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TransferWise has disrupted international transactions in many ways. When you make a transfer through their system, instead of going through the “traditional” money route of brokers or physical or online banks and then to the recipient in another country, the money you send is instead redirected to someone who is receiving money in the opposite direction (from the country you are sending it to).

 

What this has allowed was to avoid currency conversion fees. While we may believe that a worldwide money transfer company manages transfers across borders, the disruption rests in the fact that all outbound and inbound transactions stay within the originating country.

The revenue of TransferWise is based on fixed transactions fees and a percentage of the transfer. The transaction fee is either 2£, 2€, 2$ or 0.5% of the amount transferred, whichever is highest.

 

The novelty and disruptive attributes of TransferWise is that it uses Peer-to-Peer, a way of networking that is increasingly viewed as relatively unsafe (as you route data through third party computers and servers) which might have hinder the adoption of the technology in the corporate sphere for applications such as Skype. Other prominent tech companies are substituting away from peer-to-peer, such as Spotify as operating servers internally yields more flexibility. However, the security concerns do not seem to be relevant in TransferWise’s model.

 

 

However, reports from specialised information channels actually shed light on some details that are unknown to the public. It is argued that matching all outbound transfers to inbound transfers is very difficult. Traditional banks have a matching rate that is close to 100% because they have been building, expanding and consolidating networks and points of sale worldwide. When a payment is not matched by a payment going the opposite way on TransferWise, it has to be completed using reserve liquidity from the bank or transactions on the traditional Forex (foreign exchange) markets.

 

Anon (n.d.) The growing pains of P2P FX /Euromoney magazine [online]. Available from: http://www.euromoney.com/article/3591063/the-growing-pains-of-p2p-fx.html (Accessed 23 October 2016).

Anon (n.d.) TransferWise explained – everything.explained.today [online]. Available from: http://everything.explained.today/transferwise/ (Accessed 23 October 2016).

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Around thirty percent of Estonia’s population votes online. Administrative tasks such as birth, death and marriage registrations can also be done over the Internet.

Most of the territory has been covered by free Wi-fi since 2000.

Estonia implements digital solutions for all of its issues. When faced with the issue of declining birth rates, the government decided to offer the possibility to become an e-citizen.
Instead of opting for expensive lengthy constructions and infrastructures to help the population deal with snow and extremely low temperatures as well as to solve the time sensitive issue of the lack of governmental services in rural areas, Estonia opted for improving access through online government services.
98% of banking transactions are conducted over the Internet and 95% of income tax declarations are also submitted online. There is also more more mobile phone contracts than inhabitants: 139 per 100 capita.

The example of Estonia would be useful for larger countries who would like to pave the way towards digitalization. Although the population in Estonia is 1.3 million, an initiative starting with municipalities or smaller organisational divisions of countries would be a good way to start. The Netherlands for example, although quite more populous, is only so by a factor of approximately 15.

Implementing advanced digitalization within a country would also be useful for countries with little population stretched across large areas with little connections and governmental infrastructures. This would allow for a swift solution to the lack of connections to isolated areas.

The areas that would be enhanced by digitalization are numerous. In the case of Estonia, while we might think that it is limited to mundane tasks such as birth registration, the reality covers much more aspects of Estonians’ daily life. Healthcare (with digital prescriptions and online health records), E-school are among sectors which have been made better by digitalization.

Reynold, M. (2016) Welcome to E-stonia, the world’s most digitally advanced society [online]. Available from: http://www.wired.co.uk/article/digital-estonia (Accessed 23 October 2016).

Anon (n.d.) e-Estonia – estonia.eu [online]. Available from: http://estonia.eu/about-estonia/economy-a-it/e-estonia.html (Accessed 23 October 2016).

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The retail industry has been deeply changed by new technologies and ways of conducting business.

 

 

We have focused on two innovative retailers who have reaped the benefits of innovative technologies in two very different ways.

 

It is commonly believed that new technologies clash with conventional brick-and-mortar locations. Zara is the perfect example which shows that It is not always the case.

Zara combines cutting-edge technology and traditional stores to maximize value.

The most notable example is its use of RFID (Radio Frequency Identification) along all of its supply chain. Garments are tagged with RFID chips which allows for tracking items from where they are manufactured to the store. While it is true that this is helpful to gather information about the location of items as well as the efficiency of the supply chain, Zara uses the chips for another value-creating reason: inventory management.

When an item is sold in-store, it is instantly recorded and this can allow staff to know when to order more of an item, or less in case it does not sell as well as expected. Thanks to this, Zara knows what they have in the inventory at any point in time. Keeping track of inventory is costly for all companies and this is an ingenious way to do so.

Real-time tracking of sales also allows for predictive analysis of sales. It takes no more than 15 days for Zara to move a garment from where it is manufactured to the store. This means they are very flexible when it comes to emerging fashions and can satisfy the customers’ needs as efficiently as an online retailer.

 

Zalando, on the other hand, leans towards the “conventional” disruptive retailer model. They are an e-retailer which sells products offered by partner companies. Their competitive advantage rests on the relatively low-cost structure of retailers who do not have to maintain expensive physical locations and their respective staff.

Zalando is in many aspects concordant with academic research when it comes to the new generation retail industry.

Firstly, Zalando focuses on the “Long-tail”, they sell an extremely wide range of different products in very low quantities and have a few main products (“best-sellers”).

They do not have physical locations but take advantage of the concept of virtual shelf space. If managed well, their supply chain allows for the “just-in time” logistics method which means they do not have to stock everything they display on their website. This is a great advantage over traditional retailers as costs of warehousing are high.

Zalando’s return policy also immensely helped them gain market share. Any item can be returned within 100 days, which means customers no longer have to worry about buying online because there is a risk that the item does not fit, that it is defective, or that they just do like it as much as when they saw it on their computer or phone screen.

In conclusion, while structurally different, Zalando and Zara’s business models satisfy the same customer needs.