Last December marked the end of three years of conflict in the Donbass region of Ukraine, Europe’s second-biggest nation. For many, the coverage of the war in the East of the country between Ukrainian government forces and pro-Russian separatists has become synonymous with Ukraine’s reputation – but not for much longer.
December incidentally also marked the conclusion of the Central and Eastern European leg of the Seedstars World Competition, a contest which aims to identify the best start-ups in emerging markets. Held in Kyiv, the winner was EVE.Calls, a Ukrainian automated communications company. After its victory, EVE’s CEO Aleksey Skripka triumphantly declared that the start-up would then begin increasing its operations in Europe and the United States and would seek a seed funding round of $250,000.
However, Skripka is far from the only Ukrainian fintech success.
Fintech In Ukraine
Video doorbell firm Ring was acquired by Amazon for $1 billion in February of this year, while Looksery, an Odessa-founded augmented reality start-up has also been bought by Snapchat for $150 million. Other well-known firms originating from Ukraine include Grammarly, BitFury and Petcube. Incidentally, Grammarly secured $110 million of funding in May, with BitFury and Petcube receiving $30 million and $10 million respectively. Even the co-founder of WhatsApp, Jan Koum, hails from Kyiv.
Start-ups from Ukraine, or founded by Ukrainians, raised $265 million in 2017, according to AVentures Capital, a Kyiv-based venture capital fund. While the amount raised in 2017 trails far behind many Western European nations – firms in the United Kingdom raised almost $4 billion, for example – it demonstrated that Ukraine has become a start-up hub compared to other countries in Eastern Europe. Furthermore, the amount raised in Ukraine by the 44 investment deals that took place in 2017 was a remarkable 231% increase on 2016.
Yet, the emergence of Ukraine’s fintech sector has been a relatively new phenomenon with 58% of the country’s 60 fintechs having been launched since 2015. In a country where the on-going conflict is estimated to have cost 20% of the country’s GDP, Ukraine’s burgeoning tech scene is showing residents that there is hope for the future.
The Triumph Of Monobank
Perhaps, the most significant success story to date is that of Monobank, a Ukrainian digital bank which provides payment services, microlending and deposits for its customers via a mobile application. Having gone live in November 2017, the platform already has over 450,000 users in a country of just 45 million people. With over 3,000 new customers signing up every day, Monobank’s story clearly shows that the Ukrainian people are willing to embrace fintech and any associated opportunities.
Monobank is the brain-child of Ukrainian entrepreneurs Dima Dubilet, Misha Rogalskiy and Oleg Gorokhovskiy. All three previously worked together at PrivatBank, Ukraine’s largest bank which has around 20 million users. Dubilet was the Information Technology Director, Rogalskiy the Head of Payments Business and Gorokhovskiy the Deputy Chairman. The trio left the company when PrivatBank was nationalized in 2016 after suffering a capital shortfall of $5.65 billion.
The trio took some time to reflect on the banking landscape in Ukraine and concluded that the then-current most technologically-advanced offering – an online banking service run by PrivatBank — could be improved upon.
“We wanted to reduce the hassle of physically dealing with the bank – no-one likes to deal with their bank in person unless it is to check their pay,” jokes Dubilet, “so, we decided interaction with your bank should be hassle-free and fun and not something that you postpone all the time.”
To open an account with Monobank, prospective customers download the app and follow a simple mobile-application process which includes sending in a photo of their passport. In accordance with Ukrainian law, it is not possible to send a bank card in the post and so Monobank has a courier network of around 100 people that will deliver your new credit card to you personally. You can then use the card to withdraw money from ATMs in Ukraine while the app allows you to send money to friends or family with just several taps of your smart-phone.
As Monobank’s operation is entirely mobile and does not involve the running of costly physical branches, the firm has been able to offer its customers cheaper interest rates and a longer grace period. “When we decided that we wanted to do banking ourselves it was natural that we went with mobile-only banking as a way of providing services and this model turned out to be very efficient because suddenly it turned out that you don’t have to pay these thousands of pounds of rental costs and transaction fees,” clarifies Rogalskiy. “We can be much more efficient compared to other banks and we don’t have fees like traditional banks have.”
According to Rogalskiy, Monobank offers an interest rate of 10-15% less than high-street banks while its grace period is up to 62 days, 50% more than other Ukrainian banks.
Paws For Thought
Bizarrely, Dubilet explains that Monobank further owes a large proportion of its initial success to an unlikely source — his pet cat.
Several months before the company launched last November, Dubilet posted a photo of his cat wearing a space backpack and it went viral. The photo was shared so many times on social media that Monobank decided to make it their logo. The company sought to capitalize on this and produced different stickers of the cat which Ukrainians have been sticking them on their smartphones and computers ever since. “They have become collectibles and you can even buy first edition stickers on eBay-like sites in Ukraine,” explains Dubilet. Talk about reactive advertising.
The community-feel to Monobank ensures that everyone’s ideas are heard and new unforeseen technology can be easily implemented. One of the company’s quirkiest ideas – cat aside – is the recent launch of its ‘sport deposit’ savings account. Offering an attractive initial interest rate of 21%, the rate falls to 11% if a participant does not complete 10,000 steps during their day. “We realized we could access the number of steps that a customer does on a daily basis if they give us their permission,” explains Rogalskiy. “We decided to try and to do a fun product around this and this is how we devised this product, with interest rates dependent on these statistics.”
While the concept may seem like a novel one, there is a very serious, altruistic side too. According to data produced by the World Health Organisation, Ukraine has the second highest death rate from coronary heart disease in the entire world at 395.73 per 100,000, with 49% of men predicted to be obese by 2030. Monobank hopes its saving account will encourage Ukrainians to make healthier lifestyle choices.
Monobank’s phenomenal success in Ukraine within the first year of operation has led the trio to think outside of the nation’s borders. While the firm hopes to continue to attract Ukrainian customers, they are also looking to introduce their unique offering to the United Kingdom before 2020, identifying it as a health-savvy market with almost total smart-phone usage.
Furthermore, Dubilet – who has previously featured on the Forbes 30 under 30 list for Ukraine — has been recently granted an ‘Execeptional Talent’ visa to live in the UK, making it a firm practical base abroad. Dubilet was awarded the permit for his work in launching the iGov NGO in Ukraine — an online platform that gave the Ukrainian government the opportunity to move its services online.
Based around the UK government’s portal, Dubilet and his team of IT specialists, many of whom who also work for Monobank, designed a platform whereby Ukrainians could, for the first time, for example, apply for a business license or a new passport online. “We thought that this would not only be far more convenient for Ukrainians but would help to eradicate corruption and back-handers our country,” he explains.
For Monobank, one of their greatest successes has been allowing an increasing number of Ukrainians to set up an account or to take out a loan in order to set up a small business — something that hasn’t always been easy in the country. “Traditionally, there has been a problem in accessing funds in Ukraine when compared to other Western European countries,” explains Rogalskiy. “We don’t have as may venture capital funds and of course it has therefore been harder for our entrepreneurs to get access to funds. However, we are now able to issue more loans to people as not only do we save costs on branches and transactions, but we can predict better who has a higher chance of returning the money.”
“We have great potential in Ukraine, an extremely tech-savvy population and we have more and more people who are now using their skills to launch new ventures. A lot of our credit goes to small enterprises who have their own businesses that need a little more cash, for example, to help to open a small store or to purchase equipment.»
«The future certainly looks bright here.”
© Forbes, Joe Wallen