Whatever the cause or focus of financial innovation, it involved four basic forms, namely product, market, organization, and regulation. Product innovation was the design of a financial instrument to meet a specific need. Market innovation was the creation of a trading system through which these financial products could be bought and sold. Organizational innovation involved the grouping of separate financial activities together in such a way as to be greater than the sum of their parts. Regulatory innovation was a response to the need to reduce the risks involved and so increase the use made of the product, market, or organization.
That’s from the financial capitalism chapter in the Cambridge History of Capitalism, Volume II. The author is Ranald Michie. That last line is worth keeping in mind during the continued debates over how we regulate the financial system.