Research on financial innovations: an interdisciplinary review

PurposeThe 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/approachThis 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.FindingsThe 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/implicationsThe 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/valueThe 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.

Applications of Blockchain Technology in the Finance and Banking Industry Beyond Digital Currencies

Blockchain and cryptocurrency have almost become synonymous. Cryptocurrency is arguably one of the most sensational financial innovations of the 21st century. The current study claims that blockchain technology is not limited to the application of digital currencies in finance and banking; there are wide applications of blockchain technology in the given field. Blockchain uses the unique properties enabling decentralized, secured, transparent, and temper-proof financial transactions that have the potential to revolutionize the financial services industry. Given such a stance, the chapter outlines the application of blockchain technology in the finance arena beyond the digital currency. In this chapter, the authors provide the 10 applications of blockchain technology in the financial services industry implementing the blockchain technology and revolutionizing the finance and banking industry. The chapter also highlights the hurdles to application of blockchain technology in the finance and banking industry.

فقہ اسلامی میں بیع سلم کاتصور اورمروجہ اسلامی مالیاتی نظام میں بیع سلم کے استعمال سے متعلق اشکالات:ایک فقہی مطالعہ

The sharī‘ah invalidates the sale of non-existing items, but salam sale was exceptionally permitted to avoid interest-based financing in commercial as well as non-commercial transactions. Salam sale is an Islamic forward sale contract, which authorizes selling something that is not present during the time of the contract. Salam is a sale agreement whereby the seller receives full price in advance and goods are delivered at a future date. Moreover, it is free from uncertainties and exploitation that is usually involved in interest-based financing. Besides the agriculture sector, currently, this instrument is also being used in the manufacturing sector where the manufacturer would need financing to produce products and/or to buy raw materials. Modern financial innovations introduced different uses of salam sale such as parallel salam, currency salam, salam sukūk etc. There are different fiqh issues related to such uses of salam in modern financial sectors. This article elaborates on the economic importance and conditions that are necessary and sufficient to makethe contract valid from the perspective of the sharī‘ahand also appraises some of the key issues related to modern practices regarding salam.

Nexus Between Financial Innovation and Financial Intermediation in Nigeria’s Banking Sector

This study evaluated the relationship between financial innovation and financial intermediation in Nigeria. It seems that banks in Nigeria may have a problem of deposit-loan mismatch and losing customers to start-ups given increasing cost of deposits attributable to disruptive practice arising from financial innovations. The specific objectives of this study were to examine the relationship between financial innovation (value of the automated teller machine, internet banking, mobile banking, point of sale transactions) and financial intermediation (commercial banks deposit mobilization) in Nigeria for the period 2009–2018. This study was anchored on the financial innovation theory of Joseph Schumpeter, which states that technology creates opportunities for new profits and super profits as a result of increased investment by banks or financial institutions on products of innovation. The ordinary least square was used to estimate the parameters. The data used were extracted from the Central Bank of Nigeria statistical bulletin. The results showed that there is a positive and significant relationship between financial innovation (value of Automated Teller Machine) and financial intermediation (commercial banks deposit mobilization) in Nigeria; there is a positive but no significant relationship between financial innovation (internet banking) and financial intermediation (commercial banks deposit mobilization) in Nigeria; there is a positive but no significant relationship between financial innovation (mobile banking) and financial intermediation (commercial banks deposit mobilization) in Nigeria; and there is no positive and significant relationship between financial innovation (point of sale transactions) and financial intermediation (commercial banks deposit mobilization) in Nigeria. The f-test result showed that financial innovations proxies jointly related significantly to commercial banks’ deposits. The work concludes that financial innovations contributed to commercial banks’ deposits in Nigeria. The researchers recommended among others that banks should improve on the security of transactions done on their platforms, continue to improve and partner with start-ups in technological infrastructure, improve on power and network stability, deploy more innovative products, and improve on the efficiency of bank staff by regular training.

Relationship between financial innovation, financial depth, and economic growth

The intrinsic property of modern economic development is financial deepening in the light of incremental spearheading financial innovation opportunities. The paper deals with the relationship between financial depth, financial innovation, and economic growth among 22 OECD economies over 2007–2018 by applying pooled OLS and fixed effect panel data regression analysis. The purpose of the paper is to empirically test whether the economic growth depends on financial depth, financial innovation, and institutional environment (Worldwide Governance Indicators). The findings shed light on the recent discussion on the pros and cons of financial innovation. The estimation results show that while financial depth is a strong predictor of economic growth across high- and upper-middle-income economies, financial innovation is a slightly weaker predictor. Despite the identified positive impact of financial innovation on economic growth, it is asserted that the negative effect of financial depth may indicate oversaturated financial market in developed countries. Сonsistent with the general notion that the institutional framework promotes the capacity of the financial sector for financial innovations implementation, this paper states that financial depth and financial innovations are better prerequisites of economic growth than institutional development. AcknowledgmentThe paper was funded as a part of the “Relationship between financial depth and economic growth in Ukraine” research project (No. 0121U110766), conducted in the State Institution “Institute for Economics and Forecasting of the NAS of Ukraine”.

THE ADVANTAGES AND CHALLENGES OF IMPLEMENTING SUKUK THROUGH BLOCKCHAIN TECHNOLOGY

Financial instruments must be able to adapt quickly in the 4.0 era. One of the Islamic financial innovations highlighted at this time is the application of blockchain technology-based sukuk. This study aims to determine specifically the advantages of applying sukuk through blockchain technology and to scale the point of view regarding the challenges faced in applying sukuk through blockchain technology. This research uses a qualitative approach. The data collection technique used is literature study by collecting data from previous studies in the form of documentation of articles, journals or books as well as publication data from other parties. The data analysis techniques used were data reduction, data presentation, and conclusion drawing. The results show that sukuk can get many benefits from blockchain technology. Although blockchain has its advantages, there are risks and challenges that need to be resolved. In responding to this challenge, it is necessary to have a harmonious synergy among all stakeholders, from Syari'ah scholars, academics, to regulators and industry

Financial Innovation and Technology after COVID-19: a few Directions for Policy Makers and Regulators in the View of Old and New Disruptors

Innovation and technology have led to the redefinition of business models and development of new ones in many bricks and mortar sectors. Similarly, blockchain and fintech have impacted the finance and banking industries and are expected to further affect them in the future, leading some media to coin the expression “Uberization of banking”. The authors extrapolate from sharing economy models to conclude that while blockchain and fintech are poised to advance finance and banking, there are no disruptive features that corroborate the term. By analogy and successive approximations, this article identifies the limitations of the arguments for disruption in finance and banking. Besides, hinging upon stylized facts, the article establishes similarities with sharing economy models to identify potential threats stemming from financial innovations such as Tokenomics, tagged as “no-ABSs”. Eventually, the authors identify entry points and ways forward arising from the COVID-19 pandemic for policy makers and regulators to regain their pivotal role in policing the market and ensuring transparency while driving innovation.

Financial technologies for bank financial stability management in economical turbulence conditions

The development of the global economy is characterized by an increase in turbulence and the restoration of a cyclic crisis component of development. An important driving force for the development of the economy is the financial stability of the bank, which manifests itself at all levels – from the micro level to the global economic system. The market of banking services is the most dynamic segment of the financial market, where the number of subjects and spectrum of products, the level of service and technologies is constantly changing. The priority instrument for managing the financial stability of the bank in the conditions of turbulence of the economy is a financial engineering, which is a system of synergistic functioning, pre-developed and implemented combinations and processes (namely the interaction of financial innovations, financial technologies and financial instruments) in financial management of the bank due to the release of innovation resource reserve. to ensure the financial stability of the bank. Financial innovations include financial instruments and financial technologies. Financial technologies are technologically supported by financial innovations, which can lead to new business models, programs, processes or products that have a significant impact on financial markets and institutions that provide financial services. It is proposed to manage the financial stability of the bank in the conditions of turbulence of the economy of Ukraine to introduce a process approach that is focused on improving the motivation of banking institutions and a clear distribution of their responsibilities; achievement of internal transparency for guidance, obtaining information in real time due to the development and strengthening of the system of current and prospective control; improving the quality and predictability of the results of work; providing trust of stakeholders to banking institutions and confidence in the financial stability of its functioning; minimization of expenses and reducing the terms of organization of technological cycles of banking operations. In order to ensure the financial stability of the bank on the basis of financial technologies, the state of turbulence of the economy should be taken into account, react promptly to its changes that require enhanced control.