The fascination with interest rates and inflation is not always constructive.
The disrupter is a company that enters the high-barrier industry with a promise of being different: different price, level of service or product. Or a combination.
We, as individuals, hold no sway over inflation, official interest rates or standard variable mortgage rates as they appear in our mortgage statements. But we’re all consumers and that gives us enormous power if we’re prepared to use it.
In particular, individual borrowers have the power to change entire industries if they spend their money with the companies known as Disrupters.
Let me explain: in what they call ‘high barrier-to-entry’ industries – airlines, phone companies, power companies, petrol station networks, supermarkets – the barriers to entry are enormous because you need so much capital to even get started.
The incumbent companies in these industries are called Defenders, because they have a near-monopoly and they try to exclude new entrants so they can defend their high prices.
Only one thing makes the defenders change their prices, and that’s competition.
Which is where the disrupter comes in.
The disrupter is a company that enters the high-barrier industry with a promise of being different: different price, level of service or product. Or a combination.
Mostly, the disrupter offers a different access point to what has been a closed industry. Examples include Virgin Blue for air travel, United for petrol stations, Aldi in supermarkets.
The disrupter creates choice and in doing so can change an industry, making all participants lower their prices and improve their products.
This works under one condition: that you, the consumers, are willing to buy goods and services from the disruptive company.
In the decade 1995 to 2005, a group of disrupters challenged the Australian mortgage lending industry.
In that decade, lenders such as Wizard, Rams and Aussie reduced their own mortgage margins, making better value loans.
Which made the banks drop their margins too.
Thus, competition forced prices down for all borrowers.
I lived through this as chairman of Wizard Home Loans. Nevertheless, as I tell people who want me to claim the kudos for this period, it was the consumers who really changed the game.
They saw a choice and voted with their feet.
For the past several years the economic cycle has been with the defenders of the mortgage industry, the banks.
Their margins have been rising, but I believe the cycle is now turning to the disrupters.
Low price mortgage lenders are entering the market again and in my own company, Yellow Brick Road, we have competitive price home loans and a different access point to the mortgage market.
But this time, we’re offering expert advice for business owners and householders, through our team of accountants, solicitors and financial planners.
So, yes, the disrupters are making a come back and offering a choice.
But then it’s up to you, the consumer: either take what’s handed to you, or change the game.
Mark Bouris is the Executive Chairman of Yellow Brick Road, a financial services company offering home loans, financial planning, accounting & tax and insurance.
Email Mark on mark.neos@ybr.com.au with any queries you may have or check www.ybr.com.au for your nearest branch.