Banking and Financial Services Outsourcing

In today's fluctuating global economy, many companies are using various channels of outsourcing to meet business objectives. One of the hardest hit industries is the financial services. With stricter regulatory parameters, unpredictable growth rates and pressures to reduce operational costs, asset and investment management industry leaders are faced with the daunting task of having to choose viable options to meet challenging targets. Given the current economic climate, in order to make prudent decisions, it is essential that the financial services industry is armed with all the necessary information on the specificity of challenges and also clearly understands the benefits of solutions such as Business Process Outsourcing (BPO). WNS, a leading global BPO provider, commissioned FSO Knowledge Xchange (FSOkx) to conduct an independent market study to analyze industry trends and identify specific concern areas plaguing the Asset and Investment Management Industry.

The mortgage industry tends towards cautious optimism this year. The crisis of 2007 has given rise to new processes such as default management, foreclosures and collections. These trends are driving loan modification programs and there has been increased focus on other loss mitigation options. Home retention strategies have changed dramatically since, opening up a lot of avenues for the outsourcing industry. The mortgage industry is looking at new ways to build efficiency and BPO firms with expertise in mortgage process outsourcing (MPO) have helped mortgage companies in the U.S. to focus on new business development, marketing and loan funding, instead of the tedious task of mortgage processing.                                   

With newer challenges due to increased pressure on performance and focus on transparency, compliance and risk management, hedge fund managers realize the need to be focused on their core competencies of asset gathering, portfolio management and trading, and delegate operational functions to an experienced outsourced partner. Outsourcing back-office functions translates to a higher degree of transparency into the management of the hedge fund, and a significant reduction in operating risks and costs. A hybrid model using the services of providers experienced in handling hedge fund accounting and shareholder servicing, can help drive greater efficiencies and value.

The real estate crisis in the US was caused by mortgage delinquencies and foreclosures, originating in the subprime segment, then drawing other segments into it as well. This crisis first impacted the loan originations side of the business, and the focus later shifted to the loan servicing side as the delinquency rate increased. The factors causing continued downturn are, in fact, interlinked. Unemployment rate in the US has been around 9.5 percent for the last 12 months which has led to delinquency and foreclosures. This, in turn, has driven the need for loan modification programs and other loss mitigation options by the federal government. The outsourcing industry can be of immense support to mortgage-servicers and borrowers during evaluation of home-owners for these alternative programs before starting foreclosure proceedings. WNS’s next generation of process management and progressive approach to transforming business along with predictable operations outcomes can help soften the blow for the mortgage industry.

Compliance and regulatory reporting is the one area in the banking and financial services sector that has witnessed explosive growth for requirements, and is drawing far more resources on several counts due to increasingly strenuous regulations. Multiple banks have managed this challenge very well through working with an outsourcing partner. The key ingredients of a successful partnership are ‘scoping’, and an ‘openness to change’. Though, as processes mature, and more units of financial services firms realize the cascading effects, there will be streamlining of costs and far more accountability and thoroughness to regulators.

With the take-home earnings taking a dip, and overtime wages being scrapped in most organizations, employees have started tapping their 401k accounts, which are otherwise intended to serve as the retirement nest egg. Read on to find out what this trend entails, and how outsourcing can be leveraged in such circumstances.

As the global economy recovers from its worst ever recession, markets continue to be unguided, riding on the back of uncertainty. The extent of impact has been significant across most asset classes and geographies. All major investors and market participants report a sentiment of cautiousness and weakness in their outlook. Although changes have been dramatic in the past couple of years, they are on their way to creating an inflection point for investment managers, where new tracks across management of risk, liquidity, reporting and compliance are beginning to emerge. Such unprecedented problems call for solutions of the same order, which are unconventional and provide a panacea for a new order.

It has been a year since the Federal Government imposed the Supervisory Capital Assessment Program (SCAP), also known as the bank stress test. "By setting reasonably ambitious capital targets, we hoped to hasten the return to a better lending environment," said Ben S. Bernanke, Chairman of the United States Federal Reserve, speaking at an event in Chicago in early May, this year (2010). However, Mr. Bernanke admitted that the objective had still not been met. "Bank lending continues to contract, and terms and conditions remain tight," added Bernanke.

It may be the last frontier for offshore outsourcing of financial services; typically wary of risk and historically cushioned by solid margins, investment managers have historically eschewed offshoring of business processes as aggressively as their counterparts in the credit card or mortgage space. However, as operating models and financial structures change dramatically due to economic conditions, offshoring must, of necessity, become a strategic tool for asset managers to manage costs, transform service levels and support the development of differentiated offerings which can effectively compete in a global, highly competitive marketplace. But it will take readiness on behalf of two parties asset managers and providers to make the change.