Advances in technology have disrupted numerous industries and people have come to expect this. The major technology companies have now taken aim at the life-blood of all industries - banking and finance. Findings from the Millennial Disruption Index show that 68% of this generation believe that in the next five years, the way people access money will be totally different, while 33% believe they won’t need a bank at all. The vast majority of millennials have also said they would be more excited by financial services from popular tech firms like Google, Amazon and Apple than they would be from their own banks. Innovation is taking place in many different (often incongruent) ways across banking and finance.
The most notable recent movement in the industry comes from Apple, with their introduction of Apple Pay late last year. Apple Pay is attempting to displace traditional credit and debit cards by using Near Field Communication (NFC) from iPhones and Apple Watches to make wireless payments. Essentially Apple is attempting to replace credit cards with phones for a quicker, smoother payment process. The service also allows users to checkout purchases online using their card details which have been stored in their phones. While the service was launched in cooperation with Visa, MasterCard and other major card players, there has been much speculation that once the service is widely adopted as a form of payment Apple will be able to bypass the credit providers and facilitate payments directly. While exact details of Apple’s deals with credit card companies are unknown, the Financial Times reported that Apple receives a 0.15% cut of transactions made using the service. In Australia alone, the introduction of Apple Pay is set to cost the financial services industry more than $1 billion.
Other technology is taking aim straight at the banks themselves. Peer-to-peer lending (P2PL) companies are building online platforms to allow individuals to lend directly to other individuals without routing through traditional financial intermediaries. Lenders compete in a reverse auction model in order to drive down the interest rate on the loans. The companies providing these services collect a one-time fee on these loans, which looks to be an extremely lucrative business model given the low overheads, automated services and the potential for huge quantities of small loans. The winners in this space so far are LendingClub and Prosper Marketplace, and while ignored initially, they have now received significant venture capital from the likes of Credit Suisse, JP Morgan Chase and BBVA.
Bitcoin, a crypto-currency or digital currency, is an online payment system with the potential to make all other real-life currencies redundant. This system is entirely peer-to-peer with users (who include both purchasers and merchants) transacting directly online, with no financial intermediary. This is facilitated by a public distributed ledger, supported by competition to “mine” for new bitcoins which effectively holds the network up. While bitcoin has yet to see major traction in major retailers adopting the service, the currency has featured prominently in mainstream media for the last few years and has wide support across multiple online communities.
The common driving force behind these three financial innovations is purchaser’s and merchant’s desires to transact quickly, easily and accessibly. PayPal and eBay have had enormous success by providing this and businesses that made early use of these platforms found themselves a new or an additional revenue stream that grew rapidly.
The marketplace of vocational education and training is essentially no different. Potential students today are mostly quite tech savvy, are high-speed transaction driven and expect to be able to 'sign up instantly online' for all sorts of things including airfares, hotels or clothing. RTOs that provide quick and easy options for potential learners to purchase training courses, whether that be online bookings for one-off courses or enrolments on accredited training programs, are logically more likely to win potential learners. Research shows that if a website provides all the information that an intending purchaser needs in order to make a buying decision combined with a simple process to complete the financial transaction, a business will significantly increase their leads to conversion ratio - and at a greatly reduced cost.
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