Drivers, processes and consequences of financial innovation: a research agenda

Abstract

It is self-evident that financial innovation is a key player in the contemporary economy. However, its significant importance has largely been overlooked in innovation studies. To fill up this gap, and through an interdisciplinary approach, this article details a research agenda for innovation in financial services. It reviews the 'what', 'why' and 'how' of financial innovation in order to clarify all the ambiguities surrounding its nature, creation, purpose and impact. Specifically, the article investigates its definition and distinguishing features, its key determinants, its supporting processes, and finally its effects, mainly at firm-level. Therefore, the article opens the black box of financial innovation and uncovers its peculiarities in order to understand how it occurs when innovation is considered both as an 'outcome' of financial innovation and a 'process' supporting its creation.

Open innovation and collaboration in the financial services sector: exploring the role of trust

“…Financial innovation as a concept is a research niche since it involves a four-level analysis; making and promotion of financial products and services (product innovation), development of new processes (process innovation), interaction with customers and development of new structures for the financial institutions . Open innovation in financial services is a new research area since it calls for an interdisciplinary approach to define the role of open innovation paradigm and the impact that it has within the financial services industry Mention and Torkkeli, 2012. ).…”

“…More generally, regulation plays a dominant role in either hampering or fostering innovation in financial services, as scholars have highlighted (e.g. Mention and Torkkeli, 2012).…”

E-finance innovation services in Russia

“…We agree with Mention (2011) and Mention and Torkkeli (2012) that concept of 'financial innovation' can be defined as making and promoting new financial products and services, developing new processes to facilitate financial activities, to interact with customers and to design new structures for financial institutions.…”

The double knot of technology and business-model innovation in the era of ferment of digital exchanges: The case of OM, a pioneer in electronic options exchanges

“…Together, these characteristics of financial industries create a socio-technical regime with high political and regulatory barriers for innovative experimentation (Lerner, 2006;Mention and Torkkeli, 2012). This is especially the case when experimentation threatens an established vested interest group's economic and political interests, as is often the case with discontinuous innovation.…”

“…However, there is lack of process studies of how resource-constrained technological entrants such as OM could transform the financial system through new market niches. This is an important gap that is relevant for understanding other current, ongoing transformations by technological entrants challenging incumbents in finance, seen in peer-to-peer technology in consumer lending and equity crowdfunding (Mention and Torkkeli, 2012), virtual currency brokerages (European Banking Authority [EBA], 2014; Middlebrook and Hughes, 2014), dark-pool operators (White, 2014), and online wealth-management products (Bloomberg, 2014).…”