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Having a cost advantage means having the ability to offer lesser prices or earning higher profits since lower production costs can give a company a competitive edge in the market.

Because of the loss of income advantages for banks as a result of these innovations, these innovations have been used to shift borrowers away from traditional banking and resulted in a loss of market share.

Using improved information technology, financial innovations have made it easier for companies to issue securities directly to investors. As a result, customers prefer to apply for commercial papers for loans instead of going to banks for their short-term credit needs.

In addition, the commercial paper market facilitates the acquisition of funds to expand the operations of finance companies through banks, which they otherwise would not have.

So, there is an increase finance companies over banks. Prior to 1980, the proportion of commercial and industrial bank loans made to businesses was approximately 30%. Now its reached 50%.