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Financial services

Milk, Red meat, digital disruption and financial services!

The concept of “digital disruption” is not new. We have seen the examples of Kodak emerging from “near death”, Amazon reinventing itself, 3D printing emergence and so on.

If you are wondering about how milk and red meat are related to disruption, you have come to the right place. By the way, even if you are vegetarian like me, you are going to be impacted by digital disruption. So, be my guest!

One way of defining digital disruption is the “new services that were not available a decade ago!”. For example, last year I was looking for an accommodation at Brisbane. I wanted to find an accommodation that is close to my workplace, preferably walkable. I checked the hotels for last minute deals. Then I found a place through the website, airbnb.com. It was a beautiful “queenslander” home, in which I could rent a room that was bigger than the hotel room with included breakfast. It was cheaper and close to my workplace! The hosts were originally from UK and very friendly.

Airbnb allows one to rent out the extra room in the home. Before renting, one can check the photos, read the reviews, contact the owners and take an informed decision whether it is the type of the accommodation they will be comfortable. Airbnb has redefined the traditional “bread and breakfast” business model. It increases the competitive landscape of hospitality industry.

This is a typical example of competitions coming from “non-traditional” players. In many industries the competition is not restricted to usual “rivals”.

No industry can escape digital disruption and anyone can compete!

Why now?

We have been witnessing the digital disruption for many years. We are now in a time where the world is recovering from GFC. So, cashed up investors are looking for opportunities in innovative start-ups that reshape the industry.

For large organisations, the “belt tightening” is easing up. Now, it is time for CEO to invest in technologies that reshape their businesses. They are aware of the changing competitive landscape.

Looks like we have an ideal mix of demand and supply. Let the drums roll!

Financial services and digital disruption


While no industry can escape digital disruption, the pace of the change and impact will differ from industry to industry.

Deloitte research has released a white paper titled “Digital Disruption: Short fuse, Big Bang?” (Deloitte, 2014))

In this whitepaper paper they have classified the industries based on the time window and the size of the impact. The “short fuse” indicates that the disruption could occur in less than 3 years. The “big bang” means the impact within the business operating model is more than 15%.

The following table summarises Deloitte’s prediction of Australian market:

Disruption Classification Industries
small fuse, Big Bang Financial services

ICT and media

Financial services

Professional services

Art and recreation

Real estate

Long fuse, Big Bang Education

Transport and post







Short fuse, short bang Construction

Wholesale trade

Accommodation and food services

Long fuse, small bang Mining



Zooming into Financial Services


Financial services industry has always seen attacks from different fronts. Virgin group entering into credit cards, Cole entering car loans and more recent speculation about Woolworths and Coles entering home loans market are some of the examples the blurring line of business boundaries. (ABC news, 2014)

The key competitive advantage the retailers have is the access to customer spending data. This is a strategic asset that the retailers have been painstakingly building over the last few years. Now it is leveraging this data in different markets.

However still the barrier to entry into core banking is high. The financial market is Australia is not a level playing field. At one end we have the big four banks who have a different risk profile due to the advanced basel accreditation (The Australian, 2014).The retailers cannot partner with the big players because ACCC would not allow such a move. The other option is to partner with a second tier banks. While it is a viable option, there are not many players to choose from. More importantly, the benefits of synergy due to merger/acquisition, needs to be appealing for both sides. In the near future the retailers would be consolidating the insurance and credit card market, while carefully monitoring the banking sector.

Let us shift our focus to another frontier of disruption that questions the fundamentals of current banking model. Let us explore Bitcoin.

BitCoin is a peer to peer, crypto currency. Khan’s academy gives a good introduction about the concept. (Khan Academy, 2014)

BitCoin replaces the General Ledger maintained by the bank, and replaces with a global, centralised General Ledger known as Block Chain. There is no denying the fact that BitCoin is risky. The governments are still trying to understand the impact.

Here are some of the facts:

  • Bitcoin is legal in Australia (Wikipedia, 2014)
  • Australian Tax Office is still not clear how to tax bitcoin. The matter has been referred to legal for further clarification. An interim advice to tax payers is released:
  • “The key information that a taxpayer will need about each transaction or event with Bitcoin is the date, the amount in $A, what it was for, and who the other party was (their Bitcoin address, at a minimum” ( ATO, 2014).
  • No major financial institution is associated with Bitcoin: NAB was closely associated with bitcoin traders until April 2014. Then it announced that it will be exiting the crypto currency market citing high risk. (The Sydney Morning Herald, 2014)
  • There are ATMs cropping up in major cities. We have Bitcoin ATMs in Sydney, Melbourne and Brisbane. It is becoming easier to get access to Bitcoin. There are many traders in Australia and globe that accept bitcoins.

Why should I care about Digital disruption?


We discussed two major examples of disruption in financial services sector. What does it mean to an individual?

When the retailers enter the financial services market in a big way, we need to be careful whenever we swipe our loyalty card. Woolworths announced that “Customers who drink lots of milk and eat lots of red meat are very, very, very good car insurance risks versus those who eat lots of pasta and rice, fill up their petrol at night and drink spirits,” (ABC news, 2014)

Well, I have reservations about this oversimplified statement. Of course, I do not like the statement because I eat rice and pasta. Still my car risk rating will very, very, very, very, very low because I rarely drive the car! I also do not like the fact that Woolies know too much about our personal preferences. They know where we put your petrol, how much we spend on groceries, what type of car we have, how much we drink etc. The remaining “big ticket” item is the home loan.

To summarise, here are two possible responses to digital disruptions at a personal level:

– if you are going to take up a financial product from a retail vendor, check the assumptions on which they give you quote

– for 4c a litre saving, be aware of the details you are providing

The bitcoin impact – it depends upon the type of individual you are!

  • If you are a venture capitalist, go and invest in a bitcoin start up( FYI: Richard Branson has recently invested).
  • If you are a CEO of a bank (are you really reading my blog?), watch the guidelines from ATO , which will be followed by APRA.
  • If you are a wealthy politician, you should seriously consider bitcoin as an option to your Swiss bank account. It gives you the same or superior level of anonymity over Swiss bank account. Of course, you may have other compelling reasons to visit Switzerland.



ABC News, (2014). Coles, Woolworths preparing to enter home loans market. [online] Available at: http://www.abc.net.au/news/2014-08-06/coles-woolworths-preparing-to-enter-home-loans-market/5653288 [Accessed 16 Aug. 2014].

ATO, (2014). BITCOIN guidelines ATO. [online] Available at: https://www.ato.gov.au/General/About-consultation/In-detail/Completed-matters1-July-2013-and-30-June-2014/

[Accessed 17 Aug. 2014].

Deloitte Australia, (2014). Digital Disruption: Short fuse, big bang. [online] Available at: http://www.deloitte.com/assets/Dcom-Australia/Local%20Assets/Documents/news-research/Building%20the%20lucky%20country/Deloitte_Digital_Disruption_Whitepaper_Sep2012.pdf

[Accessed 17 Aug. 2014].

Khan Academy, (2014). Bitcoin: What is it?. [online] Available at: https://www.khanacademy.org/economics-finance-domain/core-finance/money-and-banking/bitcoin/v/bitcoin-what-is-it

[Accessed 17 Aug. 2014].

The Australian (2014). Small banks push may lead to new rules to level playing field. [online] Available at: http://www.theaustralian.com.au/business/small-banks-push-may-lead-to-new-rules-to-level-playing-field/story-e6frg8zx-1226936480297

[Accessed 17 Aug. 2014].

The Sydney Morning Herald (2014). NAB severs ties with bitcoin vendors. [online] The Sydney Morning Herald. Available at: http://www.smh.com.au/it-pro/business-it/nab-severs-ties-with-bitcoin-vendors-20140410-zqt3b.html

[Accessed 17 Aug. 2014].

Wikipedia, (2014). Legality of Bitcoin by country. [online] Available at: http://en.wikipedia.org/wiki/Legality_of_Bitcoin_by_country

[Accessed 17 Aug. 2014].



About Murali Ramakrishnan

Murali is the Managing Director of the boutique consulting firm "Process-Symphony". Process-Symphony specializes in IT enabled business process orchestration. http://www.process-symphony.com.au http://www.kloudax.net.au


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