Financial innovation: theoretical issues and empirical evidence in Italy and in the UK (original) (raw)

Innovation changes and the traditional financial sector

Humanities & Social Sciences Reviews, 2022

Purpose of the study: The main objectives of this work are to analyze the innovation process in general and financial Innovation in particular, during which potential effects will appear on the financial structures of economic units and considering the recent financial events of the crisis of the subprime discuss whether financial Innovation is a source of growth or, on the contrary, is a source of financial instability. Methodology: The financial crisis has cast a shadow over recent financial innovations, particularly those that call for risk elimination. This research used secondary methods for innovation changes and traditional financial sectors. The secondary research method will collect data through google, websites, books, and other sources. Main findings: The main goal of financial technologies offered by entities in this sector is to improve the efficiency and availability of financial services, both from the customer and the perspective and a financial institution. The digi...

Innovation Drivers in Retail Banking: The Case of Italian Banks

Innovation is more than ever a hot topic among company executives in every country and industry sector. It is common knowledge that it is a key factor for mature industries to remain competitive. We focus on the retail banking sector, examining the particular case of Italian banks, and ask what drives innovation? Although managers are responsible for bringing new products and services to the market, do they utilise a formal process to capture such opportunities for their customers? We compare retail banking with other service and manufacturing industry sectors to identify where innovations are captured. We also interviewed several Italian retail banking executives to compare the results found previously in the literature. Finally, we provide a framework for managers working in retail banking to be aware of where the opportunities for developing new products and services may come from.

Banks and innovation: Microeconometric evidence on Italian firms☆

Journal of Financial Economics, 2008

In this paper we investigate the effect of local banking development on firms' innovative activities, using a rich data set on innovation for a large number of Italian firms over the 1990's. There is evidence that banking development affects the probability of process innovation, particularly for small firms and for firms in high(er) tech sectors and in sectors more dependent upon external finance. The evidence for product innovation is weaker. There is also some evidence that banking development reduces the cash flow sensitivity of fixed investment spending, particularly for small firms, and that it increases the probability they will engage in R&D.

FINANCIAL INNOVATION, TECHNOLOGICAL IMPROVEMENT AND BANKS' PROFITABILITY: AN EMPIRICAL INSIGHT

An increasing trend of development in the financial system, with the use of information technology and the modernization of products and services, has led to financial innovation being considered one of the most important topics in the research community. The paper discusses the role of financial innovation and its importance in the modern financial system. We have proxied financial innovation in three dimensions, namely Fintech infrastructure, Fintech number of transactions, and Fintech amount of transactions; and we have tested the impact of these financial innovation variables, along with some control variables, on the profitability of the banking system. The study uses time series data from 2008 Q1 to 2021 Q4 and the ARDL Bounds test for analysis purposes. Using the ARDL model, a few proxies (latm, advtodep, cosstoinc, netpltonetloan, postram) of financial innovation demonstrate a positive and significant relationship in long run implying that financial innovation has an effect on the profitability of the financial sector in long run. _____________________________________________________________________ www.ijbms.org 88 their funds and other transactions (Fohlin, 2016), from a simple exchange between lenders and borrowers to the complex models and software-based transactions, it has traveled a great deal of innovation. Since the medium of communication keeps on changing, or to say, it keeps on advancing, therefore the problems related to the exchange of funds, transactions, market dynamism vary over time, the financial system has kept on evolving itself to meet the needs. A typical financial system involves Banks, financial institutions other than banks, financial markets, financial transactions, financial instruments, and financial services. The financial system, as a whole, and its components have a long history of innovation and evolution. When it comes to instruments and institutions, both can be understood from global, regional and local perspective. Today, the world has a global financial system, that includes, global financial institutions and instruments (Verdun, 2018), whereas every region has its own such systems as well (García-Herrero & Wooldridge, 2007). Similarly, every country has its local financial system including its all relevant components (Kendall, 2012). These three levels of financial systems have their innovation-based evolution. Pakistan has a local financial system. Not only globally, but in developing countries like Pakistan, financial innovation enlarges the financial sector and ultimately contributes to the growth and economic development. This makes financial innovation a high priority in countries like Pakistan which direly needs growth and development. Historical Background: Evolution of Financial System The main role of the financial system is to channel savings from ultimate lender to ultimate borrowers. Households and institutions i.e insurance companies, pension funds, and mutual funds. Some credit is provided directly from the lender to borrowers like corporate bonds, treasury securities, and municipal bonds, and other investments on behalf of households. The financial system has evolved through various stages from its beginning and therefore it is important to understand how it has been developed and changed up till now. Before industrialization, the medium of exchange and its development was the point of concern for finance. Methods of payments were the main factors in the development of the financial system and barter was inefficient. To discourse this need, two financial innovations evolveddeposit bank and bill of exchange. After the mid of nineteen century, when large scale industrialization was originated and urban society expanded, the role of finance was modified. Now, mobilizing resources for heavy capital investments and large scale infrastructure was the main role of finance. But due to fraud and mismanagement, this system suffered and experienced crises. Soon in the 1930s, after great depression governments

A model for managing innovation in banks

Vikalpa, 1986

Considering the critical role of nationalized banks in India's economic transformation, there is a need to replace the present piecemeal approach to innovation by a systemic approach similar to that underlying the setting-up of R & D departments in manufacturing organizations.

Can we have a general theory of financial innovation processes? A conceptual review

Financial Innovation

Introduction: Since the financial crisis of 2008, the theory of financial innovation has been a focus at a time of re-evaluation and re-conceptualization. However, little has been done to evaluate the current state of research considering the increasing complexity of financial innovation. This paper examines the hypothesis of a general theory that encompasses increasing complexities in the financial innovation process. Methods: The paper begins with an overview of the definitions, the features, and the classification schemes of financial innovation. Additionally, the paper reviews the existing literature on the main objects of study in financial innovation and groups the findings under four main concepts. A conceptual analysis is presented that evaluates current approaches to the study of the financial innovation process and the difficulties inherent in constructing a single general theory. The paper proposes a framework based on a meta-theory of financial innovation as a better approach to understanding the inherent complexities and diversities affecting financial innovations. Discussion: (1) Financial innovations present diversities and complexities that make it infeasible to build a unifying general theory to explain their development. (2) The current state of research on financial innovation theories is limited and requires additional input. (3) A meta-theory that identifies, classifies, and connects theories of development for financial innovations is better suited to explaining the complexity of financial innovation processes.

Financial innovation and its governance: Cases of two major innovations in the financial sector

Financial Innovation, 2017

The power of financial innovations to affect societies on global and intergenerational levels compels us to ask how we can ensure their responsible emergence in society. This requires an understanding of how innovation occurs and how it is governed in practice. Despite this, there is little research on the process and governance of financial innovation. The few studies conducted in this area have focused on the 'backend' of the innovation process. Therefore, using data from secondary sources, this study investigates how two major financial innovations occurred and were governed, and it discusses the findings in relation to those in the literature. This approach revealed that innovation processes fall within a continuum ranging from structured to unstructured. Moreover, lead times are potentially longer for innovations that are significantly disruptive, new to the market, and technological in nature. Finally, innovation processes can involve multiple stakeholders who use both statutory regulation and self-regulation for innovation governance. This paper concludes that innovation processes and their governance can vary significantly according to different areas of the financial landscape and associated innovation contexts. Thus, there is a need for more empirical work to understand such variability and practices in the sector as a whole.