FINANCIAL INNOVATIONS AS AN ELEMENT OF THE FINANCIAL SYSTEM

Abstract

The financial sector, which is an important part of the country’s economy, needs changes that will allow it to properly perform its tasks for a long time to come. Innovation and competitiveness should characterize both the financial sector as a whole and individual enterprises and institutions within it. Therefore, the question of the general impact of innovation on growth processes in a competitive economy, the division of innovation into products and processes of the linear sector, the dependence of this component on technical and organizational steps taking place throughout the economy. Thus, a number of applied studies have given rise to a new economic theory, which due to the spread will have a significant impact on the functioning of the monetary system and macroeconomic policy. In addition, financial innovation is an important element that causes a modification of the form of financial systems, and hence the conditions and potential for the functioning of financial and real actors. They affect, in particular, the general opportunities for economic development of the country, the cost of financing the activities of entities, types and amounts of economic risk that arise in socio-economic systems. The consequences can be both positive and negative, which obviously leads to discussions about the reaction of market regulators to the fact of the above and its application. The article analyzes the impact of innovations on growth processes in the economy. The author structured innovations of products and processes, investigated the consequences of such a classification for the linear sector of the economy. The impact of international agreements (Basel 1, Basel 2, Basel 3) on the security of the banking system was shown in the article. The banking of the payment system, as well as the impact of ATMs and Internet transactions on banking activities were considered in the article. Financial innovations reflect every change in existing financial products, changes in a number of financial intermediaries, their types and business models, transformations in financial markets and in the relationship between entities. The basic component of such modifications is regulatory and supervisory systems, which ensure their functioning. Despite computerization, the essence of modern banking has not been changed for many years. However, it is hard to deny that information technology has evolved significantly in recent decades. Information technology and automation have changed the methods of organization of production, design, research, medical research, administration in almost every sphere of life. In addition, information and telecommunication technologies (ITT) have created a new section of technologies for the modern use of GPT, which, of course, affect the situation in the financial sector.