Report on Internship Project at Zest Money

INDUSTRY
PROFILE

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Financial services are major economic services provided by the finance industry, which
comprises of a broad range of businesses that involves in managing money, including
banks ,credit unions, insurance companies , credit-card companies, , accountancy
companies, consumer-finance companies, stock brokerages, investment funds,
government-sponsored enterprises
HISTORY
The term "financial services" became more rampant as a upshot of the Gramm-Leach-
Bliley Act of late 1990s, in United States which enabled companies operating in the
U.S. financial services industry at that time to merge.
Companies usually have two distinct approaches to this new type of business. One
approach would be a bank which simply buys an insurance company or an investment
bank, keeps the original brands of the acquired firm, and adds the acquisition to its
holding company simply to diversify its earnings. Outside the U.S. (e.g. Japan), non-
financial services companies are permitted within the holding company. In this scenario,
each company still looks independent, and has its own customers, etc. In the other style, a
bank would simply create its own brokerage division or insurance division and attempt to
sell those products to its own existing customers, with incentives for combining all things
with one company.
Companies in the financial services industry are in the business of managing money.
Globally, the financial services industry leads the world in terms of earnings and equity
market capitalization. Large conglomerates dominate this sector, but it also includes a
diverse range of smaller companies.
According to the Finance and Development department of the International Monetary
Fund (IMF), a financial service is best described as the process by which a consumer or
business acquires a financial good. For example, a payment system provider is providing
a financial service when it is able to accept and transfer funds from a payer to a recipient.
This includes accounts that are settled through credit and debit cards, checks and
electronic funds transfers.
Consider a financial advisor. The advisor manages assets and offers advice on behalf of a
client. The advisor does not directly provide investments or any other product. Instead,

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the advisor facilitates the movement of funds between savers and the issuers of securities
and other instruments. This service is a temporary task rather than a tangible asset.
Financial goods, on the other hand, are not tasks; they are things. A mortgage loan may
seem like a service, but it's actually a product that lasts beyond the initial provision.
Stocks, bonds, loans, commodity assets, real estate and insurance policies are examples
of financial goods.

Players in financial services sector

1.Bank plays a major role in financial service sector, which comes under the tertiary sector.
banks are ideally led by the central bank of the country for the growth of financial services
industry which are often followed by other institutions like foreign banks, commercial banks,
development banks, co-operative banks etc.

2.Consumer is enabled to buy the product on credit basis by hire purchase financier who in turn
is also a player in the financial service sector

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3.Acquiring of assets by producers are done on a reasonable charge by Leasing companies

through financial and operating lease

4. Factoring enables the seller to obtain maximum value of sales from the financial companies
commissioning factoring services.

5. Underwriters and merchant bankers promote companies and also ensure vibrant activity in
the capital market.

6. Book-builders help companies in allotting shares to different categories of investors.

7. Mutual funds ensure investment by the public and also ensure tax relief to the investor.

8. Credit cards, another important player in the financial services, ensure the circulation of
plastic money and enable purchase on credit by the consumer.

9. Credit rating companies play an important role by giving different credit ratings to companies
to mobilize public deposits.

10. Housing finance companies and insurance companies also promote investment in the
economy as they also form a part of the players in the financial services.

11. Asset liability management company enables mutual funds to undertake proper investment
in different types of companies.

12. Finance companies in general and also as a part of non-banking finance companies provide
additional funds to the above players so that there is more activity in the economy.

In addition to the above players, the government acts as the umpire and the various enactments
as rules for playing a fair game in the field of financial services.

Berkshire Hathaway

Berkshire Hathaway (BRK-A), the well-known most expensive stock in the world, is a
multinational conglomerate initially composed primarily of insurance companies, including
GEICO and National Indemnity. It now also owns companies involved in real estate,
transportation, the furniture industry and several jewelry companies, notably Helzberg
Diamonds.

Directed overall by famed investor Warren Buffett, Berkshire Hathaway has an established
record of financial success with companies that it has acquired over the years. One of its most
recent acquisitions is the Burlington Northern Santa Fe railroad company.

American Express

American Express (AE), a Fortune 100 company and a component of the Dow Jones Industrial
Average (DJIA), is a multinational firm offering a variety of credit cardservices worldwide.
American Express is one of the oldest financial firms in America, dating back to 1850. It was one
of the first companies to offer charge cards.

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Despite competition from newer firms with more aggressive credit card marketing, such as Visa
and MasterCard, American Express has continued to prosper. It attempted, but then
abandoned, a foray into investment banking. More recently, it has continued to expand its
credit card offerings, creating a number of co-branded cards with hotels and other travel
services, as well as venturing into the prepaid card business. The elite status of American
Express is demonstrated by its ability to offer a premium black card charging a hefty $7,500
initial fee.

Wells Fargo

Wells Fargo (WFC) is a global bank and financial services company. Measured by market
capitalization, it is the largest bank in the United States, and it is among the 100 largest U.S.
corporations.

Wells Fargo, with operations in over 30 countries, has the distinction of holding the first ever
bank charter issued in the U.S. The company made a major acquisition in 2008 when it bought
Wachovia Bank, winning out over one of its major competitors, Citigroup.

E-Trade Financial Corporation

E-Trade Financial Corporation (ETFC ) was founded in 1982 as one of the first online discount
brokerage firms targeting self-directed investors. It has continued to expand its business rapidly
despite an influx of competition from older, much more well-established firms, such as Charles
Schwab,

E-Trade has garnered industry awards for its trading platform and consistently ranks in the top
three online discount stock brokerage firms in the U.S. Along with acquiring a number of other
online brokerage firms, E-Trade has grown its business by offering banking services to its clients,
notably sweep accounts that allow for automatic transfers back and forth between savings,
checking and brokerage accounts.

Financial services in India | History and trends

The financial services sector in India, which accounts for 6 percent of the nation’s GDP, is
growing rapidly. Although the sector consists of commercial banks, development finance
institutions, nonbanking financial companies, insurance companies, cooperatives, mutual funds,
and the new “payment banks,” it is dominated by banks, which holds over 60 percent share.

The Reserve Bank of India (RBI) is the apex bank of the country, controlling all activities in the
financial sector. Commercial banks include public sector and private sector banks and are under
the regulatory supervision of the RBI. Development finance institutions include industrial and
agriculture banks.

Non-banking finance companies (NBFC) provide loans, purchase stocks and debentures, and
offer leasing, hire purchase, and insurance services.

Insurance companies function in both public and private sectors and are controlled by the
Insurance Regulatory and Development Authority (IRDA).

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India also has a vibrant capital market with stocks exchanges controlled by the Securities and
Exchange Board of India (SEBI).

According to “India in Business,” a website of the Union Government, India’s banking sector
assets were worth $1.8 trillion in the 2014-15 financial year.

According to a report by KPMG-CII, India’s banking sector is on the way to becoming the fifth
largest in the world by 2020. The country’s life insurance sector is the biggest in the world, and
the market size is expected to touch about $400 billion by 2020.

The assets of the mutual fund industry are worth $190 billion. The pension corpus fund is
projected to record $1 trillion by 2025. Reforms to put the financial services industry and the
economy on the fast track include measures to make finance available to medium, small, and
micro industries.

India once had a heavily government-dominated financial services industry, and most services
were provided by nationalised banks. Financial sector reforms were initiated in 1991 with the
aim of accelerating economic growth.

In the following years, industry and service sectors were opened up for foreign direct
investment. The reforms ended the dominance of the public sector and reduced direct
government control on industrial investments.

Financial sector reforms in India have improved resource mobilisations and allocation. The
liberalisation of interest rates and the easing of cash reserve norms have helped make funds
available to various sectors.

However, prudential norms have been tightened and transparency and regulation increased to
avoid a systemic collapse that other countries have suffered.

Last Updated: July, 2019

INDIAN FINANCIAL SERVICES INDUSTRY REPORT (SIZE: 1.04 MB ) (JULY, 2019)

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Introduction

India has a diversified financial sector undergoing rapid expansion, both in terms of strong
growth of existing financial services firms and new entities entering the market. The sector
comprises commercial banks, insurance companies, non-banking financial companies, co-
operatives, pension funds, mutual funds and other smaller financial entities. The banking
regulator has allowed new entities such as payments banks to be created recently thereby
adding to the types of entities operating in the sector. However, the financial sector in India is
predominantly a banking sector with commercial banks accounting for more than 64 per cent of
the total assets held by the financial system.

The Government of India has introduced several reforms to liberalise, regulate and enhance this
industry. The Government and Reserve Bank of India (RBI) have taken various measures to
facilitate easy access to finance for Micro, Small and Medium Enterprises (MSMEs). These
measures include launching Credit Guarantee Fund Scheme for Micro and Small Enterprises,
issuing guideline to banks regarding collateral requirements and setting up a Micro Units
Development and Refinance Agency (MUDRA). With a combined push by both government and
private sector, India is undoubtedly one of the world's most vibrant capital markets. In 2017,a
new portal named 'Udyami Mitra' has been launched by the Small Industries Development Bank
of India (SIDBI) with the aim of improving credit availability to Micro, Small and Medium
Enterprises' (MSMEs) in the country. India has scored a perfect 10 in protecting shareholders'
rights on the back of reforms implemented by Securities and Exchange Board of India (SEBI).

Market Size

The Mutual Fund (MF) industry in India has seen rapid growth in Assets Under Management
(AUM). Total AUM of the industry stood at Rs 23.80 trillion (US$ 340.48 billion) between April
2018-February 2019. At the same time the number of Mutual fund (MF) equity portfolios
reached a high of 74.6 million as of June 2018.

Another crucial component of India’s financial industry is the insurance industry. The insurance
industry has been expanding at a fast pace. The total first year premium of life insurance
companies reached Rs 214,673 crore (US$ 30.72 billion) during FY19.

Along with the secondary market, the market for Initial Public Offers (IPOs) has also witnessed
rapid expansion. The total amount of Initial Public Offerings (IPO) increased to US$ 1.2 billion
raised from 37 between April – June 2018.

Over the past few years India has witnessed a huge increase in Mergers and Acquisition (M&A)
activity. In H12018, 74 deals of acquisition took place in financial sector. The total value of such
transactions was US$ 4.166 billion. *

Furthermore, India’s leading bourse Bombay Stock Exchange (BSE) will set up a joint venture
with Ebix Inc to build a robust insurance distribution network in the country through a new
distribution exchange platform.

Investments/Developments

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Investments by Foreign Portfolio Investors (FPIs) in Indian capital markets have reached Rs 6,310
crore (US$ 899.12 million) up to November 22, 2018.

As of October 2018, the Financial Inclusion Lab has selected 11 fintech innovators with an
investment of US$ 9.5 million promoted by the IIM-Ahmedabad's Bharat Inclusion Initiative (BII)
along with JP Morgan, Michael and Susan Dell Foundation, and the Bill and Melinda Gates
Foundation.

The private equity and venture capital (PE/VC) investments reached US$ 25.20 billion between
January to October 2018.*

Government Initiatives

In December, 2018, Securities and Exchange Board of India (SEBI) proposed direct overseas
listing of Indian companies and other regulatory changes.

Bombay Stock Exchange (BSE) introduced weekly futures and options contracts on Sensex 50
index from October 26, 2018.

In September 2018, SEBI asked for recommendations to strengthen rules which will enhance the
overall governance standards for issuers, intermediaries or infrastructure providers in the
financial market.

The Government of India launched India Post Payments Bank (IPPB), to provide every district
with one branch which will help increase rural penetration. As of August 2018, two branches out
of 650 branches are already operational.

Road Ahead

India is today one of the most vibrant global economies, on the back of robust banking and
insurance sectors. The relaxation of foreign investment rules has received a positive response
from the insurance sector, with many companies announcing plans to increase their stakes in
joint ventures with Indian companies. Over the coming quarters there could be a series of joint
venture deals between global insurance giants and local players.

The Association of Mutual Funds in India (AMFI) is targeting nearly five fold growth in assets
under management (AUM) to Rs 95 lakh crore (US$ 1.47 trillion) and a more than three times
growth in investor accounts to 130 million by 2025.

India's mobile wallet industry is estimated to grow at a Compound Annual Growth Rate (CAGR)
of 150 per cent to reach US$ 4.4 billion by 2022 while mobile wallet transactions to touch Rs 32
trillion (USD $ 492.6 billion) by 2022

Last Updated: July, 2019

INDIAN FINANCIAL SERVICES INDUSTRY REPORT (SIZE: 1.04 MB ) (JULY, 2019)

Introduction

India has a diversified financial sector undergoing rapid expansion, both in terms of strong
growth of existing financial services firms and new entities entering the market. The sector
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comprises commercial banks, insurance companies, non-banking financial companies, co-

operatives, pension funds, mutual funds and other smaller financial entities. The banking
regulator has allowed new entities such as payments banks to be created recently thereby
adding to the types of entities operating in the sector. However, the financial sector in India is
predominantly a banking sector with commercial banks accounting for more than 64 per cent of
the total assets held by the financial system.

The Government of India has introduced several reforms to liberalise, regulate and enhance this
industry. The Government and Reserve Bank of India (RBI) have taken various measures to
facilitate easy access to finance for Micro, Small and Medium Enterprises (MSMEs). These
measures include launching Credit Guarantee Fund Scheme for Micro and Small Enterprises,
issuing guideline to banks regarding collateral requirements and setting up a Micro Units
Development and Refinance Agency (MUDRA). With a combined push by both government and
private sector, India is undoubtedly one of the world's most vibrant capital markets. In 2017,a
new portal named 'Udyami Mitra' has been launched by the Small Industries Development Bank
of India (SIDBI) with the aim of improving credit availability to Micro, Small and Medium
Enterprises' (MSMEs) in the country. India has scored a perfect 10 in protecting shareholders'
rights on the back of reforms implemented by Securities and Exchange Board of India (SEBI).

Market Size

The Mutual Fund (MF) industry in India has seen rapid growth in Assets Under Management
(AUM). Total AUM of the industry stood at Rs 23.80 trillion (US$ 340.48 billion) between April
2018-February 2019. At the same time the number of Mutual fund (MF) equity portfolios
reached a high of 74.6 million as of June 2018.

Another crucial component of India’s financial industry is the insurance industry. The insurance
industry has been expanding at a fast pace. The total first year premium of life insurance
companies reached Rs 214,673 crore (US$ 30.72 billion) during FY19.

Along with the secondary market, the market for Initial Public Offers (IPOs) has also witnessed
rapid expansion. The total amount of Initial Public Offerings (IPO) increased to US$ 1.2 billion
raised from 37 between April – June 2018.

Over the past few years India has witnessed a huge increase in Mergers and Acquisition (M&A)
activity. In H12018, 74 deals of acquisition took place in financial sector. The total value of such
transactions was US$ 4.166 billion. *

Furthermore, India’s leading bourse Bombay Stock Exchange (BSE) will set up a joint venture
with Ebix Inc to build a robust insurance distribution network in the country through a new
distribution exchange platform.

Investments/Developments

Investments by Foreign Portfolio Investors (FPIs) in Indian capital markets have reached Rs 6,310
crore (US$ 899.12 million) up to November 22, 2018.

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As of October 2018, the Financial Inclusion Lab has selected 11 fintech innovators with an
investment of US$ 9.5 million promoted by the IIM-Ahmedabad's Bharat Inclusion Initiative (BII)
along with JP Morgan, Michael and Susan Dell Foundation, and the Bill and Melinda Gates
Foundation.

The private equity and venture capital (PE/VC) investments reached US$ 25.20 billion between
January to October 2018.*

Government Initiatives

In December, 2018, Securities and Exchange Board of India (SEBI) proposed direct overseas
listing of Indian companies and other regulatory changes.

Bombay Stock Exchange (BSE) introduced weekly futures and options contracts on Sensex 50
index from October 26, 2018.

In September 2018, SEBI asked for recommendations to strengthen rules which will enhance the
overall governance standards for issuers, intermediaries or infrastructure providers in the
financial market.

The Government of India launched India Post Payments Bank (IPPB), to provide every district
with one branch which will help increase rural penetration. As of August 2018, two branches out
of 650 branches are already operational.

Road Ahead

India is today one of the most vibrant global economies, on the back of robust banking and
insurance sectors. The relaxation of foreign investment rules has received a positive response
from the insurance sector, with many companies announcing plans to increase their stakes in
joint ventures with Indian companies. Over the coming quarters there could be a series of joint
venture deals between global insurance giants and local players.

The Association of Mutual Funds in India (AMFI) is targeting nearly five fold growth in assets
under management (AUM) to Rs 95 lakh crore (US$ 1.47 trillion) and a more than three times
growth in investor accounts to 130 million by 2025.

India's mobile wallet industry is estimated to grow at a Compound Annual Growth Rate (CAGR)
of 150 per cent to reach US$ 4.4 billion by 2022 while mobile wallet transactions to touch Rs 32
trillion (USD $ 492.6 billion) by 2022

innovation is disrupting financial services. Three key challenges emerged.

On October 2nd and 3rd 2018, directors and executives from among the largest banks and
insurers globally, FinTech executives, regulators and other subject-matter advisors, including EY
financial services leaders and professionals, met in London for the Financial Services Leadership
Summit. This summit is organized and led by Tapestry Networks and supported by EY, to discuss
how the increasingly rapid pace of innovation is disrupting financial services.

Small, agile FinTech firms are taking ever-larger shares of what were once markets served only
by incumbent providers. This accelerated change is fueled partly by the failure of incumbents to
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meet customer expectations. As they look into the future, financial institutions do see a
changing financial services ecosystem — one in which incumbent firms need to adapt operating
models, structures and systems to improve agility and efficiency, and one where they may play
different roles than they have historically.

Three issues confront financial institutions:

Can financial institutions adapt to disruption in financial services?

Can massive institutions transform their businesses?

Can financial services providers increase inclusion?

Chapter 1

Can financial institutions adapt to disruption in financial services?

New market entrants attract talent and offer more agile and customer-centric solutions.

Two years ago, a lot of this was theoretical. Now, it is happening

Financial Services Leadership Summit participant

The accelerating pace of technological advancement and the applications in financial services
are creating opportunities to serve customers in new ways; the situation is giving rise to new
entrants who are achieving real scale and experimenting with innovative models.

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Incumbents see potential to apply their own innovative approaches, but the rapid changes make
it difficult to predict how different businesses will be impacted and what investments and
strategies will be most effective. Financial institutions hold a strong position, with massive
customer bases, strong balance sheets and substantial amounts of capital to invest.

But pressure is building on them to innovate as new technologies are changing the shape of the
markets. New technologies and growing competition are putting pressure on incumbents:

More agile, and magnets for talent, fintech firms are growing, with investment on pace to reach
$100 billion globally in 2018. Today, fintechs make up 12 percent of all ‘unicorns’ (startup
companies valued at over $1 billion) globally.

Big technology companies could be the most disruptive if they increasingly move toward direct
competition with financial services institutions.

While much of the growth has been focused on retail consumer businesses, like payments and
lending, new technologies have the potential to drive unprecedented transformations and
competitive shifts in commercial and wholesale markets as well. The same technologies that
enable new entrants to compete with established incumbents are also changing how
incumbents themselves operate, manage information, and engage with customers.

“They all want to eat our lunch … Every single one of them is going to try,” warnedJPMorgan
Chase CEO, Jamie Dimon in his annual letter to shareholders in 2014.

We’ve spent the last 10 years not thinking about the customer. Not only that, but we’re making
them fill out more forms and charging more fees. We have made it incredibly easy for FinTechs
and other challengers.

Financial Services Leadership Summit banking participant

Customers increasingly expect flexible, personalized services. They expect them at times and in
places of their choice and to have products specifically tailored to their needs. And they want
full services on their mobile phones.

FinTech firms make this kind of relevancy their take-off point. Many are focused on the
consumer space, where technology has enabled them to reach and acquire customers more
easily. Some of the greatest inroads from new competitors have come in retail consumer
banking.

The $100 trillion payments market has long been dominated by major banks, credit card
companies, and other financial firms. But new entrants are emerging, offering cheaper and
more flexible ways of processing payments, and they now have most of the online market, as an
article in The Banker, “Chinese Banks’ Big Tech Threat” shows. Some challenger banks now have
over now have over 2 million customers, according to CB Insights’ The Challenger Bank
Playbook: How 6 Digital Banking Startups Are Taking On Retail Banking.

The largest InsurTech companies have collectively raised nearly $1 billion, with total valuations
approaching $9 billion.

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Many of these FinTech firms are targeting younger customers—their average age is currently
34—and are marked by agility in organizational design as well as in deployingtechnology . The
continued scaling up of these startups poses growing competitive threats to the incumbents.

“Product by product, if someone figures out how to do it cheaper, and better, it will crush the
margins in each,” as one director observed at the summit.

Peer-to-peer and online lending represent a major market for growth outside of traditional
incumbents. In 2016, online platforms provided approximately 15% of all SME loans in the
United Kingdom. In the United States, FinTech companies account for about a third of this
lending, up from less than 1% in 2010. New models are emerging as well, which could have a
significant effect on financial services in the future. One new model is the “bank-as-a-
marketplace,” which allows customers to easily move money into multiple providers.

“That’s the opportunity. It’s about finding a way to feed customers content and get time on
their mobile device,” according to one participant at the summit. Innovative business models
are also emerging from InsurTechs, creating innovation in response to changing customer needs,
although few have reached the scale seen in banking.

“This is how insurance started: getting together to solve problems and reduce risks,”
commented one director at the summit.

Incumbents face the additional threat of major entry into financial services by the large-scale
technology platforms. It is easy for these huge service providers to offer banking and insurance
across their networks, which comprise billions of consumers.

Competition in the financial sector matters for a number of reasons. As in other industries, the
degree of competition in the financial sector can affect the efficiency of the production of
financial services. Also, again as in other industries, it can affect the quality of financial products
and the degree of innovation in the sector. Specific to the financial sector is the link between
competition and stability that has long been recognized in theoretical and empirical research
and, most importantly, in the actual conduct of prudential policy towards banks. Importantly, it
has also been shown, theoretically as well as empirically, that the degree of competition in the
financial sector can effect the access of firms and households to financial services and external
financing. The direction of the latter relationship is, however, unclear. Less competitive systems
may lead to more access to external financing since banks are more inclined to invest in
information acquisition and relationships with borrowers. When banking systems are less
competitive, however, hold-up problems may lead borrowers to be less willing to enter such
relationships. Furthermore, less competitive banking systems can be more costly and exhibit a
lower quality of services thus providing less financing and encouraging less growth. These
effects may further vary by the degree of a country’s financial sector development.

Financial Services Porter Five (5) Forces Analysis for Financial Industry

Threats of New Entrants

New entrants in Credit Services brings innovation, new ways of doing things and put pressure on
Discover Financial Services through lower pricing strategy, reducing costs, and providing new
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value propositions to the customers. Discover Financial Services has to manage all these
challenges and build effective barriers to safeguard its competitive edge.

How Discover Financial Services can tackle the Threats of New Entrants

By innovating new products and services. New products not only brings new customers to the
fold but also give old customer a reason to buy Discover Financial Services ‘s products.

By building economies of scale so that it can lower the fixed cost per unit.

Building capacities and spending money on research and development. New entrants are less
likely to enter a dynamic industry where the established players such as Discover Financial
Services keep defining the standards regularly. It significantly reduces the window of
extraordinary profits for the new firms thus discourage new players in the industry.

Bargaining Power of Suppliers

All most all the companies in the Credit Services industry buy their raw material from numerous
suppliers. Suppliers in dominant position can decrease the margins Discover Financial Services
can earn in the market. Powerful suppliers in Financial sector use their negotiating power to
extract higher prices from the firms in Credit Services field. The overall impact of higher supplier
bargaining power is that it lowers the overall profitability of Credit Services.

How Discover Financial Services can tackle Bargaining Power of the Suppliers

By building efficient supply chain with multiple suppliers.

By experimenting with product designs using different materials so that if the prices go up of
one raw material then company can shift to another.

Developing dedicated suppliers whose business depends upon the firm. One of the lessons
Discover Financial Services can learn from Wal-Mart and Nike is how these companies
developed third party manufacturers whose business solely depends on them thus creating a
scenario where these third party manufacturers have significantly less bargaining power
compare to Wal-Mart and Nike.

Bargaining Power of Buyers

Buyers are often a demanding lot. They want to buy the best offerings available by paying the
minimum price as possible. This put pressure on Discover Financial Services profitability in the
long run. The smaller and more powerful the customer base is of Discover Financial Services the
higher the bargaining power of the customers and higher their ability to seek increasing
discounts and offers.

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How Discover Financial Services can tackle the Bargaining Power of Buyers

By building a large base of customers. This will be helpful in two ways. It will reduce the
bargaining power of the buyers plus it will provide an opportunity to the firm to streamline its
sales and production process.

By rapidly innovating new products. Customers often seek discounts and offerings on
established products so if Discover Financial Services keep on coming up with new products
then it can limit the bargaining power of buyers.

New products will also reduce the defection of existing customers of Discover Financial Services
to its competitors.

Threats of Substitute Products or Services

When a new product or service meets a similar customer needs in different ways, industry
profitability suffers. For example services like Dropbox and Google Drive are substitute to
storage hardware drives. The threat of a substitute product or service is high if it offers a value
proposition that is uniquely different from present offerings of the industry.

How Discover Financial Services can tackle the Treat of Substitute Products / Services

By being service oriented rather than just product oriented.

By understanding the core need of the customer rather than what the customer is buying.

By increasing the switching cost for the customers.

Rivalry among the Existing Competitors

If the rivalry among the existing players in an industry is intense then it will drive down prices
and decrease the overall profitability of the industry. Discover Financial Services operates in a
very competitive Credit Services industry. This competition does take toll on the overall long
term profitability of the organization.

How Discover Financial Services can tackle Intense Rivalry among the Existing Competitors in
Credit Services industry

By building a sustainable differentiation

By building scale so that it can compete better

Collaborating with competitors to increase the market size rather than just competing for small
market.

Implications of Porter Five Forces on Discover Financial Service By analyzing all the five
competitive forces Discover Financial Services strategists can gain a complete picture of what
impacts the profitability of the organization in Credit Services industry. They can identify game
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changing trends early on and can swiftly respond to exploit the emerging opportunity. By
understanding the Porter Five Forces in great detail Discover Financial Services 's managers can
shape those forces in their favor.

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