Westpac is leading the way with its investments in tech startups and the online mortgage broker uno.

Businesses big and small are grappling with digital disruption.

They are pondering how they can take advantage of new technologies, instead of getting eaten by the more nimble rivals that develop them.

Among the big incumbent businesses facing up to digital disruption, few are doing a better job than Australia's major banks.

The big four banks are lumbering behemoths. They have legacy computer systems dating back to the 1970s, millions of customers, tens of thousands of employees, extensive networks of branches, and are governed by reams of complex legislation.


Yet parts of them, at least, are striving to be as nimble as a start-up.

Each of the big four is pouring large amounts of money into researching and developing new digital applications that will better serve their customers' needs while at the same time reducing costs.

They are also forming partnerships with potential rivals whose business models threaten the traditional banking offering, and trying to bring some of their agility and culture of innovation into their own organisations.

The banks have realised Australians are rarely without their smartphones and the more services and capabilities they can push on to smartphones, the better their customers will respond.

Australians spend an average of 7 hours and 20 minutes sleeping per night, yet spend an average of 10 hours a day engaging with their digital devices, according to research by EY.

Westpac is leading the way in innovation.

Australia's oldest bank has established a A$100 million ($103m) fund called Reinventure to invest in financial technology, or fintech, startups.

And separate from the fund, it announced last week that it was investing A$16.5m into uno, an online, do-it-yourself mortgage broker.

Uno lets customers see all the alternative loans on offer, and all of their components including price (interest rates), access and speed of approval.

Customers can choose a loan and complete their loan application via uno without having to interact with the bank issuing the loan.

Australian banks pay A$2 billion in commissions to mortgage brokers every year and Westpac is hoping to get a slice of that pie. Interestingly, uno offers 400 separate loan products, including those from rivals National Australia Bank and the Commonwealth Bank of Australia.

The bank has also invested in SocietyOne, a peer-to-peer lender. Peer-to-peer lenders match people who have money with those who want to borrow it. They claim to have very low default rates and to offer better interest rates to both lender and borrower, while at the same time cutting the banks out of the process.

Only a few years ago it would have been unthinkable for the banks to embrace a potential rival which would undermine their business model like this. But they have recognised that if they don't act they will be overtaken.

It's quite different from the head-in-the-sand approach some other business sectors are taking to digital.

This is because banks have a lot to gain from digital but they also have a lot to lose.

Australians love to hate the banks and many would gladly go elsewhere if they could.

Customers would flock to a more convenient and cheaper option, which digital platforms have the potential to offer. Digital puts small startups on a more equal footing with larger corporates. It allows them to scale quickly and cheaply, so they can rapidly eat away at the market share of bigger rivals.

The scalability and low cost of digital apps also applies to the banks. They can quickly roll out new offerings they hope will keep customers loyal, while at the same time reducing costs.

JB Hi-Fi buy

Electronics chain JB Hi-Fi will transform itself into Australia's largest home appliance retailer after buying rival The Good Guys for A$870m.

It's a big bite for a company with a sharemarket value of A$3b and will see its share of Australia's A$4.6b home appliance market leap from 3 per cent to 29 per cent. Its share of the electronics market will rise from 19 per cent to 24 per cent.

JB Hi-Fi chief executive Richard Murray plans to keep the Good Guys brand and head office separate. But he hopes to extract better terms from suppliers which will flow through to the bottom line.

The transaction is not without risks.

JB Hi-Fi's only other purchase of another company was for a majority stake in a small electronics retailer a decade ago and that didn't go well.

The company's spectacular success has mostly been based on organic growth and getting the fundamentals of retailing right in the competitive electronics segment.

It has been able to stay on top of the fast-moving trends in consumer electronics that have led rivals such as Dick Smith to fall by the wayside.

If it can bring the same sort of market and technological savvy to The Good Guys, it should do well.