MAC3703 Assignment
2 (COMPLETE
ANSWERS) Semester 2
2025 - DUE 30
September 2025
NO PLAGIARISM
[Pick the date]
[Type the company name]
,Exam (elaborations)
MAC3703 Assignment 2 (COMPLETE
ANSWERS) Semester 2 2025 - DUE 30
September 2025
Course
Selected Accounting & Financial Management Techniques (MAC3703)
Institution
University Of South Africa (Unisa)
Book
Financial Management - Techniques
MAC3703 Assignment 2 (COMPLETE ANSWERS) Semester 2 2025 - DUE 30
September 2025; 100% TRUSTED Complete, trusted solutions and
explanations. Ensure your success with us.
(a) Discuss the risks and benefits of the main strategic options open to the existing banks
(established financial institutions) to prevent the loss of the foreign exchange profits that
they currently enjoy.
Answer 1
The foreign exchange market for travellers has traditionally been dominated by established
banks, who profit from the wide margin between their currency buy and sell rates. However, the
entry of disruptor banks offering multi-currency accounts and peer-to-peer exchange
platforms threatens this lucrative revenue stream. Established banks have several strategic
options, each with associated benefits and risks:
Option 1: Maintain the Status Quo (Do Nothing)
Benefits:
o Minimal short-term costs – banks continue enjoying existing profit margins.
o Loyal and less price-sensitive customers may still use banks out of convenience,
trust, or lack of awareness of alternatives.
Risks:
o Loss of market share over time as travellers shift to cheaper, more flexible
disruptor platforms.
o Reputational risk – customers may perceive banks as exploitative if cheaper
alternatives exist.
o Threat of long-term decline in profitability of the foreign exchange service line.
, Option 2: Compete by Lowering Exchange Rate Margins
Benefits:
o Makes banks more competitive with disruptors, slowing customer defection.
o Builds goodwill and brand loyalty by demonstrating fairer pricing.
o Leverages existing trust in established banks while offering improved value.
Risks:
o Immediate reduction in profit margins.
o Banks’ cost structures are generally higher than fintech disruptors, making
sustained price competition difficult.
o Risk of a “race to the bottom” in pricing, further eroding profitability.
Option 3: Innovate with Multi-Currency Accounts and Apps
Benefits:
o Meets evolving customer expectations by offering convenient, digital solutions.
o Banks can leverage their regulatory expertise, compliance systems, and large
customer base to scale new services quickly.
o Potential to capture transaction fees from peer-to-peer platforms or small margin
trades at high volumes (as disruptors do).
Risks:
o Requires significant investment in technology and partnerships (fintech
collaborations).
o Cannibalises the bank’s current high-margin foreign exchange profits.
o Risk of failure to compete effectively if the digital offering is clunky compared to
disruptors.
Option 4: Form Strategic Alliances with Disruptor Banks/Fintechs
Benefits:
o Access to innovative technology without fully developing in-house.
o Enhances customer experience while maintaining the bank’s trusted brand.
o Provides a new revenue-sharing model instead of outright competition.
Risks:
o Dependence on external partners may reduce banks’ control over customer
relationships.
o Profit-sharing arrangements may yield lower margins than current models.
o Disruptors could eventually become competitors again once they establish strong
market presence.
2 (COMPLETE
ANSWERS) Semester 2
2025 - DUE 30
September 2025
NO PLAGIARISM
[Pick the date]
[Type the company name]
,Exam (elaborations)
MAC3703 Assignment 2 (COMPLETE
ANSWERS) Semester 2 2025 - DUE 30
September 2025
Course
Selected Accounting & Financial Management Techniques (MAC3703)
Institution
University Of South Africa (Unisa)
Book
Financial Management - Techniques
MAC3703 Assignment 2 (COMPLETE ANSWERS) Semester 2 2025 - DUE 30
September 2025; 100% TRUSTED Complete, trusted solutions and
explanations. Ensure your success with us.
(a) Discuss the risks and benefits of the main strategic options open to the existing banks
(established financial institutions) to prevent the loss of the foreign exchange profits that
they currently enjoy.
Answer 1
The foreign exchange market for travellers has traditionally been dominated by established
banks, who profit from the wide margin between their currency buy and sell rates. However, the
entry of disruptor banks offering multi-currency accounts and peer-to-peer exchange
platforms threatens this lucrative revenue stream. Established banks have several strategic
options, each with associated benefits and risks:
Option 1: Maintain the Status Quo (Do Nothing)
Benefits:
o Minimal short-term costs – banks continue enjoying existing profit margins.
o Loyal and less price-sensitive customers may still use banks out of convenience,
trust, or lack of awareness of alternatives.
Risks:
o Loss of market share over time as travellers shift to cheaper, more flexible
disruptor platforms.
o Reputational risk – customers may perceive banks as exploitative if cheaper
alternatives exist.
o Threat of long-term decline in profitability of the foreign exchange service line.
, Option 2: Compete by Lowering Exchange Rate Margins
Benefits:
o Makes banks more competitive with disruptors, slowing customer defection.
o Builds goodwill and brand loyalty by demonstrating fairer pricing.
o Leverages existing trust in established banks while offering improved value.
Risks:
o Immediate reduction in profit margins.
o Banks’ cost structures are generally higher than fintech disruptors, making
sustained price competition difficult.
o Risk of a “race to the bottom” in pricing, further eroding profitability.
Option 3: Innovate with Multi-Currency Accounts and Apps
Benefits:
o Meets evolving customer expectations by offering convenient, digital solutions.
o Banks can leverage their regulatory expertise, compliance systems, and large
customer base to scale new services quickly.
o Potential to capture transaction fees from peer-to-peer platforms or small margin
trades at high volumes (as disruptors do).
Risks:
o Requires significant investment in technology and partnerships (fintech
collaborations).
o Cannibalises the bank’s current high-margin foreign exchange profits.
o Risk of failure to compete effectively if the digital offering is clunky compared to
disruptors.
Option 4: Form Strategic Alliances with Disruptor Banks/Fintechs
Benefits:
o Access to innovative technology without fully developing in-house.
o Enhances customer experience while maintaining the bank’s trusted brand.
o Provides a new revenue-sharing model instead of outright competition.
Risks:
o Dependence on external partners may reduce banks’ control over customer
relationships.
o Profit-sharing arrangements may yield lower margins than current models.
o Disruptors could eventually become competitors again once they establish strong
market presence.
