
Contents
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11.1 Introduction 11.1 Introduction
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11.2 Background: The Role of Finance and Financial Innovation 11.2 Background: The Role of Finance and Financial Innovation
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11.3 Financial Innovation and Banking: 1980–2010 11.3 Financial Innovation and Banking: 1980–2010
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11.3.1 Products 11.3.1 Products
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11.3.1.1 Subprime Mortgages 11.3.1.1 Subprime Mortgages
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11.3.2 Services 11.3.2 Services
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11.3.2.1 Debit Cards 11.3.2.1 Debit Cards
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11.3.2.2 Online Banking 11.3.2.2 Online Banking
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11.3.2.3 Prepaid Cards 11.3.2.3 Prepaid Cards
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11.3.3 Production Processes 11.3.3 Production Processes
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11.3.3.1 Automated Clearinghouse (ACH) 11.3.3.1 Automated Clearinghouse (ACH)
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11.3.3.2 Small Business Credit Scoring 11.3.3.2 Small Business Credit Scoring
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11.3.3.3 Asset Securitization 11.3.3.3 Asset Securitization
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11.3.3.4 Risk Management 11.3.3.4 Risk Management
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11.3.4 Organizational Forms 11.3.4 Organizational Forms
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11.4 Conclusions 11.4 Conclusions
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References References
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11 Technological Change, Financial Innovation, and Diffusion in Banking
Get accessW. Scott Frame is a financial economist and senior advisor on the financial markets team in the research department of the Federal Reserve Bank of Atlanta. His major fields of study are financial institutions, credit markets, real estate, and public policy. He has been with the Bank since 2001, although he spent two years as the Belk Distinguished Professor of Finance at the University of North Carolina at Charlotte (2012–14). Before joining the Bank, he was a senior financial economist at the US Treasury Department from 1996 to 2000. He also worked at the Federal Reserve Bank of Atlanta as an economic analyst from 1993 to 1995 and as an instructor at the University of Georgia. He was promoted to financial economist and policy advisor in 2007 and assumed his current duties in 2012.
Lawrence J. White is Robert Kavesh Professor of Economics at New York University’s Stern School of Business. During 1986–9 he served as a Board Member for the Federal Home Loan Bank Board, in which capacity he also served as Board Member for Freddie Mac. In the period 1982–3, he was on leave to serve as Director of the Economic Policy Office, Antitrust Division, US Department of Justice. He is the General Editor of the Review of Industrial Organization and was Secretary-Treasurer of the Western Economic Association International (2006–9). He received the B.A. from Harvard University (1964), the M.Sc. from the London School of Economics (1965), and the Ph.D from Harvard University (1969).
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Published:07 April 2015
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Abstract
The commercial banking business has changed dramatically over the past 30 years, due in large part to technological change. This chapter first describes the role of the financial system in economies and how technological change and financial innovation can affect social welfare. We then survey the literature relating to several specific financial innovations—broadly categorized as new products or services, new production processes, or new organizational forms—and evaluate them in the context of the broader economics literature on innovation. While much effort has been devoted to understanding the characteristics of users and adopters of financial innovations and the attendant welfare implications, we still know little about how and why financial innovations are initially developed.
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