The last three decades have seen rapid growth in the number and variety of financial products issued. This paper studies innovation in financial products using a combination of granular data on security issuance and a model of allocation of financial products to firms in specific sectors. We find three key patterns. First, there is substantial heterogeneity in the adoption of financial products across firms, particularly of new products. Second, the differential adoption of new products, explains most of the observed variation in the amounts of funds raised. Finally, new financial products contribution to the share of funds raised comes from a great number of distinct products that are specialized and only a few firms use them. Our analysis indicates that innovation in the financial market is akin to innovation in consumer markets, which tends to result not just in improvements in the quality of standardized products, but also in increasing variety in a given market as products become more specialized.