Reinventing Financial Services through Disruptive Innovation

25 Mar 2016

Blockbuster Video, HMV and Borders Bookstores used to be household names, but in a few short years these decades-old companies were all but wiped out by the same affliction. A wave of digital offerings – from YouTube and Netflix to iTunes and Spotify to Kindle and Audible – has rapidly changed our behaviours, and completely transformed entire industries globally. Similarly, Australia’s traditional media industry is experiencing a viability crisis, with Google, Facebook and other international online players taking almost a quarter of a slow-growing revenue pie in 2015. In fact, Morgan Stanley predicts the internet/online revenue share will surpass 55% by 2020.

Despite incumbents often dismissing early startup efforts or ignoring their presence altogether, the reality is no industry – however established, entrenched and trusted – is immune to digital disruption. And it currently has Financial Services in its sight. The rise of disruptive financial technology, or FinTech, through Australia’s startup ecosystem certainly will be a test for the big banks, insurance, superannuation and the rest of the industry. But the flipside of every challenge is an opportunity for discovery, reinvention and improvement. The question is which approach to take?

  1. Disrupt from within
    With bigger budgets, state-of-the-art resources and access to some of the best talent, incumbents can actually have an advantage when it comes to putting weight behind disruptive thinking. The challenge is to be able to step far enough away from the day-to-day business to come up with fresh approaches to existing products and services, or reinvent them altogether. As an example, Commonwealth Bank Innovation Lab prototypes new solutions, and exposes their clients and staff to their innovation process. Similarly, NAB Labs has recently created an innovation fund to invest in technology partnerships.
    While there are plenty of internal innovation success stories, it is important to recognise it requires a different kind of management and operational thinking, faster approval processes – and permission to disrupt the organisation from within, which can be a threatening prospect.
  2. Invest in the ecosystem 
    Sometimes the best path to innovation is not to look internally, but instead outside the organisation to observe new trends, patterns and consumer behaviours. Today’s startups have the benefit of being able to tackle specific parts of the entire customer solution being offered by the incumbents – deeply investing expertise in one key area to either optimise on experience or minimise costs. This ‘unbundling’ of traditional financial services into its core components is at the core of industry disruption, and makes it difficult for incumbents to compete.Instead of seeing these new startups as a threat to compete with, some of the more established players are taking an approach of investing, and therefore taking a stake in, leading FinTech players. Reinventure Fund is an example of this corporate venture capital approach, with Westpac investing $50m into an independently managed fund focused specifically on FinTech and adjacent areas, including peer-to-peer lending, marketplace payments and data collaboration. Independence of the portfolio is key to ensuring the greatest chance of success for the startups, however Westpac’s partnership and involvement can provide significant competitive advantage.
  3. Take a leap and start afresh 
    Not all organisations are established in a way that supports internal innovation, nor do they have an ability to create independent venture capital arms. So what else can be done for those working in the industry that bring a desire to innovate and solve problems in new ways? Join the FinTech revolution and build your own startup! Never has there been more support for FinTech and innovation in our country, with the Treasury’s recent announcement of a FinTech Advisory Council, and the simultaneous launch of FinTech Australia, an industry body for the fintech startup ecosystem. Coworking spaces like Stone & Chalk and Tyro FinTech Hub are bringing the startup community, and venture capital investment is increasing into the space.

One thing that could be in greater supply is the number of women founding and leading FinTech startups. With a unique perspective on how to develop greater financial products and services, as well as being able to more directly address the needs of women consumers, its critical that women’s voices can be heard at this exciting and game-changing time not just for Australian Financial Services, but for Australia’s economy as a whole.

Author Bio
Lauren Capelin ( is a Community Strategist & Disruptive Technology Specialist. She is also the Head of Venture Community, Reinventure Fund. Follow her on Twitter: @laurenjcapelin