This is a brief exploration into how specific applications of Disruptive Technologies are impacting Financial Institutions, Customers, Governments and Merchants. For many years, financial institutions have employed the same traditional business models. But today, they find themselves threatened on all sides by latest technology trying to take over their businesses through easy to use, more simplified and efficient ways of doing things.
Impacts on Financial Institutions
Traditionally, most banks charged high fees for cross-border transfers of money and provided poor customer experience. Some transfers take three to four days to arrive at their destinations. Today Transferwise, a UK-based company has challenged that process using user-friendly web interface and an innovative network on bank accounts to make international transfer easier, faster and cheaper. The company now oversees more than £500 million of transfers each month.
Innovators are also automating manual processes that are presently very resource intensive for traditional financial players. This enables them to provide services to new group of customers who cannot access those services in banks. For instance, “Robo-advisers” like FutureAdvisor, Nutmeg and Wealthfront have automated wealth management services. Consequently, wealthy individuals are getting easy support and advice in their effort to save. It is very unclear if such individuals will ever desire to turn to traditional wealth advisors.
Impacts on Customers
Disruptive Technology provides customers with improved and efficient products and services. It focuses on satisfying customers who think traditional institutions are neglecting their needs. Today, customers are feeling very comfortable processing financial transactions on their phones. This has also challenged traditional financial institutions like banks to adopt this model and to provide mobile friendly financial transactions to their customers through mobile banking.
There is also a great demand for a new method of lending, mainly on the customer side. For instance, customers have embraced marketplace lending; an approach where companies advance unsecured money online to borrowers.
Impact on Governments
Many governments are harnessing Disruptive Technology to provide more efficient services to their citizens. For example, wearable technology has found its way into public sector and emergency response. The U.S. Department of Homeland Security is already funding a startup to develop wearable that can be used to improve public security.
A combination of geocoding and mobile data collection allows parks and natural resources agencies to be more proactive about managing urban forests and collecting tree data. Consequently, this method has replaced the traditional method of forest conservation.
Video conferencing has disrupted business in prisons and jails, Technology has come with video visitation and families do not have to visit their relatives in prison. Governments are using telemedicine to lower prisoner health-care costs and to improve access to certain kinds of care for inmates.
Impacts on merchants
Technology disruption makes impact on merchants mainly at the point of sales. New technological developments in payment may disrupt traditional forms of payment. Take a look at the Square company, a US-based mobile payment company. Square’s innovation brought new base of merchants and also disrupted cash and checks payments. Square is a financial services, merchant services aggregator and mobile payment company, it markets several software and hardware payments products, including Square Register and Square Reader, and has expanded into small business services such as Square Capital, a financing program, and Square Payroll. The “ease of use, simplicity and elegance” has made it a very preferable payment tool for merchants.
These are few of the many ways Disruptive Technology is not only challenging traditional financial institutions but also influencing the behavior of customers, merchants and governments.