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FINANCIAL INNOVATION Like other industries, the financial industry is in business to earn profits by selling its products. If a soap company perceives that there is a need in the marketplace for a laundry detergent with fabric softener, it develops a product to fit the need .Similarly, in order to maximize their profits, financial institutions develop new products to satisfy their own needs as well as those of their customers; in other words, innovation-which can be extremely beneficial to the economy-is driven by the desire to get (or stay) rich. This view of the innovation process leads to the following simple analysis: A chance in the financial institutions for innovations that are likely to be profitable. Starting in the 1960s, individuals and financial institutions operating in financial markets were confronted with drastic changes in the economic environment: Inflation and interest rates climbed sharply and became hard to predict, a situation that changed demand conditions in financial markets. Computer technology advanced rapidly, which changed supply conditions. In addition, financial regulations became especially inconvenient. Banking institution discovers many old ways of doing business being able to not have earned money again; they provide the masses finance with service and financial products sale neither well. Many financial intermediary is discovered they have no way to raise having arrived at a fund, but these self that will not a suspense of business right away with original tradition finance implement. For existing under new economy environment, research and development puts up banking institution be obliged to being able to satisfy customer need moreover the new product being able to gain a profit of and serving, this process is called financial engineering. In their case, necessity was the mother of innovation. Our discussion of why financial innovation occurs suggests that there are three basic types of financial innovations: Escapism to res