Cloud Technologies and Artificial Intelligence as the Basis of Digital Development of the Financial Sector of the Economy of Ukraine Maryna Demianchuk 1, 2, Natalia Maslii 1, 2 and Olena Kniazieva 3 1 Odessa I.I. Mechnikov National University, Frantsuzkyi boulevard, 24/26, Odesa, 65044, Ukraine 2 Institute of market problems and economic & ecological research of the National Academy of Sciences of Ukraine, Frantsuzkyi boulevard, 29, Odesa, 65044, Ukraine 3 State University of Intellectual Technologies and Communications, Kuznechnaya 1, Odessa, 65029, Ukraine Abstract In the modern world, digitalization processes are the basis for stimulating the country’s economic growth. The intensity of globalization processes leads to the economic integration of the economies and financial sectors of the countries of the world. The main trend of the modern financial sector is the accelerated introduction of technological innovations, innovative financial services and tools for their implementation. The use of digital technologies helps to reduce the cost of maintenance and operational risks. Creating a digital basis for serving consumers by finance companies increases their productivity and spurs more innovation in the financial arena. This, in turn, maintains the soundness of the financial sector. Restyling of financial services is based on the use of artificial intelligence and cloud technologies by financial companies, which allows to meet the needs and expectations of consumers. The use of tools for digital transformation of the financial sector provides maximum personalization, while using a large variety of parameters. Tracking and comparing changes in regulatory documents using RegTech and NLP provides an important area of activity for financial companies - compliance. An inevitable process is the virtualization of information interaction between financial sector entities based on the use of cloud technologies. However, the imperfection of these technologies at the moment does not allow them to be fully used. Therefore, in order to create favorable conditions for the introduction of innovations in the financial sector based on cloud technologies, it is necessary to implement a number of actions proposed in the article. The studies carried out allow us to assert that due to digital transformations of the financial sector, the efficiency of business processes increases and powerful advantages of its subjects are formed. But at the same time, there are some restrictions on their full implementation and risks on the way to the development of the digital financial sector in Ukraine. The proposed potential means of accelerated digitalization of the financial sector of the economy are in the large-scale and all-encompassing use of cloud technologies and artificial intelligence. Keywords 1 financial sector, digitalization, financial innovation, ICT, artificial intelligence, cloud technologies, restyling, RegTech 1. Introduction A significant trend in the development of the world economy in the 21st century is the spread of ICT, which provided opportunities for the development of the “digital economy” and caused the ISIT 2021: II International Scientific and Practical Conference «Intellectual Systems and Information Technologies», September 13–19, 2021, Odesa, Ukraine EMAIL: ma- demyanchuk@ukr.net (A. 1); masliy.natalia@gmail.com (A. 2); 7234275@gmail.com (A. 3) ORCID: 0000-0002-3907-3464 (A. 1); 0000-0002-3472-5646 (A. 2); 0000-0002-9853-0637 (A. 3) ©️ 2021 Copyright for this paper by its authors. Use permitted under Creative Commons License Attribution 4.0 International (CC BY 4.0). CEUR Workshop Proceedings (CEUR-WS.org) introduction of the concepts of “digitalization” into face of growing competition and transformation scientific circulation. In the modern world, significant into service companies investing in the mega-regional changes are taking place with varying development of the digital economy, rather than intensity and results. They are caused by the traditional services, is emphasized [3]. The use of intensification of the processes of globalization of the artificial intelligence and RegTech provide new world economy and the expansion of economic opportunities for high-quality regulation and integration, changes in the structure of national settlements in the financial sector [4], influencing economic systems [1], transformational shifts. At the the banking and financial stability [5]. The same time, the process of transition from an industrial introduction of new technologies (cognitive society to the development of the information space technologies, robotics, IoT / connected devices, is under way. Its level of development significantly mobile / social media), depending on the level of affects the economy, culture, politics and financial investments and their place in the production sector of countries. process [6], affects the performance of financial The reorientation of the traditional economy to a companies. The effectiveness of investments in digital one requires the use of innovative digital technologies is manifested in the indicators technologies, including in the financial sector. of the company’s performance and labor According to the adopted “Strategy for the productivity. However, it is necessary to take into development of the financial sector of Ukraine until account their biggest threats [7], companies’ value 2025” [2], the main directions of innovative chains, commodity risks. development of the financial market of Ukraine are The imperatives of the digital transformation of determined: development of an open architecture of the financial sector (digital statistics, managed data, the financial market and oversight; ensuring the integrated customer experiences, digital marketing, development of the FinTech market, digital digital operations, next-generation technologies and technologies and regulatory platforms; ensuring the digital tools) act as a factor in maximizing the ROI development of SupTech & RegTech; development of digital investments [8, 9, 10]. The use of cloud of the digital economy. The development of the technologies in practice requires the selection of the financial sector at the present stage is associated most appropriate model for the secure deployment with the use of the latest information technologies. of such a cloud, taking into account the level of The development and use of technological information security of the company, confidentiality innovations by institutions of the financial sector and compliance with the necessary requirements is one of the important areas for the successful [11, 12, 13]. At the same time, the introduction of development of the national financial services cloud computing technologies and services in the market in Ukraine. The introduction of the latest financial sector of developed countries increases the ICTs leads to a reduction in costs and an increase efficiency of payment transactions, risk in labor productivity, the creation of remote jobs, management and business processes. Ensuring the development of distance learning, etc. This digital development of the financial sector of the will help to increase the income of financial economy provides an opportunity to determine the institutions, enhance their competitiveness in the further development [14] of companies from the market, improve the image and increase the level standpoint of competition or symbiosis. Taking into of confidence on the part of non-financial account the research carried out, in order to ensure corporations and households. the digital development of the financial sector of the Ukrainian economy, additional research requires tools for the implementation of such development. 2. Researches of the imperatives of the digital transformation of the 2.1. The financial services market in financial sector the context of digitalization The financial sector receives the greatest benefits from the use of digital technologies, Existing studies do not fully disclose the tools therefore, scientists from different countries are for implementing the strategy for the development studying the issues of transformation processes of the financial sector in Ukraine. This requires and digitalization of the financial sector. At the the determination of the main development trend same time, the need to maintain stability in the of the modern financial sector; substantiation of the objective need for the use of artificial intelligence and cloud technologies, as well as well as manual processes in branches by organizing actions to create favorable conditions for the smooth operation and 24-hour availability of ATMs. introduction of innovations in the financial sector; Note that the performance indicators of financial identify the advantages, limitations, risks and institutions vary significantly. Leaders are means of accelerated digitalization of the significantly ahead of other institutions in terms of financial sector of the Ukrainian economy. the number of retail customers served in one branch, The purpose of the article is to substantiation and are successfully moving transactions to of the expediency of using cloud technologies and electronic channels. Consolidation and artificial intelligence as the main tools for dissemination of best practices can help increase ensuring the digital development of the financial productivity in the sector. Relatively efficient sector of the Ukrainian economy. financial institutions serve almost three times as many clients per branch. Building new IT infrastructures for financial institutions allows them 2.1.1. The main development trend of to manage markets for profitability. The widespread use of digital services is the future of the financial the modern financial sector in system. Ukraine has a great competitive advantage Ukraine in this area, since domestic financial institutions have long and effectively used advanced innovative Digital transformation is a new direction in the technologies in their practice. At the moment, the development of the financial sector, which involves financial sector of the Ukrainian economy is the use of new technologies, the Internet, mobile undergoing a stage of qualitative transformation and devices and a variety of electronic channels. In turn, is capable of large-scale use of cloud technologies digitalization of the financial sector is the and artificial intelligence. introduction of new technologies and data into In the context of digitalization, the financial business processes in order to increase the efficiency services market has changed dramatically and is of its activities. The factors that contribute to the developing dynamically. Today it is not enough to spread and development of digitalization of the apply traditional methods of providing financial financial sector are the development of new services. The digital transformation of the technologies, the need to reduce costs, and increased financial sector of the economy involves the competition. It is expected that plastic cards will be restyling of financial services. Changes are taking replaced by smartphones with an Internet bank, but, place from customer service to machine learning on the other hand, this requires significant and from artificial intelligence to mobility. The investments and investments. The National Bank financial industry is changing from complex and should become the driver of the development of time-consuming transactions to a more digital technologies of the financial system in transparent structure. The transition from the Ukraine, as clients begin to turn to digital services classic “product” organization to the for certain forms of financial services that are technological one is under way, new management needed by a modern Internet user. models based on digital strategy are being used. In Ukraine, there are three main challenges to To be competitive, it is necessary to create and expanding the digital format of the financial sector: properly use new forms of customer acquisition and a significant amount of paperwork and a surplus of service based on the implementation of cloud branch network; high share of cash transactions; technologies and artificial intelligence. The gradual differences in performance levels between financial digitalization of the financial sector covers its institutions. Today in Ukraine, on average, there are various areas - payment technologies, remote 2-3 times fewer clients per bank branch than in customer service, developing relationships with developed countries, which indicates the feasibility them, developing and mastering new products, risk of further network optimization. Ukrainian banks management, internal operations and others. The have strict regulation of processes and a significant implementation of such a transformation is possible amount of paperwork. by stimulating FinTech companies and introducing The branches of Ukrainian banks are overloaded sustainable financial revolutionary technologies. with cash transactions, which reflects the high share To be able to quickly and flexibly adapt to of the shadow economy and the underdevelopment changes, there is a need to use cloud platforms. of the payment infrastructure. There is significant They can help meet customer needs and potential to reduce the share of cash transactions, as expectations, enhance workflows and data integration, and improve analytic processes and corporate reporting. Therefore, financial non-compliance can lead to the application of companies are increasingly moving from “target various sanctions, financial or reputational losses. audience” to personalization, thereby protecting Natural language processing (NLP) algorithms new competitive advantages and customer loyalty. allow you to track and compare changes in regulatory documents. Therefore, the implementation of ICT for compliance is a vital 2.1.2. The objective necessity for the necessity for financial companies and a promising field of activity for IT companies through the use of artificial intelligence and cloud development of RegTech. technologies Digital technologies make it possible to virtualize the information interaction between Artificial intelligence is able to quickly find customers and financial workers providing information about any customer or transaction, services, use cloud services that provide end users therefore a number of banks. It is used to monitor with the ability to use dynamic access to services, the negotiations between managers and clients and computing resources and applications over the to conduct internal investigations. To do this, the Internet remotely. With the digitalization of the program instantly analyzes recordings from many financial sector, the use of cloud computing different sources and checks texts, audio and video solutions is increasing. recordings. Artificial intelligence systems help Complementary digitalization of any financial banks respond to various requests from regulators, company is taking place. There is a including those connected to customer complaints, complementarity of financial services, in which which usually take a lot of time and resources. the consumption of some services causes a Big data helps finance companies maximize constant need for others. At the same time, it is service levels and self-value. They form a critical to modernize the business model of a complete data map of each client. At the same financial company and transform it into a cloud time, one of the main problems is the need to platform. The use of cloud technologies allows: to study huge volumes of information about client reduce the time and financial costs of maintaining operations. The use of artificial intelligence can be the physical IT infrastructure; provide customers used to solve many of such problems as modeling, with effective multi-channel digital interaction in scenario analysis and forecasting; conducting real time; simplify and optimize business customer identification; monitoring of processes through standardization, optimization organizational culture; collection and analysis of and implementation of cloud solutions; creates data for risk management. Artificial intelligence opportunities for the introduction of advanced algorithms analyze transactions in many more technologies, in particular artificial intelligence, parameters than is possible with human work. the Internet of things, blockchain, etc. Leverage machine learning to identify suspicious With cloud computing, finance companies can transactions and dramatically reduce false alerts focus on their core business, increasing by empowering employees to focus on real issues. productivity during peak periods. Here’s a good Many banks are testing artificial intelligence example: using a smartphone, today you can make technologies for stress testing, as well as contactless payments instead of using a plastic implementing a system for combating money card and paper money. The implementation of this laundering and terrorist financing. Corresponding process is based on a cloud-based approach and a algorithms scan client documents and check the specialized service. It is built using HCE (Host received information with data from the Internet. Card Emulation) technology, which allows you to If a discrepancy is found, the so-called “red flags” emulate a physical card on a host system in the are raised, that is, a warning to bank employees cloud and transfer customer payment data to a about the need for additional study of the client. smartphone. It is noteworthy that no data remains Artificial intelligence technologies do not replace on the device itself, since during the transaction humans in making management decisions, but they come from the cloud in encrypted form. help to do it faster and better. Information technologies are being introduced quite actively into compliance, which is one of the important areas of activity of financial companies all over the world. Since the realization of risks of 2.1.3. Accelerated digitalization of activities; minimization of the risk of the human factor; an increase in the speed of decision the financial sector of the Ukrainian making; providing additional opportunities for all economy: advantages, limitations, subjects of the financial sector; lower user costs; risks and means expanding access to finance for individuals, small and medium-sized enterprises, underserved by financial services; consolidation of information Cloud computing and artificial intelligence technologies by financial organizations to provides virtually limitless opportunities for the diversify the risks of their business; expanding the financial sector. However, the technologies range of financial services and the circle of themselves are quite young and have certain potential clients; reducing information asymmetry problems that require solutions. Financial and improving pricing efficiency. institutions have large and complex IT At the same time, existing restrictions (an infrastructures that rely on mission-critical increase in the number of cases of implementation applications and meet stringent criteria and of operational decisions in the short term; extremely stringent security requirements. imperfection of legislation in the field of digital Therefore, until now, key banking applications are technologies; underdevelopment of digital not used in the cloud. The main reason is the risk infrastructure; insufficient digital culture of of transferring confidential financial information to business and other users of banking services; lack the cloud, since the security of the clouds is of highly qualified personnel; insufficient level of uncertain. To create an enabling environment for regulatory regulation of the use of FinTech cloud-based innovation in the financial sector, a companies that differ from traditional business number of actions need to be taken. model institutions; unpredictable decision- The use of cloud technologies in the financial making by consumers of online services; limited sector leads to risks of transferring confidential access due to the inadequate level of skills and the information to the cloud. They are associated with ability of consumers’ available gadgets to carry a lack of visibility and control over processes in the out online transactions) prevent the full clouds; shadow IT; the likelihood of accidental realization of the benefits. data publication; malicious data breach; distortion At the same time, the pace of development of or loss of critical data; non-compliance with the digital financial sector is reducing regulatory requirements; the presence of cloud- macroeconomic threats, digital divide, and based malware; the likelihood of malware various kinds of risks. Macroeconomic threats to spreading to the entire corporate network To digitalization are caused by a mismatch and lack minimize these risks, it is necessary to take actions of skills, reduced spending on science and to create an enabling environment for the innovation, and demographic factors. Digital introduction of innovations in the financial sector divide, digital divide, polarization refers to based on cloud technologies. Namely: analysis and inequalities in access to social, economic, determination of the composition of cloud services educational, cultural and other opportunities. on the market and regulatory barriers to their Market risk implies the negative consequences of development. Creation of standard clauses for a significant change in market conditions. Cyber outsourcing agreements, taking into account the risks arise due to the specifics of the financial requirements of the financial regulator for the IT technology environment. Technological risk service provider, including in the field of risk implies a disruption in the uninterrupted provision management, audit and supervision. Stimulate the of services as a result of failures or errors in the development of qualified auditing and cloud operation of the service. Legal risks touches upon service provider certification practices by setting the problem of insufficient consumer protection. contractual and quality label requirements in line Limitations and risks are not new. They can be with internal control maturity. strengthened by the rapid development of Thanks to the digital transformations of the FinTech and new forms of interconnection, the financial sector, the efficiency of business regulation of which is currently insufficient. processes is increasing and powerful advantages However, it is the processes of digitalization of of its subjects are formed. Namely: intensification the financial sector that contribute to the of the development of the financial sector; improvement of regulatory documents. significant increase in the return on investment in digitalization; ensuring the continuity of banking 3. Conclusions [2] National Bank of Ukraine, Strategy for the development of the financial sector of Ukraine until 2025, 2021. 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