{"id":1269,"date":"2015-12-14T12:22:38","date_gmt":"2015-12-14T12:22:38","guid":{"rendered":"http:\/\/ianalderton.com\/?p=1269"},"modified":"2016-01-29T09:38:16","modified_gmt":"2016-01-29T09:38:16","slug":"digital-disruption-part-1","status":"publish","type":"post","link":"https:\/\/ianalderton.com\/?p=1269","title":{"rendered":"Digital Disruption (Part 1)"},"content":{"rendered":"

\u00a0<\/strong>1. Technical Innovation<\/strong>
\nFor centuries banks \"disruption\"have been a strong force in driving technical innovation, from the development of the first credit card in 1966 followed by the ATM in 1967, through to the introduction of telephone banking in 1980 and faster payments in 2008.<\/p>\n

Fast forward to 2016 and existing business model are being challenged by agile new disruptors that have been built for the digital age, putting the customer in charge, with social, mobile, data analytics\u00a0and cloud technologies at their core.<\/p>\n

These new digital disruptors can quickly build scale and often face fewer regulatory challenges than more established players.<\/p>\n

2. Cost of Inaction<\/strong>
\nIn this new digital world, the cost of inaction almost exceeds the cost of action.<\/p>\n

The retail sector presents a cautious tale, for example Borders book stores (sales $3.3bn 2001) and Kodak (sales $15bn 1999) paid the ultimate price for failing to anticipate how digital could destroy well established business models.<\/p>\n

Blockbuster famously passed on the opportunity in 2000 to purchase Netflix for $50m as it was felt that the on demand \/ streaming service was too niche, only to see Blockbuster\u2019s eventual bankruptcy in 2010.<\/p>\n

Having killed off the DVD market, digital continues to challenge the revenue streams of established cable and satellite providers as customers continue to \u201ccut the cord\u201d and stream TV content over the Internet.<\/p>\n

Late action can be just as costly.\u00a0 WM Morrison, the fourth largest grocery chain in the UK, did not introduce online shopping until 2014, forcing it into a costly shotgun wedding with one of its competitors, Ocado, for which it pays an annual fee of \u00a345m per year.<\/p>\n

3. New Wave of Disruption<\/strong>
\nWhile digital disruption to date has typically focused on the retail sector, new levels of digital disruption are being focused on the financial services sector. From new Robo advisors for Asset Management\u00a0through to Online peer to peer lenders and payment platforms, the level of digital change continues to accelerate.<\/p>\n

Increased competition from emerging peer to peer lenders, which were first established in 2004 to connect investors to borrowers online, continues to grow at a rapid pace. Organisation such as Funding Club and Zopa continue to challenge legacy business models, offering improved returns for borrowers and investors alike.<\/p>\n

Peer to peer \u201cmarketplace Lending is in Liftoff, with a 123% Compound Annual Growth Rate from 2010-2014\u201d Morgan Stanley June 2015<\/em><\/p>\n

New digital disruptors are not weighed down by legacy infrastructure and higher regulation facing the more established players. Operating costs are significantly lower at\u00a0 2%<\/strong> compared to 7%<\/strong> for traditional banks, enabling digital organisations to\u00a0rapidly transform, grow and expand new business opportunities.<\/p>\n

At the Gartner Symposium in Barcelona this year is was reported that digital organisations allocate a far higher proportion of their investment budget to Transform and Grow\u00a0new business opportunities (25% \/ 25% respectively) when compared to a typical enterprise (13% \/\u00a0 20%) as shown in the following schematic:<\/p>\n

\"\"<\/p>\n

4. In Conclusion<\/strong>
\nWhile digital disruption has been successful in breaking down the barriers to entry for new players such as peer to peer lenders and payment platforms, the question remains will established banking business models face a similar prediction as when Uber disrupted the\u00a0400 year old taxi market?<\/p>\n

In my next post I will be discussing the key trends of Digitisation and Digitalisation.<\/p>\n

IAN ALDERTON
\nEmail : ian@IanAlderton.com<\/a>
\nTel : +44 (0) 7702 777770<\/p>\n","protected":false},"excerpt":{"rendered":"

\u00a01. Technical Innovation For centuries banks have been a strong force in driving technical innovation, from the development of the first credit card in 1966 followed by the ATM in 1967, through to the introduction of telephone banking in 1980 … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":1338,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"enabled":false},"version":2}},"categories":[17],"tags":[],"class_list":["post-1269","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-digital"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/ianalderton.com\/wp-content\/uploads\/2015\/12\/disruption.png?fit=758%2C461&ssl=1","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p76RsR-kt","jetpack-related-posts":[],"_links":{"self":[{"href":"https:\/\/ianalderton.com\/index.php?rest_route=\/wp\/v2\/posts\/1269","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ianalderton.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ianalderton.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ianalderton.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/ianalderton.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1269"}],"version-history":[{"count":27,"href":"https:\/\/ianalderton.com\/index.php?rest_route=\/wp\/v2\/posts\/1269\/revisions"}],"predecessor-version":[{"id":1440,"href":"https:\/\/ianalderton.com\/index.php?rest_route=\/wp\/v2\/posts\/1269\/revisions\/1440"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ianalderton.com\/index.php?rest_route=\/wp\/v2\/media\/1338"}],"wp:attachment":[{"href":"https:\/\/ianalderton.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1269"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ianalderton.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1269"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ianalderton.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1269"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}