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Article
Publication date: 10 January 2022

Mohammad G. Nejad

The financial industry offers a unique setting to study innovations. Financial innovations have fueled the growth of economies, markets and societies. The financial

Abstract

Purpose

The financial industry offers a unique setting to study innovations. Financial innovations have fueled the growth of economies, markets and societies. The financial industry has successfully become the breeding ground for innovative services, processes, business models and technologies. This study seeks to provide a holistic view of the literature on financial innovations, synthesize the research findings and offer future directions for research in light of three market developments that are disrupting the industry and opening up a new era for the financial services industry. Disruptions from within and outside the industry offer new generations of radically innovative services. Moreover, new generations of consumers differ from previous generations in their needs and wants and look for innovative ways to handle their financial needs. Finally, significant developments related to financial innovations have emerged in Asia and developing countries.

Design/methodology/approach

This study systematically reviews the academic research literature on financial innovations in two phases. The first phase provides a quantitative review of 546 journal articles published between 1990 and 2018. In the second phase, the study synthesizes the extant research on financial innovations and maps them in five research areas: firms' introduction and adoption of FIs, financial innovation development, the outcomes of financial innovations, regulations and intellectual property, and consumers.

Findings

The analysis found that disciplines differ with regard to the employed research methodologies, the units of analysis, sources of data and the innovations they examined. A positive trend in the number of published articles during this period is observed. However, studies have primarily focused on the USA and Europe and less so on other parts of the world. The literature synthesis further identifies research gaps in the available research that highlight future research opportunities in light of the three market disruptions. The financial services industry is on the brink of a new era due to disruptions from within and outside the industry and the entrance of new generations of consumers. Moreover, the financial industry has successfully become the breeding ground for innovative services, processes and business models. Therefore, financial innovations offer promising opportunities for bridging the gap between research on product and service innovations.

Research limitations/implications

The work provides a holistic and systematic overview of extant research on financial innovations and highlights future research opportunities in light of the three disruptive market developments. It helps researchers take advantage of the opportunities in studying financial innovations while maintaining industry relevance.

Originality/value

The study is the first to review and synthesize the academic research literature on financial innovations across marketing, finance and innovation disciplines. In addition, the study highlights three primary disruptive forces in the financial industry and identifies future research directions in light of these disruptive forces.

Details

International Journal of Bank Marketing, vol. 40 no. 3
Type: Research Article
ISSN: 0265-2323

Keywords

Article
Publication date: 1 June 2021

Sholikha Oktavi Khalifaturofi'ah

This study aims to examine the effect of financial innovation, financial ratios, cost efficiency and good corporate governance on the financial performance of banks in Indonesia.

Abstract

Purpose

This study aims to examine the effect of financial innovation, financial ratios, cost efficiency and good corporate governance on the financial performance of banks in Indonesia.

Design/methodology/approach

The data in this study are in the form of annual financial statements of conventional banks in Indonesia. The effect of cost efficiency, innovation and financial performance of banks in Indonesia is expected to be evident in 2009–2018. The research method used is the panel regression method.

Findings

The results show that financial innovation affects the financial performance of banks. Cost efficiency has a negative effect on the financial performance of banks. Financial ratio, which is proxied by the capital adequacy ratio (CAR) and loan to deposit ratio, has a positive effect on return on asset and net interest margin. Financial ratio, which is proxied by nonperforming loan and equity to total assets, has a negative effect on return on asset and return on equity. Good corporate governance (GCG), which is proxied by the proportion of managerial ownership (PMO), does not affect the financial performance of banks, whereas GCG, which is proxied by the proportion of independent board of directors, has a negative and significant effect on the financial performance of banks in Indonesia.

Practical implications

These results are a warning to bankers and the government to be cautious when formulating a strategy for the financial performance of banking.

Originality/value

Cost efficiency and financial innovation are important for the financial performance of banking. However, the possible impact of cost efficiency and financial innovation in Indonesia does not have a significant impact. The study uses static panel estimation techniques to analyze the data.

Details

Journal of Economic and Administrative Sciences, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1026-4116

Keywords

Article
Publication date: 1 August 2016

Li Li, Renxiang Wang and Xican Li

According to the grey uncertainty and the connotation of different types weights, the purpose of this paper is to establish the pattern of multi-dimensional grey fuzzy…

1236

Abstract

Purpose

According to the grey uncertainty and the connotation of different types weights, the purpose of this paper is to establish the pattern of multi-dimensional grey fuzzy decision making with feedback based on weight vector and weight matrix, and applies this pattern to evaluate the regional financial innovation ability.

Design/methodology/approach

At first, this paper analyzes the connotation of financial innovation ability and establishes the evaluation system of regional financial innovation ability. Second, the formula of computing the multi-objective weighted comprehensive value based on weight vector and weight matrix is put forward. In view of the object function with supervised factor and stability coefficient, this paper gives the formulas to compute weight vector and weight matrix. Moreover, the algorithm of the multi-dimensional grey fuzzy decision making pattern with feedback based on weight vector and weight matrix is expressed. At last, this paper uses the presented pattern to evaluate the financial innovation ability of thirty-one provinces in China.

Findings

The results are convincing: the development of regional financial innovation is not balanced in China, having obvious spatial clustering feature. The comparisons of evaluation results based on different forms of weights show that the calculating convergence speed of the pattern presented in this paper is fast. The pattern enhances the rationality of the demarcation point between categories, and the convergence within categories, making the evaluation more reasonable.

Practical implications

The method exposed in the paper can be used at evaluating the regional financial innovation ability and even for other similar evaluation problem.

Originality/value

The paper succeeds in realising both the pattern of multi-dimensional grey fuzzy decision making with feedback and evaluating the regional financial innovation ability by using the newest developed theories: weighted grey and fuzzy recognition theory based on weight vector and weight matrix.

Details

Grey Systems: Theory and Application, vol. 6 no. 2
Type: Research Article
ISSN: 2043-9377

Keywords

Article
Publication date: 23 October 2009

Torben Juul Andersen

The purpose of this paper is to argue that strategic responsiveness is of paramount importance for effective risk management outcomes and to introduce an empirical study…

2675

Abstract

Purpose

The purpose of this paper is to argue that strategic responsiveness is of paramount importance for effective risk management outcomes and to introduce an empirical study to demonstrate this.

Design/methodology/approach

Real options logic is adopted to explain how effective risk management capabilities improve performance and how innovation and financial slack enhance this effect. The propositions are examined across 896 companies using two‐stage least square regressions.

Findings

The study reveals that risk management effectiveness combines both the ability to exploit opportunities and avoid adverse economic impacts, and has a significant positive relationship to performance. This effect is moderated favorably by investment in innovation and lower financial leverage.

Research limitations/implications

The analysis is based on a sample of large firms, which may affect the generalizability of results. Nonetheless, the study shows that effective risk management capabilities differentiate the firms and determine success and failure. It further underscores the importance of combined innovation policy and capital structure decisions as firms deal effectively with risk and uncertainty.

Practical implications

The findings indicate that corporate management must consider commitments for innovation and financial slack to enhance positive risk management effects. This result is in dire contrast to traditional beliefs that tighter resource management and higher financial leverage lead to better economies.

Originality/value

This is one of few studies to explicitly consider strategic responsiveness as instrumental for effective risk management outcomes while investigating the economic effects associated with the ability to combine generation of upside gains and downside loss avoidance.

Details

Journal of Strategy and Management, vol. 2 no. 4
Type: Research Article
ISSN: 1755-425X

Keywords

Article
Publication date: 1 February 2016

Andrey Martovoy and Anne-Laure Mention

– The purpose of this paper is to map the existing patterns in the development of services innovations in financial institutions.

1769

Abstract

Purpose

The purpose of this paper is to map the existing patterns in the development of services innovations in financial institutions.

Design/methodology/approach

The data come from a dedicated survey of banks located in Luxembourg. Executives and innovation managers reported on banks’ innovation processes for the period of 2010-2012.

Findings

The study unveils four patterns of new service development (NSD) processes. The problem-driven pattern starts with problem definition and represents a bank’s response to an issue. The proactivity-driven pattern commences with idea generation to explore a variety of alternatives. The market-driven pattern emphasises a profit rationale and starts with a business analysis. The strategy-driven pattern frames idea generation within the scope of business goals and starts with the development of a service concept. Most banks keep a balance between being open and closed to cooperation with external partners in the innovation process. Service concept development is the stage most open to the cooperation for innovation, while introduction to a market is the opposite.

Research limitations/implications

The national context and small sample size are the limitations of this study. Promising research avenues include the extension of findings to other settings and understanding of the effects of NSD patterns.

Practical implications

Banks adopt different approaches to the innovation process in order to pursue their innovation goals. Practitioners may use this knowledge in order to re-think the way they innovate.

Originality/value

The unveiled mapping of NSD processes contributes to the understanding of the innovation in financial services. The findings will be valuable for innovation managers, scholars, and students.

Details

International Journal of Bank Marketing, vol. 34 no. 1
Type: Research Article
ISSN: 0265-2323

Keywords

Article
Publication date: 2 May 2017

Melanie Brody, Ori Lev, Jeffrey P. Taft, Guy Wilkes, Matthew Bisanz, Tori Shinohara and Joy Tsai

To summarize developments by the US Consumer Financial Protection Bureau (“CFPB”), the US Office of the Comptroller of the Currency (“OCC”), and the UK Financial Conduct…

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Abstract

Purpose

To summarize developments by the US Consumer Financial Protection Bureau (“CFPB”), the US Office of the Comptroller of the Currency (“OCC”), and the UK Financial Conduct Authority (“FCA”) in their respective efforts to facilitate responsible financial innovation, and to predict what the financial services industry may expect in coming months.

Design/methodology/approach

This article summarizes financial marketplace developments of particular interest to the CFPB based on the CFPB’s report on its initiative to support responsible financial innovation and CFPB Director Richard Cordray’s speech at the Money 20/20 conference. The article also discusses the OCC’s release of a framework for its “Innovation Initiative”, providing insight to how the agency intends to engage with the fintech industry. Finally, this article explains how the FCA has identified the first cohort of firms to participate in its regulatory sandbox to test new financial products and services as part of the FCA’s wider “Project Innovate” initiative.

Findings

Financial technology innovators should closely monitor the agencies’ recent regulatory and policy developments to facilitate responsible financial innovation to be aware of new opportunities and regulatory consequences.

Originality/value

This article provides practical advice for fintech companies and other financial innovators on regulatory and policy updates from experienced financial services lawyers.

Book part
Publication date: 21 October 2019

Omer Unsal and Blake Rayfield

In 1971, the patent for the Automated Teller Machine was awarded to David Wetzel. While possibly not the first application of financial technology, since 1971 time, the…

Abstract

In 1971, the patent for the Automated Teller Machine was awarded to David Wetzel. While possibly not the first application of financial technology, since 1971 time, the innovation in the financial industry has grown beyond expectations. However, most studies in innovation ignore the financial sector altogether. In this study, the authors investigate financial technology firms and innovation. After identifying firms that are considered financial technology, the authors collect innovation outcomes such as patents and data breaches associated with those firms. The authors show that patent activity has enjoyed modest growth year over year; however, firms still have challenges to overcome such as market risk and data security. This study serves as a perspective on financial technology.

Details

Disruptive Innovation in Business and Finance in the Digital World
Type: Book
ISBN: 978-1-78973-381-5

Keywords

Book part
Publication date: 9 November 2009

Eduardo Pol

This paper views the housing and credit bubble 2001–2008 as a sequence starting with a financial innovation in 2001 followed by the superimposition of other financial

Abstract

This paper views the housing and credit bubble 2001–2008 as a sequence starting with a financial innovation in 2001 followed by the superimposition of other financial innovations leading to the prevalence of uncertainty in Knight's sense and ending in the last quarter of 2008 with both market failure and regulation failure. To the extent that financial innovations were an important factor in the development of the bubble, the most obvious question is whether anything can be done to prevent destabilizing innovations from entering the market. The paper outlines a policy proposal to keep pace with financial innovation and strike a balance between innovation and financial stability.

Details

Credit, Currency, or Derivatives: Instruments of Global Financial Stability Or crisis?
Type: Book
ISBN: 978-1-84950-601-4

Article
Publication date: 17 June 2021

Thomas Anning-Dorson

This paper aims to examine the quadratic relationship between customer involvement capability and performance, and innovation of small- and medium-scale service firms. The…

Abstract

Purpose

This paper aims to examine the quadratic relationship between customer involvement capability and performance, and innovation of small- and medium-scale service firms. The study answers the critical question of how SMEs make the most benefit from their involvement capability.

Design/methodology/approach

Data from small and medium enterprises (SMEs) operating in the service sector of an emerging economy in sub-Saharan Africa were used. A two-stage data analysis with a quadratic estimation was used to assess the hypothesized relationships.

Findings

The study found that the influence of involvement capability over SME performance differs in terms of financial and non-financial. And that, while increasing customer involvement will improve non-financial performance such as customer satisfaction and service quality, it is only at the intermediate level that financial performance is optimized.

Originality/value

The relationships (involvement, and performance and innovation) are not linear, and that at some levels, the relationship with financial or non-financial performance is more positive than other levels. The findings also suggest that involvement capability influences both process and product innovations most at intermediate levels than at low and high levels.

Details

European Journal of Innovation Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1460-1060

Keywords

Article
Publication date: 16 August 2021

Nor’Aini Yusof, Kong Seng Lai and Amy Marisa

As innovation has been recognised as important in improving construction company performances, this study aims to determine the effects of client focus and company type on…

Abstract

Purpose

As innovation has been recognised as important in improving construction company performances, this study aims to determine the effects of client focus and company type on innovation and company financial performances.

Design/methodology/approach

A self-administered questionnaire was sent to 300 architectural and contractor companies and 163 (54.3%) were returned. The questionnaire data were analysed using a partial least squares structural equation modelling.

Findings

Client focus was found to have a complementary partial mediation effect on the relationships between innovation and company financial performance and that innovation independently affected company financial performance with the influence being stronger in the architecture companies than in the contractor companies.

Research limitations/implications

The study adopted a broad definition for innovation without considering the innovation types. As different types of innovation require distinct knowledge, skills, capabilities and management practices, future studies could investigate the various types of innovation and their effects on financial performance.

Practical implications

The findings provide valuable suggestions for principals, top management and policymakers on the importance of client focus when developing and disseminating innovation within the company. Also, architecture companies should focus on implementing innovation to stay competitive.

Originality/value

The mediating effects of client focus and the moderating effects of company type were simultaneously analysed on the relationship between innovation and financial performance.

Details

Construction Innovation , vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1471-4175

Keywords

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