Financial development: The concept and prospects

A significant and ever-growing body of papers revealing various aspects of financial development lead to polysemy regarding this concept. Fundamentally financial development is defined in this study as such alterations which help to reduce explicit and implicit costs related to the work of the financial system and providing its functions. Practically it is characterized by various configurations and scenarios depending on the place and time. Historically, we can see the transition from financial repression to financial liberalization, but the assessment of the consequences of financial liberalization remains ambiguous. Moreover, there are concerns that financialization, as a phenomenon of outpacing growth in the financial sector liabilities compared to the economy as a whole, will restrain incentives for financial development. However, financial innovation as another objectification of financial development can overcome the confines imposed by financialization. Financial innovations contribute more to increasing the financial inclusion and financial systems efficiency and to a lesser extent to financial deepening. In contemporary world financial development trends, driven by digitalization, lay the basis of the financial sector’s fundamental modernization. They will make it possible to overcome the imbalances that were previously associated with the concept of financialization, the weakening of the link between financial development and economic growth, and other structural issues.