Banking Innovation In Emerging Countries: An Overview of Ecuadorian Financial System

In emerging countries, the financial system plays a fundamental role as a promoter of economic growth. Banks must adapt their processes, products, and services to serve a population that increasingly demands appropriate innovative low-cost financial products with good levels of security. Ecuador is a country located in South America. It is characterized by having a financial system that has suffered from constant crises. Still, since 2000 and with the adoption of dollarization, the financial system has presented a critical evolution in terms of amounts traded and the presence of new financial intermediaries that have achieved greater access and coverage to the country's popular sectors. The chapter focuses on analyzing the advances in financial innovation of the Ecuadorian banking system. The information included the evolution of loans and deposits, national and regional coverage, financial development indexes, and these variables' relation to financial innovation. We use a panel data analysis from 2016 to 2020, and the results show a positive and significant relationship between financial innovation, financial density, and growth.