Essay On Financial Innovation

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Financial innovation: transforming the way of doing goods

There is no doubt that financial innovation plays a vital role in the development of commercial world. The inventions of ATM and online banking make money conveniently available 24-7; Payment network such as Visa and MasterCard has become part of our daily life; a wide range of financial products were created to facilitate transactions and improve the liquidity of market. Those innovations have influenced millions of people.

Imagine a world where people lack basic financial services – transactions are difficult to take place; credits are scarce and expensive; and economy is inevitably moving slowing. It’s time to use the force of financial innovation to promote financial inclusion
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New money created by central banks is only backed by credits and always comes with interests. There is always a lack of money in the system equal to the interest required for all issued loans. This results in a continuous increase in money supply and inevitably causes inflation. Policies with an initial attempt to increase lending and stimulate economy, such as quantitative easing, ultimately leads to an erosion of money’s purchase power. Under this circumstance, cash and cash-equivalent securities depreciate, while the debts appreciate. It is an indirect wealth transfer to those who issue the money, and a hidden tax for the lower income…show more content…
The disruptive financial innovation is taking over territory of traditional banking, and have the potential to scale up and help a wider range of people to thrive. Think about the rapid growth of AliFinance, a P2P lending firm launched by Alibaba in 2011. It has offered loans to over 400,000 micro-entrepreneurs with an outstanding portfolio of 105 billion RMB in less than three years. It is foreseeable that more businesses and individuals, who are not served by the traditional banking industry in developing countries, will benefit from various kinds of financial innovation in the

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