| by Tom Bloomfield
‘Digital disruption’ is a phrase that is increasingly found in boardrooms, at strategy meetings, and around the water cooler. But what does it mean, exactly? Chris Riddell, an award-winning commentator, futurist and thought-leader on digital, believes the phrase is generic rather than precise, defining it as ‘a buzz-phrase used to describe the impacts that new digital technologies are having across all industries and sectors’.1
Using the non-specific definition allows a broad brush approach to listing examples of digital disruption that we as consumers, suppliers, and citizens will have experienced in our daily lives. Service aggregators such as Uber and Airbnb have disrupted their respective industries in spectacular fashion. WhatsApp has disrupted the telecoms industry, Netflix the film and television industries, and there are countless further examples of disruptors who are breaking down the value chain and reinventing a service through a digital medium. The disruption cited follows a common theme, convenience through increased access and speed of information to the consumer and lower costs due to leaner and more digitised delivery models. The power is back with the consumer. As a consequence, Chris Riddell suggests that ‘digital redistribution’ is a more practical and accurate expression to describe the phenomenon.2
As a mounting number of industries become affected by digital redistribution, companies are increasingly becoming required to act, or react, to avoid suffering from a Kodak moment of failing to innovate and alter business practices in a rapidly changing world. In Australia for example, our banks are being forced to rethink business practices in the wake of disruption caused by a rise in peer-to-peer lending. This is not the first time the banks have been challenged by digital redistribution. For several years now, retail and business customers have not had to physically enter a banking branch to perform money transfers, change personal details, or attend to other day- to-day banking matters. Password based online banking portals and sophisticated Smartphone and mobile-device apps provide for these transactions to occur after a few taps of a screen.
And screens are being increasingly tapped. Banking, purchasing movie tickets, browsing social media, flight boarding passes, and even dating are a small fraction of the industries and interactions that Smartphone and mobile-device apps can provide an easier access platform to than via email, web browsers, or traditional physical channels.
In recent decades, businesses presented email to their clients and consumers as an electronic form of the paper outcome. Whilst in part addressing issues around certain costs and speed of communication, email does not necessarily address ease of access. For example, the majority of emails sent will still require the opening of a PDF or the following of a link to download a printable document via a website. Accessing a website then requires a web browser and a log-in process and generally the prompt from the email in the first instance to direct you there.
So what is powering the trend towards digital redistribution? Besides the convenience provided to users, Australia’s adoption of smartphones is important.
The IAB Australia 2015 Mobile Landscape Survey asserts that Australia is one of the most advanced Smartphone markets in the world, with 89 per cent of Australians owning a Smartphone, and 86 per cent of their mobile time spent on apps as oppose to websites.3 Mobile apps allow immediate access and receipt of information; the latter delivered via interactive push notifications, with the IAB estimating that mobile app push notifications are opened and read by 97 per cent of their recipients.4
The popularity of push notifications to mobile devices has allowed businesses such as banks to reduce a high proportion of the costs associated with printing and mailing information to their customers, at the same time delivering a more convenient and timelier service than email and websites offer. This and the aforementioned examples of successful digital redistribution prove that people are seeking, and will embrace, an experience that is more convenient, faster and more innovative than current options.
The move away from hard-copy mailing was the topic of recent headlines when costs associated with the practice increased on 4 January 2016, after Australia Post announced that the basic postage rate was increasing from 70 cents to one dollar as a means to recover more of the cost of providing the letters service. For businesses that rely heavily on print and mail to deliver messages to their consumers or clients, the increase in costs has the potential to be devastating. And when businesses suffer from increased costs in performing services, they are prone to pass these on to their clients and customers.
The securities (share) registry provision industry in Australia is an industry that has been slow to embrace digital solutions. Holding statements are printed and posted to new shareholders, and the vast majority of companies still work with their registry service provider to print and mail hard-copies of general meeting documentation and, where required, annual reports.
A number of registry service providers have vested interests in print and mail services, through the revenue they generate and/or print and mail businesses they own. Furthermore, the industry operates inside of a regulatory environment that suffers from conflicting interpretations on the requirement to send hard-copy documents and information to shareholders.
Rhett Tregunna, CEO of Boardroom Pty Limited, one of Australia’s leading security registry services providers estimates that on average, 30-50 per cent of annual share registry costs are a direct result of disbursement charges for print and mail services.5 For large listed entities with substantial shareholder bases, this figure can amount to hundreds of thousands of dollars per annum. Without action to reduce the reliance on print and mail, this number will only rise further as the increase in the postage rate is passed onto these clients by their registry service providers.
In addition, shareholders are generally required to deal in paper through submitting hard-copy forms with the share registry when changing personal details. Hard-copy proxy forms are normally required, as are hard-copy entitlement acceptance forms. Registry service providers will commonly charge for then handling these documents when they are returned.
The paper paradigm that the securities registry faces ensures hard-copy communication remains king and has caused limited motivation amongst registry service providers to embrace digital solutions. As a consequence the clients have been left with the bill.
The JP Morgan and Governance Institute of Australia Australian Registry Services Provider Survey provides an overview of the current state of the Australian registry services industry, and the future direction and competitive dynamics within the industry.6 The report collates data from surveys of companies in the S&P/ASX200 conducted from December 2014 to January 2015. As one could expect, the results revealed that a major consideration in the assessment of registry provider’s performance is strategies to reduce the ongoing expenditure associated with print and mail communication. However, one other consideration was ranked as being of greater importance to large Australian listed companies than overall costs – the theme of innovation.7 Australian companies have an increasing desire to engage and connect at an investor level and with participants in their employee equity plans. These companies are looking to their share registry providers for dynamic solutions.
In a marketplace where companies are seeking increased innovation in the delivery of services as a means to reduce costs, while still looking for the ability to supply information to their shareholders and stakeholders in a timely fashion, the share registry services industry displays the classic signs of an industry ripe for disruption and redistribution. Just as the success of digital redistribution models such as Uber, Airbnb, and Netflix demonstrate, where an opportunity for disruption and redistribution is addressed, it can cause devastating industry results.
Aware of the opportunity and necessity for digital redistribution, Boardroom Pty Limited, has taken a lead in launching a series of applications specifically targeted at Smartphone users. This initiative was announced to clients and the media in March 2016. The Boardroom application is specifically designed to improve engagement with investors, employee equity plan participants and clients alike, whilst at the same time saving time and money by reducing print and mail and usage of websites. The solution aims to provide a single online destination that combines smart technology with comprehensive real-time analytics, insights, news, statements and transactional features including straight through processing of common investor maintenance transactions, lodgement of votes for general meetings, and acceptance of employee equity plan offers.
The requirement for paper handling is removed as investors and employee equity plan participants can view and update their details via the mobile application, access and accept offers or respond to a current event. BoardRoom’s solution to avoiding website access, reliance on email, and costly print and mail fees is to utilise real-time push notifications. Investors and employee equity plan participants can be sent a notification of their dividend payment, an ASX announcement, a notice of meeting, media release, and availability of the annual report. Recipients then have the opportunity to browse or download the document using the application. BoardRoom’s direct clients can take further advantage of real-time push notifications on time critical matters such as significant movements within the register, securities expiration, and directors interest reporting.
Powering disruption is the rise of user expectation. As the data shows, Australians are avid users of Smartphone and mobile-device apps and we demand technology improve efficiencies and productivity. However, as with any solution, it needs to address the problem, as the highly successful abovementioned examples of successful digital redistribution shows. The registry services industry must change to address the problem and meet the rise of user expectation, or face the consequences. And it must do so now. Companies need to have the foresight to change, adapt and offer customers an alternative solution using mobile technology as a cornerstone for innovation, disruption and healthy competition.
Keep up-to-date with the latest industry updates in share registry, employee plans and corporate governance.SUBSCRIBE