NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Wednesday, March 5, 2014

Financial innovation can be defined as the act of creating and then popularising new financial instruments, technologies, institutions, markets, processes and business models including the new application of existing ideas in a different market context.

This can be further defined as advances over time in the financial instruments and payment systems used in the lending and borrowing of funds.

These advances include innovations in technology, risk transfer and credit and equity generation.

The creation of technological advanced products have increased the available credit for borrowers and given banks new and less costly ways to raise equity capital.