In a rising market, are banking outsourcers pulling their weight?

In a rising market, are banking outsourcers pulling their weight?

Graham Donald

Managing Director at Equiniti Group

Views 366

In a rising market, are banking outsourcers pulling their weight?

14.07.2016 10:15 am

The Quarterly Outsourcing Index[1] recently confirmed that outside the public sector, banks and financial institutions are by far the most prodigious users of business process and technology outsourcing. In the first quarter of 2016 the industry’s contracts totaled a whopping £324m, up six per cent on the same period last year.

This comes as no surprise. Despite consumer lending continuing to rise (gross mortgage borrowing, for example, is up 64 per cent year on year[2]) many banks remain in jeopardy. In April, two of the high street’s biggest banks reported that operating losses had more than doubled since the previous year.

Commentators are quick to point the finger to past malpractice. It’s true that some big banks are facing huge FCA-imposed fines and are burdened by high volumes of customer complaints as a result. But lenders are also being impacted by other significant factors. Changes in regulation, for example, the global economic slowdown, Brexit and the Eurozone crisis and increased competition from new players entering the market. Widespread restructuring is commonplace and, in a bid to reduce cost and enable banks to refocus internal resources on generating revenues, many are outsourcing the operational upkeep of non-core operations to third parties.

But are the outsourcers that stand to benefit from these conditions adjusting their practices in order to accommodate the changing needs of banks? Historically, banks would outsource individual contracts to individual partners, each relating to a specific product or service in accordance with their departmental structure. But as internal resources are reduced and redirected, banks are fast becoming unable to manage the ever-higher numbers of partnerships that this model creates.

Consolidation is the key.

This is a huge opportunity for outsourcers with the vision, capability and the wherewithal to adapt. The most forward-thinking among them are establishing market differentiation by blending service offerings to enable banks to achieve more than they could by themselves. By replacing a bank’s legacy systems with their own agile and interoperable platforms, a multi-departmental contract could be capable of delivering the ‘single customer view’ that has long evaded so many banks. In complaints handling this is particularly pertinent; many banks are still unable to aggregate complaint data from a customer’s car insurance policy, with the data they hold that relates to their current account, car loan, or overdraft. Doing so would enable the bank not only to deliver a more connected and meaningful customer experience, but to also evaluate the commercial impact to the bank that each case poses.

Multi-departmental or ‘blended services’ outsourcing is also the route to greater cost efficiency. A bank’s negotiating power with a single partner grows in line with the scale and breadth of the contract on offer. By creating bespoke service contracts that combine specialist technology with experienced personnel and FCA compliant processes, outsourcers are able to address each bank’s specific needs, eliminating service overlap and mitigating unnecessary spend.

Banks may differ in structure, but many share the same set of challenges. For outsourcers, this means that the needs of one can support the needs of many. Specialist staff and industry best practices, sharpened by the experience gained from servicing multiple loan books for different banks, enable outsourcers to deliver continuous improvement across their entire customer base.

So my message to banks is simple: view your partnerships in terms of how they can improve your operations, not just reduce your costs. The right partner should help you to achieve both.

Latest blogs

Martijn Bos Holland FinTech

Making it through the rain: Finance in times of turmoil

You’d need to be living on a remote island, without electricity or internet to not be aware of what the world is going through right now – a medical crisis that has spread across the world and disrupted supply chains, goods and services production, Read more »

James Devoy Sysnet Global Solutions

PCI DSS and Remote Assessments

COVID-19 is obviously changing many aspects of daily life. Some will be short term measures to see us all through these times, although I wonder how many will become more permanent fixtures in our lives. The PCI SSC has provided guidance to allow Read more »

James Booth PPRO

Brave New World: A Futuristic Vision of Payments

Over the last ten years, the retail e-commerce ecosystem has undergone a wide-ranging transformation. As recently as 2010, the e-commerce and payments value chain were relatively straightforward: Any eCommerce merchant could integrate a payment Read more »

Nish Kotecha Finboot

How blockchain could potentially transform global healthcare in the wake of COVID-19

In the globalised world we live in, entities such as the World Health Organization (WHO) have been established to ensure cooperation between different governments on global health-related issues. In the face of pandemics such as the one we are Read more »

Lina Andolf-Orup Fingerprints

Dispelling biometric myths and misconceptions

Gangsters cutting off enemies’ fingers to access secret locations and spies lifting fingerprints from martini glasses - the imagination of the entertainment world has been running wild ever since biometrics entered the scene. Couple that with the Read more »

Related Blogs

Marcus Vinicius Martinez CGI

Hyper-Casual Banking

If you own a smartphone, the chances are you have at least one gaming app installed. You know, for those rare moments when you have a few minutes to spare and just need to switch your mental focus. However, with the ever-increasing power of Read more »

Danny Healy MuleSoft

The 'Lego-ification' of Banking IT and the Rise of Digital Finance Ecosystems: Four Priorities for Banks in 2020

The advent of the open banking era and continued emergence of fintech has forced customer experience up the banking agenda. According to McKinsey, of the 50 largest global banks, three in four have now pledged themselves to some form of customer Read more »

Claus Christensen Know Your Customer

Is business banking ripe for FinTech disruption?

There are always many reasons one might want to organise a trip to Paris. For the last couple of years, the Paris FinTech Forum has become another one of these reasons. First launched in 2015 and hosted in the charming Palais Brongniart - the former Read more »

Vikas Srivastava Integral

Why increasing cost pressures mean banks need to put their ‘head in the cloud’

It’s true that banks are having to do more with less budget. Recent headlines have demonstrated we’re currently operating in an increasing cost pressured environment. The solution for some banks has been to cut costs through staff reductions – but Read more »

John Phillips Zuora

Subscription Services and the Race Towards the Future of Banking

In the not too distant past, we would sign up for a current account post-school or university and still be carrying around the same worn debit card in our 30s and 40s. With very little differentiation between retail bank offerings combined with Read more »

Magazine
ALL
Free Newsletter Sign-up
+44 (0) 208 819 32 53 +44 (0) 173 261 71 47
Download Our Mobile App
Financial It Youtube channel