W. Scott Frame, Larry Wall, and Lawrence J. White
Working Paper 2018-11
October 2018

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Financial intermediation has changed dramatically over the past 30 years, due in large part to technological change. The paper first describes the role of the financial system in a modern economy and how technological change and financial innovation can affect social welfare. We then survey the empirical literatures relating to several specific financial innovations, broadly categorized as new production processes, new products or services, or new organizational forms. In each case, we also include examples of significant fintech innovations that are transforming various aspects of banking. Drawing on the literature on innovations from the 1990s and 2000s informs what we might expect from recent developments.

JEL classification: G21, G23, O33

Key words: financial innovation, technological change, banking, fintech

https://doi.org/10.29338/wp2018-11

Prepared for the Oxford Handbook of Banking, 3rd Edition, Allen Berger, Phillip Molyneux, and John O.S. Wilson, editors. The authors thank John O.S. Wilson for helpful comments on an earlier draft. The views expressed here are those of the authors and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the authors’ responsibility.
Please address questions regarding content to W. Scott Frame, Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street NE, Atlanta, GA 30309-4470, 404-498-8783, scott.frame@atl.frb.org; Larry Wall, Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street NE, Atlanta, GA 30309-4470, 404-498-8937, larry.wall@atl.frb.org; or Lawrence J. White, Leonard N. Stern School of Business, Kaufman Management Center, New York University, 44 West Fourth Street, 7-65, New York, NY 10012, lwhite@tern.nyu.edu.
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