Syllabus H. Innovation, Performance Excellence & Change Management H2. Enabling Success: Disruptive Technology

H2a. Impact Of Disruptive Technologies Such As Fintech

Disruptive Innovation

This is innovation that does not look just to improve existing products

Rather it produces new products and markets

Large companies are often too risk averse and not aware enough to notice these and take advantage of them

Think Spotify and the music business

A new set of industry leaders tend to take over as the whole market shifts

Bigger companies also tend to miss these technologies on purpose! They are reluctant to 'connibalise' their existing businesses by introducing something different.

Two ways in which companies can try to protect themselves from disruption are:

1. Develop a portfolio of real options (McGrath & MacMillan, 2000). These are limited investments that keep options open, enabling them to respond quickly to opportunities.

2. Develop new venture units. These are internal units to develop new ideas which are kept separate from the core business, often located in a different place physically, so that they do not get 'stifled' by the organisation.

Real-world example


Financial technology, or FinTech, is having a maior impact on the world of finance and is growing

fast, with many predictions that it will mean extensive disruption to established businesses in this

area. Examples of FinTech include:

o Peer-to-peer lenders replacing banks for lending and saving

o Peer-to-peer money transfer services replacing banks for money transmission and foreign

0 Firms providing payment security and verification

0 Financial advice driven by algorithms, offered at much lower cost than traditional advisors

o Appbased insurance companies


Fintech is financial technology that describes an emerging financial services sector in the 21st century.

It includes any technological innovation in the financial sector, including innovations in financial literacy and education, retail banking, investment and even crypto-currencies like bitcoin.

It can apply to any innovation in how people transact business, from the invention of digital money to double-entry bookkeeping.

Since the internet revolution and the mobile internet revolution, however, financial technology has grown explosively, and fintech, which originally referred to computer technology applied to the back office of banks or trading firms, now describes a broad variety of technological interventions into personal and commercial finance.

According to EY's Fintech Adoption Index, one-third of consumers utilize at least two or more fintech services and those consumers are also increasingly aware of fintech as a part of their daily lives.