Introductory Chapter: Modern World of Finance

1. Introduction

Finance is monetary phenomena and processes, or in other words, monetary resources, operations, and legal norms relating to them. Finance is also a social relationship that arises from collecting and spending money. Therefore, the science of finance examines money streams flowing between economic entities during the processes of production, distribution and exchange (consumption), and material accumulation, as well as money resources collected and distributed during these processes [1]. The science of finance studies and explains the economic content of the mentioned monetary phenomena and processes, that is, the connections and dependencies between the flow of money streams and the distribution of its resources and the flow and distribution of resources of products, material and immaterial services, and human labor [2]. The subject of interest in finance is the possibility of using the abovementioned relationships and dependencies to use money to control the planned course of material processes, that is, the production, distribution, and consumption of products and services [3]. The subject of interest in finance is primarily its creation in the banking system, the movement of money – circulation between various economic units and their groups, and “settling” in the form of savings and monetary reserves [4]. Therefore, finance is a field of science that deals with the analysis of how people allocate available financial resources in a given period, or it should be defined as all economic phenomena related to the accumulation and distribution of monetary resources, which can be defined as economic relations resulting from the movement of money, with collecting and spending monetary resources [5]. Finance features:

On a macroeconomic scale:

1. Passive: they record in monetary terms what is happening in economic life without influencing its modifications or structure.

2. Active: they implement a specific system of incentives by means of which they influence the course of economic processes.

On a microeconomic scale:

1. Distributive: involves transferring material values between various economic entities using money.

2. Control: involves the use of relationships between the movement of monetary resources and the movement of material value in order to obtain signals about the course of economic processes from the observation of the course of financial phenomena.

3. Stimulation (motivational): related to the active role of finance in the economy. Its aim is to influence the efficiency of collecting and spending money. For this purpose, it is necessary to use financial incentives that motivate to undertake or conduct activities or activities in exchange for monetary benefits.

It is commonly believed that finance occurs where money is used in economic processes and is usually defined as all phenomena and processes related to the accumulation, flow, division, and expenditure of monetary resources. In connection with this broad definitional analysis, finance should be defined as a “multi-paradigm” economic science, the subject of which is the description, analysis, and assessment of globalization processes, choices, and financial decisions made under conditions of risk by economic units [6]. That is why, scientific discourse on the unified division of scientific fields and disciplines is so important. It is undoubtedly an issue to consider whether, like management sciences, we should also separate the science of finance, which will be a discipline of economic sciences focusing on financial processes. Especially, as nowadays, in some classifications, there is economics and econometrics (although it is more of a research method involving the study of quantitative relationships between economic phenomena and variables), and in others, we have economics and finance as a discipline in the field of social sciences. We can see that even the classification of scientific fields and disciplines requires unification, and this is not easy and unambiguous. Although there is undoubtedly no business, management or economics (globally functioning scientific disciplines) without analysis and conclusions from the results that finance gives directly relating to monetary valuation. Therefore, just as energy is the driving force of the economy, finance is the foundation of all economic activities [7]. In modern times, knowledge and skills in the field of finance should be developed already in primary education [8] especially due to the continuous development of finance as a field that concerns all economic units, and therefore the entire society. Additionally, due to the fact that, apart from the traditional approach, where there is a connection between the monetary sphere of the economy and the real sphere, that is, financial phenomena arising in connection with the production of goods and services that meet human needs, we are dealing with an autonomous approach. This results in a reality in which the sphere of finance exists separately from the real sphere (autonomy of the sphere of finance) and money exists in an abstract (symbolic) dimension, which causes many processes that directly affect entire economies and societies operating on the global market.

2. Financial literacy and the importance of financial education

Financial education is understood as a process enabling the improvement of the low level of financial literacy, that is, knowledge, skills, but also awareness and financial behavior appropriate to the situation. However, due to the dynamic development of the complexity of the financial market, this process requires adaptation to the changing environment. Although financial education has evolved, both in terms of its importance and in relation to the organization and implementation of the entire process, the changes have not kept pace with the multi-faceted development of the global financial market. Additionally, the reason for the lack of financial success in societies in many countries is often considered to be their low level of financial literacy, which often results from insufficient financial education. The abovementioned development and the accompanying increasing complexity of all segments of the financial market require new educational content and forms. Meanwhile, financial education, especially on a larger scale, has not changed much over the years. Innovations in financial education are understood as new or transformed existing solutions in various areas related to the financial education process [9]. Therefore, financial education is an important process that makes it possible to improve the low level of financial awareness in the societies of many countries [10]. Many economic entities (governments, financial institutions, businesses, and households) are interested in improving low levels of literacy due to its impact on both the well-being of society and the economy [11]. This situation means that the importance of financial education continues to grow. In recent years, the number of activities in these areas has increased rapidly [12]. The most important innovations in financial education include solutions for organizing the financial education process, new, extended educational content and a number of new forms of financial education [13]. This confirms its importance among the necessary competences in an economy based on the information society, the development of which is related to information technology.

With globalization and technical progress, the demand for information is growing [14]. It can be transmitted, saved, and processed, but nowadays, information also functions in the virtual world, that is, the Internet space, where it is collected in databases. Its quantity has resulted in the need to solve new problems and search for optimal solutions, which is illustrated by the area of interest in big data. Information is an interdisciplinary, ubiquitous term, in common use and associated with various adjectives, for example, economic, legal, tourist, and financial information. At the same time, financial knowledge is the basis for functioning as an economic entity on the markets of the global economy. Therefore, the consequences of financial illiteracy are fundamental to functioning in social exchange markets. Frauds taking advantage of ignorance in this matter are commonplace, and regulators cannot keep up with changes in the law to properly protect financial market participants, as evidenced by international credit scandals around the world.

Nowadays, running a business or investment activity requires the ability to search, analyze, and use selected information to support decision-making processes. A special role in obtaining information about economic entities is assigned to financial statements, which should provide useful financial information. This is why, financial information is so fundamental in the information society. Especially, as new information technologies are rapidly developing and being used in this field so much so that the world has designated a new area of interest under the term Financial Technology (FinTech).

3. The needs for digital financial literacy in the FinTech (financial technology) era

Digital finance, often referred to as financial technology (FinTech), is the application of digital technologies to financial activities [15]. Consumers and businesses are increasingly using digital financial services. The COVID-19 pandemic has further increased this trend [16]. Digital finance is new financial technologies can facilitate access to financial services and improve the efficiency of the financial system [17]. Digital finance is the delivery of traditional financial services digitally, through devices such as computers, tablets, and smartphones [18]. Digital finance has the potential to make financial services accessible to underserved populations in areas that lacked physical infrastructure for these services [17]. We are currently witnessing the digital transformation of financial services, which additionally increases the need for financial education of entire societies [19].

Digital finance is the term used to describe the impact of new technologies on the financial services industry. It includes a variety of products, applications, processes, and business models that have transformed the traditional way of providing banking and financial services [20]. While technological innovation in finance is not new, investment in new technologies has substantially increased in recent years, and the pace of innovation is exponential [21]. We now interact with our bank using mobile technology. We make payments, transfer money, and make investments using a variety of new tools that were not there few years ago [22]. Artificial intelligence, social networks, machine learning, mobile applications, distributed ledger technology, cloud computing, and big data analytics have given rise to new services and business models by established financial institutions and new market entrants. All these technologies can benefit both consumers and companies by enabling greater access to financial services, offering wider choice and increasing efficiency of operations.

The digital revolution of the financial system along with the development of cryptocurrencies requires changes in financial education and its adaptation to changes introduced in the functioning of global financial markets. Nowadays, scientists, experts, and practitioners are looking for technological solutions and appropriate legal conditions for the most beneficial use of the achievements of the FinTech field. That is why, this monograph presents multi-aspect research on all possible solutions in the field of FinTech, what is the future of finance in today’s global markets.

We would like to thank all those who contributed to the creation of this publication, and especially the authors for their inspiring scientific considerations. As the editor of this monograph, I hope that many of the presented issues will motivate the reader to become interested in the subject matter, which will translate into undertaking own investigations and new solutions to the discussed research problems.