BPO and Sourcing Trends in Retail Banking (Customer Focus)

Interest in BPO services and actual take-up continues to rise in the retail banking sector as pressure on banks for technology-led transformation and operational efficiency continue to mount. This brief looks at retail banking BPO spanning sector specific operations and horizontal functions, highlighting strategic development direction of individual market segments.

• The analysis is based on interviews with over 100 retail banks from the Americas, Asia Pacific and EMEA.
• The research provides an insight into take-up plans and current BPO services penetration levels in the retail banking sector.
• The brief looks at retail banks sourcing strategies and covers the key drivers and barriers to outsourcing.

Retail banks are getting more confident in using outsourcing services and rate outsourcing quite high as the means to achieve their major business and IT goals. External supplier expertise on tap, overall rationalization driver and move from CapEx to OpEx were the top three drivers for outsourcing.

Datamonitor's end-user survey clearly shows that outsourcing is gaining significant ground across the sector. In fact, 55.3% of respondents said that they would consider outsourcing some elements of their business processes in the next two years.

Although there is still some reluctance among retail banks to hand over the management of their operations to third-party suppliers, with 43.3% of respondents looking to outsource as little as possible.

• Improve understanding of the retail banking BPO market.
• Understand the effect that outsourcing/offshoring is having on the retail banking market.
• Understand retail banking sourcing strategies.

DATAMONITOR VIEW

CATALYST

Interest in BPO services and actual take-up continues to rise in the retail banking sector as pressure on banks for technology-led transformation and operational efficiency continue to mount. This brief looks at retail banking BPO spanning sector specific operations and horizontal functions, highlighting strategic development direction of individual market segments.

SUMMARY

METHODOLOGY

ANALYSIS

Retail banking key corporate objectives are well supported by outsourcing

IT and business strategies are dominated by changing IT from a cost to a service and regulatory compliance

Outsourcing enables retail banks to achieve greater flexibility and scalability

Outsourcing is rapidly gaining currency as a vital element for corporate success

Selective outsourcing is the most widely used outsourcing strategy amongst respondents

Retail banks still remain sceptical about the merits of sending work offshore

The geographic distance is the primary drawback to offshore outsourcing

Government subsidies were rated the major driver for the offshore outsourcing

India will remain the primary offshoring market of choice

Banks seek technology leadership and financial flexiblity through BPO efforts

APPENDIX

Further reading

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List of Figures

Figure 1: Retail banking primary IT and business objectives / main objectives that can be achieved through outsourcing (1 to 4, where 4 is the most important)

Figure 2: Retail banking main drivers for outsourcing

Figure 3: Proportion of respondents that are currently using / will highly consider using outsourcing in the next two years

Figure 4: Horizontal operations currently outsourced / highly considered for outsourcing

Figure 5: Operations currently outsourced / highly likely to be outsourced in the next 2 years

Figure 6: Retail banking overall outsourcing strategy

Figure 7: Main drawbacks to offshore outsourcing

Figure 8: Main drivers for offshore outsourcing

Figure 9: Rating offshore locations (1 is "unlikely to consider" and 4 is "very likely to consider")

Figure 10: Level of importance of certain criteria when choosing a services partner (with 4 being the most important)