Transformation: beyond the buzzwords


Making sense of the pace of change

If you feel like things are changing at an increasingly rapid pace, you’re not alone. We are well into the ‘fourth industrial revolution’, where transformation is happening 10 times faster than the first.1

Fintech, the internet of things, machine learning – terms like these are the currency of this new digital economy. This article makes sense of the jargon, and looks at what they really mean for your business, your clients and the way your industry will operate in the future.

The rise and rise of – techs

From lawtech and insurtech to proptech, digital disrupters are leveraging new technology to create entirely new service models for both consumers and businesses.

All of these techs are potentially new competitors in your market. And they have more muscle than you might think.

Innes Kirkwood, previously Macquarie Business Banking’s National Head of Residential and Commercial Real Estate, describes ‘proptech’ as “technological innovation specifically designed to improve processes and remove friction in the real estate sector,”

“Most proptech innovations start with the client experience, and focus on improving one (or all) of the ‘three Ts’ – trust, transparency and time,” he explains. “In every area of real estate there are manual, inefficient processes and a lack of transparency. They can also reduce costs, enabling highly competitive pricing.”

Investment in these tech platforms has increased exponentially. Four years ago there was around $US221million invested into property technology – now proptech is attracting over $2.6 billion in capital.2 That’s a 1,200% increase – in just four years.

One example is Rentberry, which removes friction in the letting process. “This could disintermediate the property manager for that part of the process,” comments Kirkwood. Another is Macquarie’s new DEFT Auction Pay, which finally removes the need to pay a home deposit by cheque on auction day.

Hybrid competitors are also coming onto the market, including online agencies without large overheads like Purplebricks. Property Connect is about to launch a ‘live offer’ app that will make the rental market more transparent.

Although Australia is known as a fast adopter of new technology, other countries are ahead in real estate digitisation. “For example, in Sweden the entire property process is online – from listing and auction through to settlement – and it will soon have its land titles registry managed online through blockchain,” says Kirkwood.

How to keep pace with the competition

All of these techs are potentially new competitors in your market. And they have more muscle than you might think. “Purple Bricks started in the UK just three years ago, but already has the third largest market share in the country,” comments Kirkwood.

Internet of Things starts making an impact

When our physical infrastructure is connected by sensors to provide and share data, it’s part of the ‘Internet of Things’ (IoT) – where machines and devices continuously communicate with their environment. According to Kirkwood, this has great potential in the real estate sector.

“Home automation will soon be common, and you’ll be able to access and control this through apps on your device. One example would be door locks,” he says.

This could improve the convenience of repairs, maintenance or property inspections for tenants. It also supports the rise of platforms like Airbnb for longer-term letting – for example, intelligent lock apps like August allow owners to manage access to their homes from their smartphones.

The data from these connected devices can also be used to support insurance claim management or valuations.

The brave new world of AI

According to Luis Uguina, Chief Digital Officer for Macquarie’s Banking and Financial Services Group, artificial intelligence (AI) is the ‘next frontier’.

“It can already automate complex business processes with a viable outcome. Soon, computers will be able to understand patterns in behavior and predict the future or make recommendations.”

eDiscovery is an example of this in lawtech.

“We’re seeing the development of machines that don’t just process knowledge, they actually create new knowledge,” says Ian Marshall, Head of Legal for Macquarie Business Banking. “Tech companies are producing increasingly complex algorithms, predictive modeling and data mining techniques.”

This also has potential for insurance, where bots are already handling simple underwriting and claims assessments. A claims bot has brought US insurer Lemonade’s processing and payment time down to just three seconds.3

How will this impact your clients?

There’s a very simple reason all these platforms find traction in our digital economy. It makes things easier, more efficient or more affordable for customers – and it opens up access to untapped or under-serviced markets.

“2017 will be the year of customer experience,” says Uguina. “The big push from fintech means banks now need to start dealing with people as people. That means using human language, understanding the emotion behind the transaction.”

“This is an opportunity to shift from a ‘plain vanilla’ experience to something really tailor made and highly personalised.”

You will also need to re-think the type of people you need in the business, and adapt your culture and processes.

How will this impact your business?

Kirkwood recommends all businesses think about the efficiency of their business model, and how outsourcing and tech platforms could reduce the traditionally high overheads of staffing and occupancy costs – as well as improve the client experience.

“We will see margin pressure in real estate – new competitors including flat fee operators could redefine the market,” he says.

Uguina says this means you will also need to re-think the type of people you need in the business, and adapt your culture and processes. He says just two things will matter if you want to thrive in this fourth industrial revolution: speed and talent.

“In digital, everything happens at the speed of now. You can't wait three days to give a customer an answer. Make it easy for people, both clients and staff – otherwise they will leave.”

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Unless stated otherwise, this material has been prepared by Macquarie Bank Limited ABN 46 008 583 542 AFSL & Australian Credit Licence 237502 ("Macquarie") for general discussion purposes only, without taking into account your personal objectives, financial situation or needs. Before acting on this general information, you must consider its appropriateness having regard to your own objectives, financial situation and needs. The information provided is not intended to replace or serve as a substitute for any accounting, tax or other professional advice, consultation or service.