Innovations in Financial Services - A Bird’s Eye View
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Date
2013
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Abstract
The fmmtcial services inchtslry is transforming a! a very fas! pace. Globa/izalion of
markets is increasing competition from new geographies and other industries. Innovation is
recognized as the critical source of economic growth and of improvements in social welfare.
Innovation always changes the status quo. but some innovations cause greater disruption than others.
In the most severe cases, radical innovations fundamentally change society and spawn further
generations of innovation. In today's fast-changing markets, financial services institutions are facing
a wide range of inhibitors to achieve the objectives such as Customer attraction and retention.
Greater operational efficiency. Enhanced productivity, Compliance and security. Financial
innovation is the act of creating and then popularizing new financial instruments, technologies,
institutions, markets, processes and business models — including the new application of existing ideas
in a different market context. Innovation in financial services is no exception to the rule that every
silver lining has a cloud. Financial innovation is not monolithic. Careful observers accept that some
financial innovations are good, like the invention of the ATM that was praised even by Paul Volcker.
Other innovations, like the late and unlamented Structured Investment Vehicles (SIV's), are bad. The
real trick is listing and evaluating the major innovations and determining the balance of the good and
the bad.