Consumers around the world are benefiting from the meteoric rise of platform companies such as Uber and AirBnB. These companies have turned the tables on established regulated industries, and are fundamentally changing consumer behavior.
Financial services, another long-standing and highly-regulated industry, may seem a world away from hotels and taxis. Yet it also finds itself heavily disrupted by its own “findustrial revolution.” This week in Australia I learned how our key clients’ strategies are closely aligning with the open platform approach of Thomson Reuters.
So what can our industry learn from the dramatic success of platform companies? And what could an uberized financial services industry look like?
It begins with creating a community.
Platform companies create value by connecting communities and providing an opportunity for those communities to transact.
When we think of an open platform, it’s about ensuring that the customer experience extends to everyone in the community – buyers, sellers, partners, facilitators – and is seamless for all parties.
There are no incumbents. Intermediaries become irrelevant. The challenge is to create the platform the community most wants to use: Who is a member? How easily can they connect with others? How often do they want to come back?
In many ways, financial markets are the original communities. The London Stock Exchange, for example, is one of the world’s oldest stock exchanges and started life in the coffee houses of 17th century London. It also happens to be where Baron Reuter set up his first office in 1851. He understood the value of communities and the importance of news.
Intermediaries still dominate the financial world, but could this change in an uberized economy – one where the customer experience is frictionless, immediate and intuitive?
The consumer side of the financial services industry was the first to experience this shift. Distribution and access to capital has changed, and alternative lending models such as crowd funding and peer-to-peer lending are substituting for traditional lending institutions. The industry is estimated to raise $50 billion next year globally.
Consumer tools and technology have transformed user expectations in the business-to-business world as well. Users demand immediacy, ease-of-use, fingertip access and round-the-clock availability in both their personal and work lives.
Of course, consumer banking is catching up to this new world of customer expectations, with online and mobile banking, but the business-to-business (B2B) world is still rife with friction and complexity. Part of this complexity is driven by regulation, a friction which is unlikely to disappear. But what if the experience of regulation could be made frictionless? What if financial community platforms had regulation built in, so the ultimate users could transact without noticing it?
The other part of the equation is liquidity flow. Small businesses are increasingly turning to alternative forms of finance and the landscape will no doubt change further in an uberized world. What if a corporation didn’t need to approach a traditional bank to raise capital? What could the digital investment bank of the future look like?
When we think of an open platform, it’s about ensuring that the customer experience extends to everyone in the community – buyers, sellers, partners, facilitators – and is seamless for all parties. Both sides of the equation must value the platform. The more players that exist there, the more valuable it is for everyone.
And to create value, you need both providers and consumers to inhabit your platform. It must be as easy to be a provider on the platform as it is to be a user.
In our Financial & Risk business at Thomson Reuters, we are evolving to a true open platform which is helping customers, partners and suppliers to connect.
The financial services industry wants openness, interoperability and connectivity. We help them to grow and expand across borders and markets, and perform efficiently, effectively and profitably. We give them unique ways to discover opportunities, cut costs, manage regulatory burden, monitor market trends and anticipate change.
In Australia, we are partnering with Stone & Chalk, a not-for-profit, government-sponsored fintech hub for startups. Young companies at the hub are using our open platform of content and APIs to power their innovation. Another Sydney-based fintech firm is shortly to launch a new app on our flagship desktop, Eikon: our App Studio enables developers to create, develop and distribute custom applications and content.
By being open, we’re helping our clients to harness the full potential of our entire portfolio, which they in turn can use to create value for their business. Derek White, Chief Digital and Innovation Officer at Barclays, recently discussed with us how this open approach is helping Barclays connect, co-create and scale ideas that will help shape the future.
His clear message is that it all comes back to trust. It remains the key ingredient for any open platform business.
When London Stock Exchange began evolving from Jonathan’s Coffee House in Change Alley to the institution it has become today, it adopted a coat of arms with the motto “Dictum Meum Pactum”: My word is my bond.
The point I want to make here is that although many things have changed over the last 300 years in financial services, the importance of trust isn’t one of them.
All of these new and emerging technologies need trust to be integrated into their product design. Particularly in financial services, these innovations are going to be under greater scrutiny than ever before. Our word must always, unquestionably, be our bond.