What are the Pros and Cons of Financial Innovations?

In the context of India Many Indians have no contact with financial services/products. Their savings is not deployed in financial products which will offer them better returns and safety. Presently their money is either kept at home or invested in gold - both unsafe keeping.

Products designed to bring financial products to millions of Indians has to be innovative like self help groups, mutual funds / SIPs of lower contributions / ULIPs etc. But these products need to be packaged and taken to rural areas in a path breaking innovative way. The challenge is big but the opportunity is also huge.

Rashmi Ji,Innovations starts where invention ends. It is the beauty of human mind that innovations are always necessary. You might not be able to use the inventions as it is but it is certainly the innovations which makes inventions more user friendly. Now the pros and cons. It is very difficult to quantify the pros and cons untill and unless you know which group of people is going to use the product. For example the revolver or for that matter firearms was invented for the safety of oneself but you all can see for yourself what use it is being made to. In advertising it is said that a good sales message is not written but rewritten. Here also innovations comes into play. Till now I am talking about the things which are not related to financial innovations. But financial innovations are also not separate from innovations in other fields. The same things apply to them also. Here also you can see the beauty of human minds which has resulted in financial products being innovated in such a way that they have not only resulted in the breaking of monopoly of a few institutions but also have benefitted us immensely. Now the pros and cons part. A virus developing man knows how to develop a software but he does not uses his energies in the right directions. That is why he develops a virus. Same thing applies to a person misusing the financial innovations to his benefit disregarding the very purpose for which it was invented or innovated. Same way it is very difficult to quantify the pros and cons of financial innovations. You might say these are the pros and cons till now but what will happen tommorrow is anyon's guess.

I will only speak about the cons, since usually, financial innovation is represented as a product.  The pros are many.  The most important con in bringing about financial products, is that application of mind will take a back seat and check list culture comes to the fore.  There is reluctance on the part of finance professionals to take decisions.  In law, if one has followed right processes, one has defence.  Similarly, in finance too, if one has taken an informed and conscientious decision, one should have defence even if the decision proves wrong.  We however have a tendency to crucify him if the decision proves wrong.  

This reluctance to take decisions will force a person to lean on a check list.  If the check list is met, he feels confident that there is no one to crucify him.  Unfortunately, when a check list is present, there will be many people who would like to meet the check list to crucify the decision maker!!  This is how financial innovation, a necessity, is made to look like a culprit.  

I advocate for financial innovation but encourage decision making.  Old timers in the banking industry genuinely were decision makers.  Financial innovation was present and used to add sheen to decision making.  

Innovation indeed is a capitalised as a step to success in any area of human efforts, finance is one of the most interesting and a risk value addition. Time has proven the start commerce, trade, banks, insurance, mutual funds, stocks, microfinance and more if i am missing some. This is a beauty of innnivations and human mind.