Innovation in the financial sector is largely about risk – how to slice it, how to package it and how to trade it. You can think of it in two dimensions, innovation in products, illustrated by new types of securities, and innovation in processes that can be related to new means of distributing securities.
Both of these dimensions have benefited from advances in information and communication technology (ICT). ICT has made the creation, valuation and exchange of complex financial products possible. It has also affected the core of financial intermediation. But the increased efficiency has come at the cost of lack of transparency, the result of certain risk-management practices rather than computer software.