Hands up for those who have read something about digital disruption in the last week. Thought so. Digital disruption is now a ubiquitous term, you read about it all the time. You read about it so much it is almost dismissed. Dismissing digital disruption has cost retail in Australia enormously. Most large retailers were very slow off the blocks, and many are still in denial about its affects. The same goes for banking.
The affects are yet to be felt, but the pressure wave is building. Banking in Australia is a high margin business by world standards. Australian banks will try and argue otherwise, but it’s a fact. High margin businesses are always open to disrupters, digital or otherwise. The only saviour to Australian banks has been the high cost of establishing a business in Australia. Banks in Australia have a cosy business model. It is not going to stay like that forever. Recent articles have demonstrated that competitors are looking to enter the market. When (not if) this happens incumbents are going to need to respond. But they need to respond now, before it happens. Digital strategy provides one response mechanism. In a recent post I discussed scale, and the benefits that digital provides.
There are a raft of new banks entering the market in Australia presently. Many of the mutual organisations are now beginning to fill the previously relatively sparsely populated second tier of banking. Many of these organisations have been based around professional organisations, but increasingly they are opening up to a wider customer audience. These organisations will compete only in a digital sense in some cases. They do not have the size to compete physically but are prime candidates to use digital strategy to compete remotely. These will be the first competitors to the major banks in Australia. These new competitors could, assuming their business strategy allowed be the first stage disrupters in Australian banking. These new competitors could effectively cherry pick business from the incumbents. The key will be having an effective digital strategy.
Second stage disrupters will have the digital bells and whistles from day one. Their costs of doing business will be lower. They will have scale able technology. When they arrive it will all be about the technology they have to disrupt the existing participants.