Financial innovation in the AFR

Andrew Cornell in the AFR (March 10, 2007) examines whether financial innovation is part of an innovative culture. In the article, he quotes me:

The simplest indication of the value of financial innovation, however, is share price.

Joshua Gans – one of Australia’s foremost experts on innovation and co-author of the annual report Assessing Australia’s Innovative Capacity from the Melbourne Business School and Intellectual Property Research Institute of Australia – says the performance of stocks such as Macquarie Bank, Babcock & Brown, Macquarie Infrastructure Group or Westfield are clear indicators.

“What causes you to be able to consistently outperform your peers and traditional manufacturing? It is innovation,” he says.

One of the challenges for innovation in financial manufacturing – and hence its measurement – is the challenge in patenting. That said, international financial patents are a rapidly growing field.

A recent Wharton Business School report found US patents for financial services tripled last year to 238, led by General Electric’s finance arms, under GE Capital.

The same trend is not yet pronounced in Australia.

The highest-profile financial services group is probably property fund manager Rismark, whose best-known product is a shared mortgage where the lender and borrower split capital growth. Rismark holds six patents relating to design and management of the mortgages and its business processes. The company argues its value lies in the “idea, the product, the process” and it has pursued patents globally.

Rismark have actually launched their products now. More on that in another post.