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.
The foreign exchange market for travellers is a multi-billion pound business shared by
established financial institutions. Travellers buy the currency that they need at one exchange
rate and then sell any surplus back to the bank at a much lower rate. The gap between the two
rates is considerable, particularly in SA, i.e. the existing banks enjoy significant profits from
these exchange rates. Many travellers use this service and write off the currency loss as part of
the costs of their trip, but many keep the currency in a drawer hoping to use it on a subsequent
trip. There are disrupter banks hovering in the wings in this lucrative market. The emergence of
disruptor banks has introduced the concept of multi-currency bank accounts, where an
individual account holder can have a bank account in multiple currencies. Consequently, a
traveller in this position can simply “bank” their spare currency rather than convert it back after
their trip. Aligned with this is the concept of peer-to-peer transactions where, via an app, two
unconnected individuals can agree to transfer currency between each other at a rate where
both benefit (compared to the bank’s buy and sell rate). This creates the vital win/win scenario,
which is the bedrock of great ideas. The amounts per transaction are often small, but the
volume could be huge, and the disrupter banks involved see it as a way of rapidly increasing
customer numbers and making a small margin on every transaction (significantly smaller than
what is currently being made but requiring no further involvement once the programming is
complete). The established banks are worried about this development as it represents yet
another lucrative element of the financial markets that may be lost. Required:
(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.
Adopt and Develop Multi-Currency Accounts and Peer-to-Peer (P2P) Platforms
Benefits:
, Customer Retention: Offering multi-currency accounts and P2P exchange can retain
customers who would otherwise switch to disruptor banks.
Market Competitiveness: Keeps the bank competitive with the new disruptors.
Revenue Diversification: While margins per transaction are lower, the high volume could
compensate, and the bank can monetize through fees or interest.
Innovation Image: Shows the bank as an innovator, attracting tech-savvy customers and
millennials.
Risks:
Technology Investment: High upfront costs to develop or integrate technology for multi-
currency and P2P capabilities.
Cannibalization: Reduced margins compared to traditional forex spreads.
Operational Complexity: Managing multiple currencies and P2P transactions requires
robust systems and compliance measures.
Security Risks: Increased risk of fraud or cybersecurity breaches in P2P transactions.
2. Maintain Status Quo and Focus on Existing Business Model
Benefits:
Stable Revenue: Continue to profit from wide forex spreads.
No Additional Investment: Avoids costs of new technology or services.
Leverage Brand Trust: Established banks often have a trusted reputation, especially for
security.
Risks:
Loss of Market Share: Disruptor banks could steadily attract customers seeking better
rates and flexible options.
Customer Attrition: Particularly among younger or tech-savvy travelers who prefer
digital and cheaper solutions.
Reputational Risk: Could be seen as outdated or unresponsive to customer needs.
3. Partner or Acquire Disruptor Banks or Fintech Startups
Benefits:
Speed to Market: Quick access to new technology and customer base.
Risk Mitigation: Less risky than in-house development.
Market Expansion: Can leverage disruptor’s innovation and reach.
Competitive Edge: Gain insights into disruptive technologies and business models.
Risks:
Integration Challenges: Cultural and operational integration may be difficult.
Cost: Acquisitions can be expensive and may not deliver expected returns.
Regulatory Scrutiny: Increased regulatory burden around acquisitions.
, Dependency: Risk of relying on external tech that might limit flexibility.
4. Focus on Premium Services and Differentiation
Benefits:
Higher Margins: Offering value-added services like travel insurance, concierge, or loyalty
rewards can justify higher fees.
Customer Loyalty: Enhances customer experience and loyalty.
Brand Positioning: Positions the bank as a premium service provider.
Risks:
Niche Market: May lose mass market travelers to disruptors.
Customer Cost Sensitivity: Travelers may not pay for premium services if cheaper
options exist.
Investment Needed: Requires investment in service quality and marketing.
5. Lobby for Regulatory Changes
Benefits:
Barrier to Entry: Regulation can slow down disruptor growth.
Protect Revenue: Can help maintain current margins.
Risks:
Public Backlash: Customers may perceive banks as protecting profits unfairly.
Innovation Stifling: Could limit overall market innovation.
Regulatory Risk: Changes in regulation can be slow and unpredictable.
Summary
Strategy Benefits Risks
Customer Investment
Develop Multi- retention, cost, margin
Currency & P2P innovation, pressure,
competitive security
Market share
Maintain Status Stable revenue, loss,
Quo no new costs reputational
damage
Partner/Acquire Speed, Integration risk,
Disruptors innovation, cost, regulation
market
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.
The foreign exchange market for travellers is a multi-billion pound business shared by
established financial institutions. Travellers buy the currency that they need at one exchange
rate and then sell any surplus back to the bank at a much lower rate. The gap between the two
rates is considerable, particularly in SA, i.e. the existing banks enjoy significant profits from
these exchange rates. Many travellers use this service and write off the currency loss as part of
the costs of their trip, but many keep the currency in a drawer hoping to use it on a subsequent
trip. There are disrupter banks hovering in the wings in this lucrative market. The emergence of
disruptor banks has introduced the concept of multi-currency bank accounts, where an
individual account holder can have a bank account in multiple currencies. Consequently, a
traveller in this position can simply “bank” their spare currency rather than convert it back after
their trip. Aligned with this is the concept of peer-to-peer transactions where, via an app, two
unconnected individuals can agree to transfer currency between each other at a rate where
both benefit (compared to the bank’s buy and sell rate). This creates the vital win/win scenario,
which is the bedrock of great ideas. The amounts per transaction are often small, but the
volume could be huge, and the disrupter banks involved see it as a way of rapidly increasing
customer numbers and making a small margin on every transaction (significantly smaller than
what is currently being made but requiring no further involvement once the programming is
complete). The established banks are worried about this development as it represents yet
another lucrative element of the financial markets that may be lost. Required:
(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.
Adopt and Develop Multi-Currency Accounts and Peer-to-Peer (P2P) Platforms
Benefits:
, Customer Retention: Offering multi-currency accounts and P2P exchange can retain
customers who would otherwise switch to disruptor banks.
Market Competitiveness: Keeps the bank competitive with the new disruptors.
Revenue Diversification: While margins per transaction are lower, the high volume could
compensate, and the bank can monetize through fees or interest.
Innovation Image: Shows the bank as an innovator, attracting tech-savvy customers and
millennials.
Risks:
Technology Investment: High upfront costs to develop or integrate technology for multi-
currency and P2P capabilities.
Cannibalization: Reduced margins compared to traditional forex spreads.
Operational Complexity: Managing multiple currencies and P2P transactions requires
robust systems and compliance measures.
Security Risks: Increased risk of fraud or cybersecurity breaches in P2P transactions.
2. Maintain Status Quo and Focus on Existing Business Model
Benefits:
Stable Revenue: Continue to profit from wide forex spreads.
No Additional Investment: Avoids costs of new technology or services.
Leverage Brand Trust: Established banks often have a trusted reputation, especially for
security.
Risks:
Loss of Market Share: Disruptor banks could steadily attract customers seeking better
rates and flexible options.
Customer Attrition: Particularly among younger or tech-savvy travelers who prefer
digital and cheaper solutions.
Reputational Risk: Could be seen as outdated or unresponsive to customer needs.
3. Partner or Acquire Disruptor Banks or Fintech Startups
Benefits:
Speed to Market: Quick access to new technology and customer base.
Risk Mitigation: Less risky than in-house development.
Market Expansion: Can leverage disruptor’s innovation and reach.
Competitive Edge: Gain insights into disruptive technologies and business models.
Risks:
Integration Challenges: Cultural and operational integration may be difficult.
Cost: Acquisitions can be expensive and may not deliver expected returns.
Regulatory Scrutiny: Increased regulatory burden around acquisitions.
, Dependency: Risk of relying on external tech that might limit flexibility.
4. Focus on Premium Services and Differentiation
Benefits:
Higher Margins: Offering value-added services like travel insurance, concierge, or loyalty
rewards can justify higher fees.
Customer Loyalty: Enhances customer experience and loyalty.
Brand Positioning: Positions the bank as a premium service provider.
Risks:
Niche Market: May lose mass market travelers to disruptors.
Customer Cost Sensitivity: Travelers may not pay for premium services if cheaper
options exist.
Investment Needed: Requires investment in service quality and marketing.
5. Lobby for Regulatory Changes
Benefits:
Barrier to Entry: Regulation can slow down disruptor growth.
Protect Revenue: Can help maintain current margins.
Risks:
Public Backlash: Customers may perceive banks as protecting profits unfairly.
Innovation Stifling: Could limit overall market innovation.
Regulatory Risk: Changes in regulation can be slow and unpredictable.
Summary
Strategy Benefits Risks
Customer Investment
Develop Multi- retention, cost, margin
Currency & P2P innovation, pressure,
competitive security
Market share
Maintain Status Stable revenue, loss,
Quo no new costs reputational
damage
Partner/Acquire Speed, Integration risk,
Disruptors innovation, cost, regulation
market
