A taxonomy of FinTech innovation

This chapter provides a detailed overview of the importance of innovation in the financial sector and highlights key areas of FinTech growth. It is divided into two main parts. In Part 1: Introduction to Innovation we begin by outlining an important role for innovation in driving economic change, based on the seminal work of (Schumpeter, J. A. (1939). Business cycles (Vol. 1, pp. 161–174). New York: McGraw-Hill.) and his concept of ‘circular flow’, which attempts to explain how innovation can be a driver of economic change. Having established a theoretical importance for innovation as a harbinger of economic change and development, it then proceeds to discuss the role of innovation in the financial industry including the main drivers of innovation and channels through which innovation can improve economic welfare. In Part 2: A Taxonomy of FinTech Innovation based on Patents. the second half of the chapter focuses on identifying and discussing the major areas of FinTech based innovation. We begin by identifying key area of FinTech development based on worldwide patents filed with the United States Patent and Trademark Office (USPTO). From the patents data we identify four broad areas of FinTech development and then proceed to discuss FinTech development within these four areas.