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Banks Turn to Outsourcing Expertise and Experience to “Run the Bank”

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Firms providing banking and finance services are the once which face market volatility, upfront. Increasing and new challenges are forcing them to revamp their conventional operating models in favor of Outsourcing.

They have realized that extended use of outsourced models will help them improve their revenues and focus on untapped opportunities.

For more than a decade now, global capital markets have experienced extraordinary changes. Today increased regulations, reliance on technology, reduction in revenues, and aggressiveness in targeting new business opportunities, and all this while reducing the costs; has forced the banking sector to reassess their strategies, risk frameworks and of course the operating models. If this was not all, the fundamental changes in the society as a whole pose further challenges to their existing setups.

Consumers today are well aware of, and have embraced technology to the extent of making it their extension. Rising customer experience and service expectations are highly influenced by mobile technology, social media and lower costs for customers to take their business elsewhere, has exponentially changed the competitive landscape of the banking and finance sector.

The challenges are massive enough for the banks to realize that they cannot handle it alone. Outsourcing operational activities to cut costs; is not a new thing for the banks. However; evolving outsourced models have made these banks understand the potential in partnering these service providers, not only for cost savings, but to gain that value addition by expert help from these outsiders.

Outsourcing; not merely a cost saving model

To meet evolving demands and expectations, outsourcing marketplace has been delivering more services with greater expertise.

  • Technology outsourcing is no longer data centre and server hosting. It has expanded its avenues to user support & outsourced database and system administration to private and public cloud computing, to software and application development – management – enhancement and maintenance as well.
  • Offshoring, near-shoring and right-shoring, all three models for technology and operational needs are fueled by labor arbitrage across the globe. The need to outsource operational activities is increasing, there are various, positive and compelling, reasons why banks and financial institutions outsource their data entry services to India?
  • Business process outsourcing, business process management, document management outsourcing; whatever you may call it, the fact remains that partnering third parties for back office functions, has rapidly caught on to the financial service industry. Today top retail banks outsource their document processing, document management; check processing, data entry, data conversion, data processing, data collection and much more. Simultaneously, insurance companies and healthcare facility providers as well outsource their data collection and claim processing activities, along with aforesaid ones, to reliable and best outsourced data processing service providers in India.

Banks turn to outsourcing expertise to “Run the Bank”

Though most of the CFOs and CIOs, primarily focused on reducing costs, favor using managed services big time, however; a lot of them are still stuck with their conventional, complex and costly back-office systems. Recent challenges and evolving technology are compelling these stakeholders of the banking industry to rethink about their decision to hold onto such processes, business models and overall legacy systems.

It would not be wrong to say that similar to automobile industry in the 1950s, banks are forced and forced really hard, to embrace change and enable transformation, if they really are looking at thriving in the competitive market.

If we take a dipper dive, we can conclude that four key factors are primarily driving the entire change:

1. Lower Risk Appetite:

Frequently changing market dynamics and global meltdowns leave banks with very tighter operating margins. This has caused major C-suite executives demand cost savings on one hand and efficiency and quality on one hand.

2. Higher Consumer Expectations:

Convenient access to information, influence of online retail experiences and adoption of newer technologies, customer expectations are soaring high. This has brought about a shift in the market, forcing organizations to develop new interaction models which are equipped to deliver enhanced customer services, which are personalized as well.

3. Technological Advancements:

The intersection of consumer technologies into enterprises, multi-customer growth and commoditization of infrastructure has greatly changed and challenged traditional operating models. Organizations struggle big time with a desire to keep every of their process captive, but end up paying high costs while doing so.

4. Increased Regulatory and Compliance Challenges:

Increasingly complex regulatory environment has forced several banks to reassess their technology and process. To manage all these within stipulated timeframes, though a lot of banks have opted for quick fix solutions, impact on revenues and further compliance requirements, and the need for real-time insights from data is likely to drive further change.

Value additions by outsourcing; fuels the much needed change

The next step for banks is to “change the bank”. When said that; the banks should embrace Outsourced service providers as a strategic extension to their business for managing the core processes. All-time great suggestion for them is to select high-end managed service partners over low cost options. This undoubtedly will help banks to add a team of efficient and enabled data processing professionals, with executional capabilities, delivery experience, and project & account management skills backed up with adaptability and scalability.

It would not be an exaggeration to say that the change is already happening. Several researches suggest that business growth and regulatory compliance are the two most critical business drivers behind financial services firms, deciding to outsource.

Outsourcing service providers take care of a lot of back-office functions including HR activities, marketing, risk management, trade reporting, & compliance. Some of the leading financial firms including HSBC, First Tennessee Bank, Morgan Stanley and UBS utilize Outsourcing partners to process the documents and prepare reports on their behalf.

In order to curb the compliance costs, Bank of America Merrill Lynch, Citi, Commerzbank, JPMorgan, Society Generale and Standard Chartered joined hands to use a centralized due-diligence system, one of the examples where banks are letting go of core business processes in favor of third-party managed services.

Conclusion:

An activity that began as a way to cut costs, Outsourcing has now become an industry in itself, for a lot of “run the bank” initiatives. With increasingly changing customer and client expectations due to technology disruption, banks are quickly realizing that their efforts are inadequate to succeed. Outsourced data management or data processing is the only key to success. These service providers are equipped with agility, creativity and full digital adoption. A few of the banks might have these, however, rest of the counterparts need to turn to Outsourcing service providers, at the earliest, who have the skills, and experience to enable success in this new digital world.

About Author

Hitesh Mistry

is one of the key members at HabileData, contributing to lateral growth of the company since its inception. He single handedly manages data processing, customer support, marketing, administrative and people management activities in addition to handling our websites editorial responsibilities.

5 min read
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