I recently traveled to Gdynia, Poland, to celebrate the 10th anniversary of our European operations center there. To mark the anniversary, I was privileged to participate in a panel discussion with former Polish finance minister Lezek Balcerowicz. He was instrumental in pushing through Poland’s economic reforms in the 1990s, paving the way for companies such as Thomson Reuters to operate there.
The financial services sector has undergone more change in the last ten years than it has at any time in its history. The combination of regulation, big data, and technology has created a perfect storm of disruption, forcing banks to rethink the way they operate and serve customers, about whom much more can be known than before. It’s fostered the launch and rapid growth of companies in sectors that barely existed ten years ago, including cloud computing, mobile, social media, on-demand, and financial technology (also known as FinTech).
At Thomson Reuters we’re not afraid of that type of disruption – we’re working to lead it and help clients navigate change. Firms that don’t embrace new ideas and approaches are likely to find themselves losing ground to their rivals.
Much of our effort is related to big data, an essential tool for dealing with global regulations, which have grown significantly in number and complexity during the past decade. On another front, financial technology companies are coming up with new ideas about managing money, while peer-to-peer lending is threatening to disrupt a key pillar of traditional banking. The costs required to implement new strategies have risen significantly. Change is here to stay. As some pundits say, it’s the “new normal” – and we’re embracing it.
My talk with Lezek Balcerowicz centered around the wide range of challenges facing today’s financial markets. I offered up some indications of how much has changed during the 10 years we’ve been in Gdynia. Regulations such as Basel III, Solvency II, GAAP Topic 820, and Dodd-Frank have been implemented in the wake of the financial crisis. By mid 2013, the world was creating six exabytes of data every other day, a huge leap from the six exabytes generated during the entire course of world history as of 2003.
Regulation and data challenges top of mind for customers
Regulation is a major driver of change at banks. After the financial crisis, regulators in the U.S. and Europe significantly increased their efforts aimed at preventing another meltdown. The problem is that it’s not simply a matter of one set of regulations in one country, but an intricate network of rules imposed by many countries, creating a major logistical – not to mention costly – challenge for global banks. The paradox is that this seemingly onerous burden may not be such a bad thing if it forces banks to be more efficient and transparent.
The explosion of big data is another challenge. Data is the fuel that drives financial markets, but the sheer amount of it means banks must invest large sums in systems to manage it and derive insight. If they don’t proceed carefully, they risk losing ground instead of gaining it. Again, cost is an issue. The technology and tools required to meet regulations and manage big data don’t come cheap, but they will pay off in the long run.
All of this presents an opportunity for Thomson Reuters to partner with financial institutions in old and new ways. We’re helping clients manage big data, and our growing partner ecosystem and open-data platform gives them the resources they need to use data in a manner that best suits their business strategies.
The fintech opportunity
The growth of financial technology, or fintech, has the potential to disrupt our financial services clients. Banks are slow to adopt new technologies, often because they don’t understand them or are worried about cannibalizing their current businesses. They’re also concerned about costs –remember, they’re already ramping up spending to deal with regulatory and data-management concerns. Their hesitance to enter the fintech sector has left the door open for smaller entrepreneurs – though big banks are beginning to see that they can’t let this opportunity slip through their grasp.
This presents a remarkable opportunity for Thomson Reuters customers. Fintech is driven by data, and startups in the sector can use our world-class content, tap into our global platform, connect to thousands of potential customers in a distribution channel, and leverage our financial-services expertise to bring their businesses to scale. Our open-data strategy is perfectly suited to fintech, which is about breaking down walls and creating new ways to manage money. For these startups, legacy computer systems and information in silos are a thing of the past.
In a sense, we’re one of them – we like to think of Thomson Reuters as the world’s oldest, and largest, fintech company. We began with Morse code, the telegraph, and underwater cables. Now we use the internet, mobile devices, and the cloud. Data drives our business today, as it always has. And that puts us in a position of great strength in today’s business world.
Shifting workplace talent requirements
For decades, companies looked offshore for opportunities to deliver specialist talent at cost-effective rates. Gdynia is a good example of how such initiatives can exceed expectations.
Banks need people who understand compliance and regulatory issues. Such workers are increasingly in demand, and their salaries are rising. On a related front, data analysts are practically becoming mandatory hires as big data reaches into all corners of the business world.
The significant rise of technology means there is greater need for people with STEM (science, technology, engineering, and mathematics) degrees. These skillsets are crucial in Silicon Valley, a hub of innovation for makers of everything from automobiles to appliances (Gdynia is becoming such a hub). Sectors such as medical technology and the Internet of Things need visionaries with creative engineering abilities.
Languages will continue to be important in our globalized world. Your most important colleague or client might be on the other side of the globe. Knowing another language (or several) can be a differentiator. In fact, part of the reason we opened the office in Gdynia was to access the area’s deep language-skill base.
We’re on the path to gender diversity
The dynamics of the workforce have changed a lot during the past 10 years. Many prominent leadership roles are held by women. Studies show that companies with more women in senior positions outperform industry averages. We need to move the needle more when it comes to making women chief executives, and women aren’t entering the STEM fields to the same degree as men. But if Gdynia is any indication, we’re on the right path. Gender diversity—like so many hurdles—will be overcome, making companies stronger and better able to thrive in today’s competitive marketplace.
We’re lucky to live and work in an era of great transformation. This can be frightening—in some sectors, the entire playbook is being rewritten. Many businesses will have to pare down, eliminating positions or even whole divisions, then rebuild. But it’s also a time of opportunity. The best way for people and companies to succeed will be to focus less on the way things were and more on where they’re going—and be prepared to see today’s challenges as an opportunity to thrive rather than a hindrance to the status quo.
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