In the digital era, financial innovation has transformed the financial services landscape, providing greater accessibility and convenience for consumers. Yet, the comparative advantages it presents and the facilities it has recently offered to firms and investors do not always come at a low cost, particularly in the form of externalities. These costs may appear while consumers use financial innovations or services that may engender predatory lending practices, the misuse of complex financial products, or other consumer threats. At the same time, governments and international bodies have introduced various investor protection measures, such as consumer disclosures, consumer education programs, and stricter regulatory oversight. While financial innovation has brought about great opportunities for international portfolio allocation and risk diversification, the contagion and regulatory shortcomings render the international regulatory cooperation imperative. The chapter closes by examining the way that future regulatory frameworks should ensure their relevance by embedding more behavioral components in the analysis of digital and other financial innovations when endeavoring to align efficiency and growth targets with consumer protection.