Challenges to Overcome in Financial Innovation

What Is Financial Innovation?

Financial innovation is the process of generating new financial goods, services, or procedures. Financial innovation has emerged via developments in financial instruments, technology, and payment methods. Digital technology has helped to change the financial services business, transforming how consumers save, borrow, invest, and pay for things.

While huge banks continue to invest in mobile banking, FinTech startups, like Stripe, enable small businesses execute online payments, while investment broker Robinhood attempts to democratize investing and finance. These advances have expanded the number of financial providers accessible to consumers, borrowers, and enterprises.

Understanding Financial Innovation

Financial innovation is a generic word that may be broken down into particular categories depending on improvements to different areas of the financial system. While the following is not an entire list, key financial advances have emerged in the raising of equity capital, remittances, and mobile banking.

Diversity and Organisational Health in Financial Services  Building the  Foundation for Innovation - The World Financial Review

Investment Crowdfunding

Investment crowdfunding has started to open up and make the process of raising equity money more democratic. While investing in early and growth-stage companies used to be reserved for a privileged few (generally institutional investors), new infrastructure and regulations have allowed individual retail investors to invest in projects they are passionate about and/or have other connections to for a small sum. Individuals acquire shares of the new firm equal with the amount they have invested.

Two prominent sites for equity crowdfunding are SeedInvest and FundersClub. In addition, micro-lending sites such as LendingClub and Prosper provide for debt financing akin to crowdfunding. In this asset class, instead of owning part of the firm, people become creditors and earn recurring interest payments until the debt is finally paid back in full. Also, P2P lending markets allow both consumers and organizations to acquire full or partial loans.


Remittances are another area that financial innovation is altering. Remittances are monies that expatriates send back to their place of origin by wire, mail, or internet transfer. Given the amount of these payments globally, remittances are economically important for many nations that receive them.

In the early 2000s, the World Bank built a database where consumers could compare the costs of various transfer providers. The Gates Foundation later started monitoring remittances in 2011. Western Union and Moneygram historically monopolized remittances; but, in recent years, entrepreneurs such as Transferwise and Wave have challenged with their lower-cost applications.

Given the beginning of Bitcoin, Ethereum, Stablecoins, and Blockchain technology, remittances are becoming more economical. The decreased expenses are in accordance with the Sustainable Development Goals (SDG) of the World Bank to cut the cost of remittances from 7% to 3% by 2030.

Mobile Banking

Finally, mobile banking has made substantial advancements for retail clients. Today, many banks like T.D. Bank provide extensive applications with choices to deposit checks, pay for items, transfer money to a friend, or locate an ATM instantaneously. It is still necessary for clients to establish a secure connection before signing into a mobile banking app in order to prevent their personal information being hacked.

Same risk-same rule: a modular approach to regulation for financial  innovation and BigTech - Florence School of Banking and Finance


Financial Innovation (FIN) offers a worldwide academic platform for sharing research results across all sectors in financial innovation in the age of electronic commerce. It intends to enhance contacts among scholars, policy-makers, and practitioners and stimulate research ideas on financial innovation in terms of new financial instruments as well as new financial technology, markets, and institutions. Furthermore, this magazine stresses developing financial products, processes, and services that are enabled by the arrival of interruptive technology. The journal is peer-reviewed and publishes both high-quality academic (theoretical or empirical) and practical studies in the wide fields of financial innovation. Topical areas of interest include, but are not limited to: asset pricing, behavioral finance, big data analytics in finance, computational financial intelligence, corporate finance, derivative pricing and hedging, disruptive financial models, extreme risks and insurance, financial economics, financial engineering, financial instruments, financial intermediation, financial market, financial risk management and analysis, high frequency and algorithmic trading, household finance, innovative financial services, international finance, internet and mobile finance, legal and social issues of new finance, public finance and taxation, and other relevant topics. In particular, this journal specifically invites research papers that explore real-world implications around applications and management of blockchain, artificial intelligence, big data, Internet-of-Things, and other advanced computers such as 5G adoption in banking and other financial services.