Tuesday, July 15, 2008

Disruptive Innovations in Financial Services

I was asked today for some examples of disruptive innovations in the financial services industry. Here are a few quick examples to consider:
Exchange-traded funds versus managed mutual funds
Easy, convenient, low-cost. “Worse” for not being professionally managed. Diversity of choices gives an customer freedom to play desired sectors at low cost. Incumbents (managed funds) are motivated to ignore.

Online discount brokerages versus stock brokers
Easy, low cost, “good enough” for low-end users and former non-users, again offering an asymmetric advantage over the services of professional brokers.

PayPal versus traditional payment systems
Simplifies transactions, allows people to make purchases more conveniently and securely. Incumbents are motivated to cooperate or ignore.

Peer-to-Peer lending systems (e.g., Zopa.com)
Lower cost, more convenient for many. Early stages: disruptive?

2 comments:

Michael Solomon said...

Hi Jeff...noticed you were "weighing in" on "peer to peer lending" and while my opinion might be a bit subjective(as CEO and Founder of www.loanio.com), I do believe that peer to peer lending will be distruptive to the lending market.

Whether it has the ability to make an impact as profound as paypal did in the payment industry is yet to be seen, but I am extremely bullish on the subject.

Freon said...

Is there a report comparing Zopa to Loanio? Interested in understanding these two relative to one another.