Is the credit card industry under risk of disruption? Yes, definitely. Smart contracts executed on blockchain have the potential to completely disrupt the credit card industry.
Reducing the cost of making payments has the potential to disrupt major processors such as Amex, Visa, and MasterCard which charge 2% or more for each transaction. More than $24 trillion is still transferred by paper check because of these high costs.
Smart contracts executed on blockchain have the potential to completely disrupt the credit card industry by cutting costs and creating value for consumers.
Creating value for consumers in this manner can be done in a couple of ways.
The first is to invent a new product or service that they did not know they needed. The second is to find a better way to provide consumers with a product or service that they are already buying. This second approach is known as disruption because it changes an operating industry.
It is often difficult to imagine how something will disrupt an industry because it may seem that the industry is already functioning with no problems. However, industries that are ripe for disruption share some characteristics.
The first character of an industry ready to be disrupted is that it is made up of many companies or providers. One example of this type of industry is the moving industry. This is a $16 billion USD industry that is served primarily by small companies with less than 10 employees. These companies have over 50% of the market.
The wedding industry is another example of this. About $300 billion is spent on weddings around the world, but every provider of services is almost exclusively local. In fact, industries that provide local services are high on the list of those that are ready to be disrupted.
These kinds of industries can be disrupted because they are not controlled by a dominant player. The small companies have not banded together to protect their market share. This means that a change in the way the industry operates has the opportunity to be accepted by some of the small companies and spread from there.
Of course, the reason a change would spread throughout an entire industry is because it is simply a better way of doing business. The change either reduces cost or improves quality. Inc Magazine describes this as finding a problem in an industry. Reducing cost while improving both quality and customer service are the reasons why Casper is disrupting the mattress industry.
This potential and the fragmented condition of an industry mean that blockchains, virtual currencies and smart contracts can be powerful disrupters.