regulates the activities of traditional service providers and fintech operators. In our opinion, no specific legislation for FinTech companies needed, each type of activity provided by a financial or technology company is subject to a specific legislation/regulation with primary focus on services and products provided as payments, insurance, investments etc. Practical Implications: The term FinTech is freely used by policy makers, regulators, companies, researchers, academics and the public, both nationally and internationally. According to international organizations such as the IMF, the World Bank and the OECD, FinTech offers the opportunity to accelerate economic growth and expand financial affordability/inclusion in all countries. Some countries are increasingly striving to become global or international regional hubs for FinTech and are working hard to develop interagency government strategies with a supportive legal environment. Originality/Value: There is still confusion about the nature and dynamics of FinTech among politicians, scientists and practitioners, as well as about the legal framework of this area. The value of this article is to clarify and propose an apprach to definition of FinTech by combining different approaches in a very original and innovative way.peer-reviewe

The foreign exchange exposure of domestic companies in Eurozone : case of the Baltic states

In this paper we are looking for answers: are domestic companies operating in small market economies such as the Baltics with little or no direct foreign involvement also at risk, taking into account that our companies mainly as a mean of exchange are using euro. The aim of this study is to examine the foreign exchange rate exposure of domestic corporations in the Baltic States. The study shows that companies in the Baltic States tend not to manage their foreign exchange risk properly and some of the companies are thus exposed to significant losses due to fluctuations in currency exchange rates. The VaR estimates are proposed and evaluated as a method to measure the position that is necessary to hedge.peer-reviewe

SMEs’ alternative financing : the case of Latvia

This article analyses the ways how companies operating in EU countries attract alternative financial resources. The importance of non-traditional, alternative/innovative financing is gaining recognition in both developed and emerging economies throughout the world. SMEs’ financing in Europe remains primarily bank based, in spite of many policies proposed to develop alternative financing instruments (e.g., adopting directives on venture capital, improving the transparency and visibility of SMEs on capital markets, etc.). The research is therefore to expose recent trends in alternative financing in EU, significantly enhancing the evidence base on this key source of entrepreneurial finance. As a source of ‘smart money’, supporting new and early stage businesses, alternative providers are widely accepted as being a critical part of the competitiveness enhancement. Generally accepted qualitative and quantitative methods of economic research were applied in this paper, including in-depth face-to-face interviews with the board members of the nine banks of Latvia, operating in the other Baltic and Nordic countries as well as 1200 companies’ owners or top managers. Main findings show that alternative financial service providers are competing and often outcompeting the traditional ones at high speed. Conducted empirical analysis shows the most available financing sources except banking products are Friends and Family (FF) and different state (including EU grants) support programmes, Venture Capital (VC) and Business Angels (BA).peer-reviewe

Banking business models of the digital future : the case of Latvia

How the banking business model in Latvia changes? What are the main forces determining these changes? What group of banks in the retail banking sector has had more intensive changes during the last three to five years? Are banks feeling competition from the FinTech companies and realising a more flexible and focused policy or are they continuing to believe on traditional banks’ domination? This paper explores this process by analysing banking products and services in Latvia. How advancements in technology continue to transform the lives of banking customers? The study shows that digitalization guarantees the development of banks. Banks are looking at new avenues such as mobile application and mobile marketing to provide value-added services to customers and increase revenues by charging nominal fees for the services. Latvian banks are getting more flexible in customer services and banking products like crediting and financial resources transferring. We divided Latvian commercial banks into two significant groups: banks more specialized in international customers servicing and banks more specialized in domestic customers servicing. Financial indexes have been compared in conformity to these two groups. The CIR, ROA, ROE estimates point out the profitability and efficiency of commercial banks. LIQUIDITY shows that banks in Latvia have an adequate stock of unencumbered high-quality liquid assets that can be converted easily and immediately into cash. The profitability and efficiency indicators are more predictable and stable in banks servicing domestic customers. Banks servicing international customers specialize in focused retail, but banks servicing domestic customers provide a wider range of products and services. As a result, banks servicing domestic customers are more flexible.peer-reviewe

Access to finance for Latvian SMEs

In this paper, we attempt to explore why banks possessing free assets and willingness to lend, on the one side, and businesses lacking money, on the other side, do not meet. We are looking for answers why all EU initiatives for more available funding for SMEs still haven’t resulted positively and loan growth rate is more than modest. The empirical part of the research is based on the quantitative and qualitative assessment of the commercial banks, SMEs of Latvia and case studies of timber industry. The result of the analyses has been discussed and recommendations have been provided for policy makers and academician, opening new areas for this timely topic research.peer-reviewe

Main factors of emotionally attached customers in retail banking of Latvia

How the banking strategy in Latvia is changing? How can banks increase the number of active clients? Are banks in Latvia focusing to attract new clients or prefer to work with the existing client portfolio? How can the retail banking sector in Latvia impact the customer loyalty? The regulation developed by the Basel Committee and the regulations of The Financial and Capital Market Commission impacted the number of banks in Latvia and the number of active clients in retail banking. Latvian banks are getting more flexible in customer services and actively working to increase customer loyalty. If previously banks actively attracted the new clients to increase the number of customers, now banks are working to increase the number of active loyal clients. Only a totally complacent customer will be a loyal customer. The purpose of this study is to examine the effects of customer emotional attachment on customer loyalty to the provided goods and services in the retail banking sector in Latvia. The authors used their developed questionnaire that was aimed to the main factors that can increase the customer loyalty. The profitability of each bank directly depends on customer loyalty and how many customers return for goods and services. The main object of loyalty is customer emotional attachment, which is the determining factor in decision making in retail banking. The customer’s emotions and feelings drive his/her choice. When banks interact with customers’ emotions, the income could be considerable. That is why it is significant to research customer emotions to create long term partnership in retail banking. Research methods used are clients’ survey in the retail banking sector in Latvia. The banks branding, the personality of produced goods and services, the customer experience and trust, the digitalization and innovation tendency are the factors that can emotionally attach the customer. All these factors, from the new product and services development till the daily provided, affect the customers’ value to the bank. As the main result, the strategic goal is to have emotional attached customers in retail banking of Latvia

The foreign exchange exposure of non-financial companies in Eurozone : myth or reality?

The authors of this paper are looking for answers: are domestic companies operating in small market economies such as the Baltics with little or no direct foreign involvement also at risk, taking into account that our companies mainly as a mean of exchange are using euro. The aim of this study is to examine the foreign exchange rate exposure of domestic corporations in the Baltic States. The study shows that companies in the Baltic States tend not to manage their foreign exchange risk properly and some of the companies are thus exposed to significant losses due to fluctuations in currency exchange rates. The VaR estimates are proposed and evaluated as a method to measure the position that is necessary to hedge.peer-reviewe

FDI attraction : comparative analysis of the Baltic States and Georgia

The attraction of foreign direct investment (FDI) is usually an economic policy priority due to its positive effects on economic growth because of new capital and technology, higher employment, new management practices, improvements in the quality of services, as well as innovation and lower production costs. This paper aims to assess the investment climate in the Baltic states and Georgia and evaluate what are the appropriate FDI policy objectives and approaches there. It considers three international indices as measures of investment climate: Index of Economic Freedom, Corruption Perceptions Index, and Ease of Doing Business Index. The results suggest that all three international indices are useful in assessing investment liberalization, promotion and facilitation. This paper argues that FDI policy needs to consider country-specific characteristics: for countries above a certain threshold FDI attraction depends mostly on macroeconomic and external factors, while other countries need to focus on specific reforms to improve investment climate.peer-reviewe

Competitiveness enhancement of international financial centres

In recent years, international financial centres have become one of the most important elements of the international financial system. Increasing globalization of the world economy raises the role and influence of international financial centres (IFC) due to extending scope of activities of IFC that currently includes financial markets, international financial and lending relations, insurance, etc. Financial centres make a substantial contribution to the overall economic development and growth of the country. The establishment and development of financial centres is a quite complex and complicated process that combines various historical, geographic, social, economic and political factors. The establishment of international financial centres is related to financial liberalization processes as well as globalization of the financial market. According to the history of financial centres, a number of factors contribute to their establishment and development: geographic location, multicultural factors, liberal legislation, stimulating tax and customs policies, immigration legislation, competitive costs of financial services, etc. However, it is not always that financial centres are established in places with favourable economic, political and social factors. It requires both a combination and interaction of different factors, as well as political will and success. The aim of the paper is basing on the examination of the factors influencing establishment of IFC, to analyze the directions of the competitiveness enhancement of Riga International Financial Centre by identifying its potential niche. The following research methods have been used in the paper: generally accepted quantitative and qualitative methods of economic research, including comparative analysis and synthesis, graphic methods, expert methods, SWOT analysis.peer-reviewe

Latest trends in assessing pension reforms

Old age pension provision constantly creates an increasing financial pressure on most of the EU countries, therefore some of European countries are in a further stage or reforming pension system, others already completed transformation and became an object of analysis and surveillance for researchers and policymakers. Over the years attitude towards the role of pension system in economy changed significantly from simple provision of retirement benefits and income distribution to indisputable contribution to a very wide range of economic, social and other processes. Nowadays pension system is supposed to be the instrument of impact and all reforms, even parametric, have a consequent effect on work and tax incentives, welfare, consumption, demographic indicators, etc. Some of the results are well studied, e.g. income distribution, other outcomes, for example society’s radicalisation, only recently have become a subject of research. The aim of this study is to provide an overview of latest scientific approaches to the estimation of various effects of pension system’s reform including the influence of parametric corrections. Scientific papers of Latvian and foreign researchers have been considered, systemized and characterised according to the main idea of research. The study provides conclusions on the extent of research on different effects and points out the most actual and up-to-date directions of scientific activities. The results of this study can be implemented for identifying the most untapped area of research, for further investigation and for the assessment of reform from the perspective of the newest scientific achievements