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Regulation: The Mother of Invention?
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Becca L
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Becca L,
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8/31/2014 | 8:16:59 PM
Re: Is regulation needed for invention?
Banks aren't great self motivators, it seems, but they know they must leverage tech, differentiate their business and stay closer to the cutting edge. That's probably why they are starting to get deeply invoved in a lot of incubator programs that foster innovation in fintech startups. Wells fargo just launched one, too http://www.forbes.com/sites/tomgroenfeldt/2014/08/27/wells-fargo-launches-fintech-innovation-lab/
Jonathan_Camhi
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Jonathan_Camhi,
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8/29/2014 | 9:40:19 AM
Re: Is regulation needed for invention?
I wasn't just thinking in terms of product innovations, but also innovations in processes and business models. Think of all the new policies and procedures banks have had to put in place since Dodd-Frank. They're really learning a new business model that has to adapt to a changing regulatory environement. I think some of the new things banks are doing around that, and some of the back-end systems and processes being implemented in response to Dodd-Frank can be classified as innovations within the industry. And those aren't things that the market will necessarily decide if they're good or bad.
Byurcan
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Byurcan,
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8/27/2014 | 9:03:48 PM
Re: Is regulation needed for invention?
I agree, no industry should rely on regulation to be the driver that spurs them to innovation. Apple didn't create the iphone because of regulatory pressures.

But perhaps more worrisome, is Schmid's larger point that banks aren't very good at "doing" innovation, regulatory burden or no. We have all heard many experts say that banks need to adopt a  more entreprenurial or startup mentaility to innovation, and be "willing to fail." Whether this kinf od mentaility can be translated to fianncial services, remains to be seen.
Byurcan
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Byurcan,
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8/27/2014 | 9:00:33 PM
Re: Is regulation needed for invention?
Well really, the market will ultimately be the judge of whether innovation is "good or bad." Tablets: Good. Laser Disc: Bad.
Jonathan_Camhi
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Jonathan_Camhi,
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8/27/2014 | 5:15:12 PM
Re: Is regulation needed for invention?
Effective regulation necessitates that companies learn how to do business differently, which usually leads to innovation. Whether or not that innovation is good or bad probably depends on whether your the regulator or the company.
Greg MacSweeney
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Greg MacSweeney,
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8/27/2014 | 12:17:24 PM
Is regulation needed for invention?
If banks need regulation to spur innovation, they might as well through in the towel.

I'm joking, of course. Innovation does spur innovation, sometimes. Granted, excessive regulation is costly, and often useless, but it can bring about improvements.

In the capital markets, Reg NMS set the groundwork for a fully electronic equities marketplace. In the years following Reg NMS, numerous innovations (trading algorithms, low latency trading, HFT) were developed. Granted, depending on your viewpoint, those innovations may not be a good thing, but regulation did bring about innovation.


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