Financial innovation and its governance:Cases of two major innovations in the financial sector

The power of financial innovations to affect societies on global and intergenerational levels compels us to ask how we can ensure their responsible emergence in society.This requires an understanding of how innovation occurs and how it is governed in practice.Despite this,there is little research on the process and governance of financial innovation.The few studies conducted in this area have focused on the‘backend’of the innovation process.Therefore,using data from secondary sources,this study investigates how two major financial innovations occurred and were governed,and it discusses the findings in relation to those in the literature.This approach revealed that innovation processes fall within a continuum ranging from structured to unstructured.Moreover,lead times are potentially longer for innovations that are significantly disruptive,new to the market,and technological in nature.Finally,innovation processes can involve multiple stakeholders who use both statutory regulation and self-regulation for innovation governance.This paper concludes that innovation processes and their governance can vary significantly according to different areas of the financial landscape and associated innovation contexts.Thus,there is a need for more empirical work to understand such variability and practices in the sector as a whole.

Nexus between financial innovation and economic growth in South Asia: evidence from ARDL and nonlinear ARDL approaches

This study examined the relationship between financial innovation and economic growth in Bangladesh,India,Pakistan,and Sri Lanka for the period Q11975 to Q42016.The autoregressive distributed lag(ARDL)bounds test was used to gauge long-run relationships,and the nonlinear ARDL(NARDL)test was used to explore asymmetry between financial innovation and economic growth in the sample of Asian countries.The findings from the bounds tests revealed long-run cointegration between financial innovation and economic growth in the sample countries.Furthermore,NARDL confirmed that positive changes in financial innovation linked positively with economic growth and vice versa in the long run.In the short run,however,the study found mixed behaviors in the case of positive and negative changes in financial innovation.To investigate directional causality,the Granger causality test under an error correction model was employed.The Granger causality results supported the feedback hypothesis in both the long run and short run.Thus,financial innovation boosts economic growth in the long run by stimulating financial service expansion,financial efficiency,capital accumulation,and efficient financial intermediation,which are essential for sustainable economic growth.

Financial innovation and economic growth in Bangladesh

Background:This study provides evidence for the financial innovation in the financial system that resulted in the economic growth of Bangladesh from 1980-2016.Methods:To capture the influence of financial innovation on economic growth,we estimated the long-run cointegration by applying Autoregressive Distributed Lag(ARDL)bound testing and Granger causality-based Error Correction Model(ECM)to capture the directional association.Results:The Test of Cointegration satisfied the existence of a long-run association between economic growth and the financial innovation proxies,which were the Domestic Credit to the Private Sector(DCB)as a percentage of the Gross Domestic Product and the Broad-to-Narrow Money(M2/M1)as a percentage of the Gross Domestic Product.Our results showed that in the long run,credit circulation to the private sector and monetary management play important roles in economic growth.We also found that the coefficients of the financial innovation proxy variables were positive and statistically significant both in the short run and long run.We also ran Granger causality tests to investigate the directional effect.This study confirmed the feedback causality between the economic growth and 2 proxies of financial innovation in the short and long run.The gross capital formation and trade openness contribute significantly to explaining the economic growth in Bangladesh.Conclusion:The government of Bangladesh should encourage financial innovation in the financial system,especially at financial institutions,so that access to financial services can easily provide for equitable development.The government should also encourage financial innovation in the capital market,which will assist in raising longterm capital for investment and expedite overall economic growth.

Can we have a general theory of financial innovation processes? A conceptual review

Introduction:Since the financial crisis of 2008,the theory of financial innovation has been a focus at a time of re-evaluation and re-conceptualization.However,little has been done to evaluate the current state of research considering the increasing complexity of financial innovation.This paper examines the hypothesis of a general theory that encompasses increasing complexities in the financial innovation process.Methods:The paper begins with an overview of the definitions,the features,and the classification schemes of financial innovation.Additionally,the paper reviews the existing literature on the main objects of study in financial innovation and groups the findings under four main concepts.A conceptual analysis is presented that evaluates current approaches to the study of the financial innovation process and the difficulties inherent in constructing a single general theory.The paper proposes a framework based on a meta-theory of financial innovation as a better approach to understanding the inherent complexities and diversities affecting financial innovations.Discussion:(1)Financial innovations present diversities and complexities that make it infeasible to build a unifying general theory to explain their development.(2)The current state of research on financial innovation theories is limited and requires additional input.(3)A meta-theory that identifies,classifies,and connects theories of development for financial innovations is better suited to explaining the complexity of financial innovation processes.

COVID‑19 pandemic and the crude oil market risk:hedging options with non‑energy financial innovations

This study examines the hedging effectiveness of financial innovations against crude oil investment risks,both before and during the COVID-19 pandemic.We focus on the non-energy exchange traded funds(ETFs)as proxies for financial innovations given the potential positive correlation between energy variants and crude oil proxies.We employ a multivariate volatility modeling framework that accounts for important statistical features of the non-energy ETFs and oil price series in the computation of optimal weights and optimal hedging ratios.Results show evidence of hedging effectiveness for the financial innovations against oil market risks,with higher hedging performance observed during the pandemic.Overall,we show that sectoral financial innovations provide resilient investment options.Therefore,we propose that including the ETFs in an investment portfolio containing oil could improve risk-adjusted returns,especially in similar financial crisis as witnessed during the pandemic.In essence,our results are useful for investors in the global oil market seeking to maximize risk-adjusted returns when making investment decisions.Moreover,by exploring the role of structural breaks in the multivariate volatility framework,our attempts at establishing robustness for the results reveal that ignoring the same may lead to wrong conclusions about the hedging effectiveness.

Understanding the financial innovation priorities for renewable energy investors via QFD-based picture fuzzy and rough numbers

This study evaluates financial innovation priorities for renewable energy investors by generating a novel hybrid fuzzy decision-making model.First,SERVQUAL-based customer needs for financial innovation are weighted with decision-making trial and evaluation laboratory based on picture fuzzy sets.Second,the financial innovation priorities are ranked by technique for order preference by similarity to ideal solutions based on picture fuzzy rough sets.In this process,Theory of the solution of inventive problems-based technical characteristics for financial services,the process for innovative services,and competencies for financial innovation are considered using quality function deployment phases.In addition,the Vise Kriterijumska Optimizacija I Kompromisno Resenje method is also considered for an alternative ranking.Similarly,sensitivity analysis is also performed by considering five different cases.It is determined that the ranking priorities based on the proposed model are almost identical,demonstrating the proposed model’s validity and reliability.Assurance is the most crucial factor for the customer needs regarding the financial innovation priorities for renewable energy investors.Concerning the financial innovation priorities,the product is the essential priority for financial innovation;hence,it is recommended that companies engage qualified employees to effectively design the financial innovation for renewable energy investors.Additionally,necessary training should be given to the employees who currently work in the company,which can increase the renewable energy investors’trust in the innovative financial products.Companies should mainly focus on the product to provide better financial innovation to attract renewable energy investors.An effectively designed financial innovation product can help solve the financing problem of renewable energy investors.

The Relationships Between the Financial Literacy Levels of Individuals and Their Financial Innovation Utilization Habits： The Case of Kayseri Province

Organizations and researchers use different names and definitions for financial literacy. Although the concepts of ＂financial training＂, ＂financial awareness＂, and ＂financial sufficiency＂ are used in the literature, the concept of ＂financial literacy＂ has been recognized in Turkey. Financial literacy can be defined as the ability to comprehend financial concepts and issues so as to take proper decisions against changing financial conditions and to manage one＇s own financial status through financial planning. Financial innovation is defined in the broad sense as the products or processes developed to benefit from the profit opportunities which arise from incomplete financial markets or inefficient financial intermediation. Increasing savings through deposits and personal pensions in recent years and increasing debts through loans and credit cards have revealed a very high level of financial operations and activities in Turkey. The utilization of new financial instruments is also expected to increase with these intense financial activities. Parallel to such increases, individuals with high financial literacy levels are expected to have a higher knowledge level about new financial instruments and innovations and they are also expected to have a greater tendency to use such instruments. In accordance with these expectations, significant relationships were observed in this survey study between the financial literacy level of individuals living in Kayseri province and their utilization habits of many of financial innovations.

Financial Innovation as a Competitive Strategy： The Kenyan Financial Sector

The world business environment is rapidly changing and becoming intensely competitive. In this context, most organizations are realizing that knowledge is the most important resource in creating sustainable competitive advantage. Knowledge management （KM） as a discipline is designed to provide strategy, process, and technology to increase organizational efficiency and effectiveness. The survival and success of a firm are dependent on the capacity of management to generate new ideas. One such a topical idea is financial innovations. Economies and businesses across the world have embraced creativity and innovation to circumvent market imperfections. Kenya as an economy has been hailed as a regional financial hub. This paper is a narrative review seeking to establish the extent of financial innovation in Kenya and how this enhances competitiveness. The research finds out that the Kenyan financial sector has made some remarkable strides towards financial innovations. However, it is noted that there is still enormous untapped potential that can enhance Kenya＇s economy further.

Discussion on Practice of Financial Innovation in Chinese Commercial Banks

In general, based on the traditional operation and management model, innovation means reforming the activities of financial institutions, financial instruments, technology of financial services as well as organizational forms of financial markets, because promoting the overall development of the financial industry is the fundamental purpose of financial innovation, we should optimize the allocation of the existing resources of the financial institutions and improve financial efficiency, thus gradually promote the market competitiveness of financial institutions.

Research on Comprehensive Evaluation of Financial Innovation Ability of the National-Level New Areas Based on Grey Correlation

On the basis of setting up an evaluation index system of financial innovation ability and using the grey systems theory and the coefficient variation method, the article has proposed a synthetic evaluation method with grey correlation. Through evaluating the ability of financial innovation of the national-level new areas comprehensively, the article has offered reliable suggestions to adjust regional economic structure and make financial policy.

Private banking development in China under two organizational structures:Economic analysis from an organizational innovation perspective

This paper investigates optimal decisions for private banking development in China under two innovative organizational structures—the big retail mode(BRM)and the independent development mode(IDM).Under the BRM,the retail and private banking divisions form a cooperative relationship wherein the former transfers highnet-worth customers to the latter.In addition,retail banking receives a share of private banking revenues.We investigate the optimal revenue-sharing ratio between the two divisions and the optimal effort by private banking to serve transferred customers within the cooperative relationship.The analytical results show that as the private banking division becomes more developed,the optimal revenue-sharing ratio decreases,and the private banking division’s optimal effort to serve transferred customers decreases because it puts more effort into acquiring new customers.Under the IDM,the two divisions form a competitive relationship since they compete to acquire customers independently.We investigate customer acquisition efforts in this interdivisional competition.Optimal customer acquisition efforts by both divisions increase in potential assets and rates of return.This paper contributes to the literature by(1)analyzing financial innovation by private banks from an organizational perspective;(2)providing an economic analysis for private banking development in China.

Will high-frequency trading practices transform the financial markets in the Asia Pacific Region?

High-frequency trading(HFT)practices in the global financial markets involve the use of information and communication technologies(ICT),especially the capabilities of high-speed networks,rapid computation,and algorithmic detection of changing information and prices that create opportunities for computers to effect low-latency trades that can be accomplished in milliseconds.HFT practices exist because a variety of new technologies have made them possible,and because financial market infrastructure capabilities have also been changing so rapidly.The U.S.markets,such as the National Association for Securities Dealers Automated Quote(NASDAQ)market and the New York Stock Exchange(NYSE),have maintained relevance and centrality in financial intermediation in financial markets settings that have changed so much in the past 20 years that they are hardly recognizable.In this article,we explore the technological,institutional and market developments in leading financial markets around the world that have embraced HFT trading.From these examples,we will distill a number of common characteristics that seem to be in operation,and then assess the extent to which HFT practices have begun to be observed in Asian regional financial markets,and what will be their likely impacts.We also discuss a number of theoretical and empirical research directions of interest.

Environmental Capital,Negative Externality and Carbon Finance Innovation

In the context of global climate change,the internalization of negative externality,which is brought about by the traditional mode of economic growth,has become an inevitable choice.In order to achieve the internalization,it is necessary to make innovations on the market mechanism and system,find the value of environmental capital,establish a new mode of economic growth based on environmental capital,and then transform the environmental capital,an exogenous factor of economic growth,into an endogenous factor.Of this,the key of market mechanism and system innovation is the financial innovation that is based on environmental capital and negative externality;the government defines the initial property right of environmental resources and establishes environment energy trading market,so as to guide enterprises to trade environmental resources(represented by carbon emission permit trading) based on the Clean Development Mechanism,and to vigorously develop environmental finance and carbon finance.

Research On SME Financial Management Problems And The Optimization Measures

On the basis of analysis to the operating characteristics of SMEs, the paper pointed out： There is poor access to finance, lack of internal control systems, accounting foundation work is weak, financial Management Information Building and other issues in the financial management of SMEs.This paper proposes measures for SMEs to create a favorable policy environment and services, conduct financial system innovation, emphasis on financial innovation and incentives talents, network management, and establish relevant financial penalties supervision system.

The value of FinTech innovations for the finance industry:Evidence from China

This paper explores the value effects of FinTech innovations on the finance industry in China,focussing on the banking system.We use a crawler-like application programme to grab patent filing information and manually identify and classify FinTech innovations based on their application fields.FinTech patents generally bring adverse value effects to various finance sectors,revealing a competitive relationship between innovators and financial firms.FinTech innovations applied to insurance and asset management cause the most harm to the industry,especially to state-owned and joint-stock commercial banks.Moreover,disruptive FinTech innovations by start-up firms appear to pose more potential threats to commercial banks.

Investigating the components of fintech ecosystem for distributed energy investments with an integrated quantum spherical decision support system

This study aimed to evaluate the components of a fintech ecosystem for distributed energy investments.A new decision-making model was created using multiple stepwise weight assessment ratio analysis and elimination and choice translating reality techniques based on quantum spherical fuzzy sets.First,in this model,the criteria for distributed energy investment necessities were weighted.Second,we ranked the components of the fintech ecosystem for distributed energy investments.The main contribution of this study is that appropriate strategies can be presented to design effective fintech ecosystems to increase distributed energy investments,by considering an original fuzzy decision-making model.Capacity is the most critical issue with respect to distributed energy investment necessities because it has the greatest weight(0.261).Pricing is another significant factor for this condition,with a weight of 0.254.Results of the ranking of the components of the fintech ecosystem indicate that end users are of the greatest importance for the effectiveness of this system.It is necessary to develop new techniques for the energy storage process,especially with technological developments,to prevent disruptions in energy production capacity.In addition,customers’expectations should be considered for the development of effective and user-friendly financial products that are preferred by a wider audience.This would have a positive effect on fintech ecosystem performance.

Forecasting cryptocurrency returns and volume using search engines

In the context of the debate on the role of cryptocurrencies in the economy as well as their dynamics and forecasting,this brief study analyzes the predictability of Bitcoin volume and returns using Google search values.We employed a rich set of established empirical approaches,including a VAR framework,a copulas approach,and non-parametric drawings,to capture a dependence structure.Using a weekly dataset from 2013 to 2017,our key results suggest that the frequency of Google searches leads to positive returns and a surge in Bitcoin trading volume.Shocks to search values have a positive effect,which persisted for at least a week.Our findings contribute to the debate on cryptocurrencies/Bitcoins and have profound implications in terms of understanding their dynamics,which are of special interest to investors and economic policymakers.

Readiness of financial resilience in start-ups

Financial resilience refers to a start-up's capacity to anticipate,plan for,respond to,and adapt to gradual change and abrupt unforeseen shocks to survive and thrive by enacting appropriate economic policies to decrease budget deficits.Economic history tells us that more companies fail to emerge from a downturn than go into or during it.Many studies have been done on financial resilience in many dimensions,but no one has studied start-ups’organizational readiness for financial resilience.This gap inspires the current research,which uses the Total Interpretive Structural Modelling(TISM)approach to identify financial resilience factors and analyze hierarchical interrelationships start-ups’organizational readiness factors for financial resilience.This article aims to identify,assess,and categorize start-up organizational preparation elements for financial resilience.The result shows that the first importance should be given to digital financial innovation,liquidity planning,going concern consideration,financial strategy of CFOs,and cyberthreats.Managers of start-ups can utilize the findings of this study to prepare for financial resilience professionally.In a fast-paced environment,start-ups may use financial resilience to gain a competitive edge.

Analysis of crowdfunding platforms for microgrid project investors via a q-rung orthopair fuzzy hybrid decision-making approach

Effective crowdfunding platforms positively contribute toward improving micro-grid energy management systems.Therefore,a comprehensive analysis is required to understand the key factors responsible for success in crowdfunding systems by considering various criteria.This study evaluates crowdfunding platforms for microgrid project investments.In this context,a novel fuzzy decision-making model that includes two different stages is proposed.First,the selected criteria for the crowdfunding platforms for microgrid project investments are evaluated.Second,alternatives,regarding the microgrid project investments,are ranked.In this process,a multi-stepwise weight assessment ratio analysis(M-SWARA)approach based on q-rung orthopair fuzzy sets(q-ROFSs)is considered.Intuitionistic and Pythagorean fuzzy sets are also used in the calculation process to make a comparative evaluation.Similarly,a sensitivity analysis of the ranking alternatives is also conducted with 12 different q values.All the results are rather similar;thus,the findings are reliable.Another model is also created for this purpose with the help of the decision-making trial and evaluation laboratory(DEMA-TEL)and the technique for order preference by similarity to ideal solution methodologies to check the performance of the proposed model.It is defined that by considering the q-ROF DEMATEL weights,the ranking results vary for different cases.The proposed model with a M-SWARA is more reliable than the model created via the DEMATEL method.This situation provides information regarding the superiority of the model proposed in this study.It is concluded that security is the most important factor in crowdfunding platforms for smart-grid project investors.Additionally,solar panels and energy storage systems/batteries are the most significant alternatives for microgrid project investors.Necessary measures should be taken to forestall the risk of fraud that may occur on this platform.Therefore,the website to be established must be secure against possible hacking attacks.Another important conclusion of this study is that solar panels should be preliminarily developed to increase the effectiveness of microgrid systems.

The Evolution of Crowdfunding Towards an Impact Investing Logic： The Case of Paulownia Social Project

In the last years, crowdfunding is arising as a widespread financing and fundraising tool, allowing to turn a large audience of customers into investors, individuals who can supply financial capital. Thus, crowdfunding represents a novel mechanism of fundraising embedded in the current fmancial innovation, which operates in order to produce convergent innovations that produce both economic and social outcomes. Studies are mainly aimed to understand which factors led a crowdfunding campaign towards the success. The whole research aims to analyse the new emerging financial tool, known as crowdfunding, with the purpose to understand and explain how it collaborates with the main traditional financial mechanisms used by enterprises. This study leds the author to recognize a new emerging shape for the crowdfunding, a structure which allows to take advantage of the traditional limits of funds of investment. Thus, both the capability to attract a great number of investors and the social content of the project-to-fund represent the push to move the crowd investment towards impact investing. The newness of the topic, the lack of certain and various data, the youth of the analyzed phenomenon, and the explorative nature of the research, pushed the authors to choose a case study approach.