How incumbents can disrupt themselves to remain competitive

A couple of days ago I compared the rise of the 2 peer-to-peer payment apps Venmo (U.S.-based) and Swish (Sweden-based). I noted in my post that Swish, which is owned by the leading Swedish banks, is a rare case in which incumbents succeeded in “disrupting” themselves.

After I had written my article, I came to think a bit more about the success of Swish, which according to my estimates has a market penetration of more than 50 % among Swedish adults. I happened to have an electrician at my apartment who helped me to install a new stove. After the work was done, I paid him through Swish (his company uses the business/retail offering that was recently launched by Swish). He told me that Swish is great and that he also uses the service in his private life, e.g. to send money to his son. He looked like about 50 years old. It’s only an anecdote but it shows the user penetration past the usual early adopter groups of teens and tech savvy people.

At first, the story of Swish might not appear to be very relevant to people outside of Sweden, since it is not available abroad. However, if you look closer, it provides some valuable insights for companies, industries and organizations that are trying to adapt to the digital age. The success of Swish should serve as best practices for how incumbents can reinvent and disrupt themselves. Here are some of the lessions I find noteworthy:  

1. Be patient



The first version of Swish was launched in December 2012 for the customers of six of Sweden’s largest banks (over time, additional banks joined). To get from zero to 50 % market share in about 3 years is not shabby. However, these were still 3 years without significant revenue. And it took more than a year to reach 1 million users, despite marketing activities by the participating banks. So some patience was needed until the banks had a proof of concept.

2. Resist the temptation of early monetization



For people using the general services of Swish (not the new, paid offerings for businesses/retailers), transferring and receiving money is free and has been since the launch. The company leaves the decision about charges to the participating banks. I am not aware of any bank that charges its customers for sending money with Swish. For large organizations that are accustomed to business practices of the analog age, providing something without generating revenue might feel wrong. But securing market share and creating barriers to entry should be the first goal. If Swish would have charged for transactions, people would have chosen other methods to transfer money. Eventually, a rival ( maybe an international tech giant) would have captured the market with a free competitor. Swish did not let this happen and has been rewarded with a pretty desirable market position.

3. Don’t fearing cannibalization

Launching an app for letting people send money between accounts at different banks instantly and without hassle meant accepting the risk for cannibalization. For instance, Swish leads to changes in how people use credit cards. In restaurants, it is now common that groups of people select one person that pays the whole bill, using Swish to split it afterwards. Usually, in Sweden people would pay each for themselves, credit card by card card. Since cards often charge businesses a fixed fee per card transaction in addition to a percent fee, this likely leads to a drop in transaction revenue which is shared between the banks and other parties involved during the transaction process. There are many other possible scenarios in which cannibalization could happen, not least the fact that Swish makes most banking apps look cumbersome and complicated. But fortunately, possible worries about cannibalization did not prevent the financial institutions from putting their weight behind Swish.

4. If you do it, do it right

As an app, Swish leaves a good impression (even if the most recent version received some bad reviews in the app store). It works as advertised, is simple, fast and looks nice. As a user, you do not get the feeling that you are dealing with some kind of bad compromise – something that easily can happen when multiple competitors struggling to adapt to the digital economy decide to create a product together. If Swish conceptually would come across as half-baked, it wouldn’t have a chance.

5. Separate branding

Swish was launched as separate company, using a distinct, independent brand. The fact that major Swedish banks are behind Swish was mentioned here and there, but this message was never pushed too much. I am guessing that the majority of Swedes would not know who is behind Swish. It’s just a guess and I might be wrong, but my point is: The company was allowed to create its own brand personality. It feels like a WhatsApp for money, not like the brain child of suit-wearing bank managers.

6. The name matters, the domain does not

Swish as a name is pretty catchy, and it’s suitable for being used as a verb. However, the company had to resort to the domain getswish.se, since swish.se is occupied. It even chose to legally call the company “Getswish”. It did not seem to matter too much.

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Each industry has its own rules. Adapting to the digital economy must always take these industry-specific rules into account. However, I’d argue that at least when it comes to consumer products and services, there is something to be learned from the story of Swish.

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