Research on Financial Innovations: An Interdisciplinary Review

Abstract

The financial industry offers a unique setting to study innovations. Financial innovations (FIs) 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. Three market developments 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. In light of these market disruptions, this study systematically reviews the academic research literature on FIs in two phases. The first phase provides a quantitative review of 546 journal articles published between 1990 and 2018. This analysis found that disciplines differ with regard to the employed research methodologies, the units of analysis, sources of data, and the innovations they examined. The analysis found a positive trend in the number of published articles during this period. However, studies have primarily focused on the US and Europe and less so on other parts of the world. In the second phase, the study synthesizes the extant research on FIs 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. This synthesis further identifies research gaps in the available research that highlight future research opportunities in light of the three market disruptions.