Financial Innovation – Theoretical and Practical Considerations

Increasing financial market instability, manifested by volatility in interest rates contribute to increased innovation capacity of financial and banking institutions. Reduce consumers' appetite for traditional products, poor capitalization of financial institutions and insolvency issues arising from developing countries, are other reasons for boosting innovation in the financial sector. Technological change have a direct effect on innovation by lowering transaction costs, rapid dissemination of information of a financial nature, and emphasizing the integration of markets. Closely related is the technological sophistication of innovative financial product or service. The more complex, the more difficult it will be absorbed by the market and will also require substantial initial investment by the supplier. Not all customers of financial institutions have a solid knowledge base enabling them to easily understand the sometimes complex mechanisms of financial products. Therefore everything is complex and difficult to accept. If financial innovation greater complexity of implementing solutions can be serious investment in promoting and explaining the use and characteristics of the product or its adjustment to the understanding of specific customer profile that financial entities.