Q: Trends in Banking and Financial Services Industry

Ans: The past few years have caused quite a bit of chaos in the banking and financial services. The chaos that has been caused, this caused the organizations to take a different view of the way that they do business. The pain not only of the financial loss that they have taken, but the loss of personnel that also occurred at the same time create a significant amount of pain for the institution or the institutions that had to reduce the number of employees that they had. In a downsizing situation it is never easy - you have to tell friends and close associates that it is time for them to leave. The other thing that occurred in that process is in the past the memory of events that caused recessions and financial loss for banks and financial services companies has sort of been trivial. And what I mean by that is people remember it for now but then 5-6 years, 7-8years later they move on. As they move on they are replaced by new management, usually younger management that is more aggressive, more risk taking and didn’t live through the previous recession and the previous loss that has occurred. In that instance a moment occurs where another disaster is brought on by - I don’t want to say reckless - but by aggressive action and aggressive investing and aggressive monetary policy by institutions and the same thing happens again. So you have generation, learns, moves on; generation, learns, fails, moves on. This time around, I would say for the past few years actually, the organizations that were in that circumstance in that situation in the past have learned that they need to institutionalize that memory of what occurred in the past recession. This one was a very severe one. It is probably the most severe one that I have seen in my lifetime. And the desire by the regulators, by the board of directors and by the senior management of the banks and financial services companies is now saying we need to make sure that this does not happen again. The world was close to collapse on a financial basis. It would have been a disastrous event. I think everyone is now saying we can’t let that happen again; it’s too serious a thing for the world to have to go through. So we saw some of that with Basel II when we had some fairly serious financial occurrences. We saw with sovereigns actually where the regulators worldwide on a global basis said the financial institutions are now global in scope, there is global impact and we need to work together as a worldwide organization, not just as a local or a national organization to keep some of these things from recurring that have recurred in the past. So I think we are going to see the equivalent of a Basel III, where the world is going to say we need stronger regulatory action. I think the board of directors, I have worked in banking for a long time, and historically there was sort of lip service done to the Fed regulators, if they had regulatory requirements, people said do whatever you need to do to make the regulators happy and it didn’t really influence the actual work of the organization that much. Basel II was built - the require risk management to be drilled into the various business units and not so often the rivalry towers they have been in the past. And that’s not a slam on the risk management folks. It is just the business guys really did not see the risk management people as part of the integrated process that the bank was going through. The Basel II Accord and what I think is going to be happening over the next 5 years is the world will digest what occurred in the past recession. It is going to be a whole new set of much more stringent and much more demanding requirements in regulations. So, one of the trends that we are going to see is the broad of directors is going to require this. Therefore, the senior management of financial institutions is going to require a rebuilding of the whole risk management process, they are going to want it to be built into all the systems, all the processes, all the procedures, they are going to have to have some sort of risk component to them that has not existed in the past. I think the other thing that we are seeing is that as institutions failed over the last few years and as money became tight, we saw the consolidation of a lot of small regional banks into larger banks again globally. That has created a new environment or a new atmosphere for competition. The regional banks used to be more nimble, more agile and were able to compete with the larger banks with that nimbleness and creativity. That same desire and need is now moved into larger banks and the larger banks are going to have to figure out how they become more nimble to be competitive with the other banks that they are competing with. It is a different competitive environment, different horizon and a need to bring on some more creativity into larger institutions which in the past have just relied on their size; they are now looking to be a little bit more like the regional banks were in the past. They will take different approaches to that. Some will regionalized the banks even though they will have overall governance, they will have sort of local autonomy; other banks will figure out how do they just become more and more efficient through size and scale, and they will compete in different atmospheres and different environments. Another thing that we are seeing in the recovery is the slowness for taking up new jobs. People were saying when this recession occurred that this would be a jobless recovery; I think they have been right about it. There is some job recovery, but it has been slow, probably very painful for the world in general. What they are looking to do is in that processes there is the memory of having to get rid of a bunch of people that they didn’t want to get rid of, or probably some of them they might have wanted to get rid of, but they didn’t want to get rid of as many as they did. Good people, very productive people, productive workers, close friends, close allies were sent off the door because the financial situation just didn’t allow them to stay. And I think that the slow pickup in jobs is the result of near term memory about the fact that they had to get rid of people in a - I would say a very painful manner. There were lot of good people that were let go, it wasn’t just like we will turn the fate, we will get rid of the people who are non-performers. There were people that were very good that had to be sent off the door. That’s a painful process for management to go through. It is a breached of contract between manager and worker. You do a good job for me I will make sure you have a job. In this case you did a good job for me, but I still have to let you go because financial pressures are just too great on us and we have to rebuild our capital base. So in this phase and with that environment and that thought process, you have workers who need to be placed into positions but you have people who don’t want to do permanent hiring. That’s an opportunity for the business process outsourcing group to come in and say we can help you fill this gap and keep you moving forward, keep you making progress, help you with the capital recovery at a slightly lower cost and with skill sets that are very noble and can be moved from place to place as needed in a much easier and more faster manner than you can move permanent employees. So basic trends that we see are rebuilding capital, institutionalization of regulatory and risk components, more noble work space and more flexibility in the up-scaling and downscaling of people. And there is one more in there too, which is in that process when we are bringing people in, we are seeing that the people are not just saying - bring in cheaper labour, they are saying bring in smarter labour, bring in people that can help us change the process within our organizations, bring your knowledge of the industry in with you and help us rebuild and reconstruct and redirect the way that our business is built and is running. So that’s basically the general trends.

Q: Challenges faced by senior executives in the financial services industry and how WNS can address them?

Ans: The challenges that the financial services industry faces are slightly different than the challenges of some of the other industry that WNS also deals with. The difference is that everybody has taken a hit with the recession that we just went through. But the financial services industry took a significant hit on their capital base. Capital in financial services is much more important than it is in other industries. Capitals are always important but it is very important in the financial services space. Their basic business is invest money, lend money; different than they have been in the past in other recessions that we have gone through. One thing, the recession that hit was more global than any that I have seen in the past. It affected every economy, every institution, every bank in the world. There was a significant liquidity crunch, there was a very strong desire not to do business with other institutions because of fear and inability to determine their financial strength, the failure of Lehman Brothers created much more chaos than anyone in the planet have imagined. At the end of the day what we saw was a significant drop in value of the capital assets of most of the financial institutions in the world. We saw a lot of them go away, we saw a lot of mergers and acquisitions, we saw a lot of forced mergers in the process, and the chaos that the lack or the reduction in capital assets and the desire by the regulators to increase the capitalization of institutions, which caused consolidation and a lot more government intervention, discussions about senior managers salaries and compensation, things that never had occurred in the past or certainly not within the last 50 years, may be that came up with the Great Depression, but certainly nothing that we have seen in the past 30-40-50 years within the banking institutions worldwide. The impact of that has been the impact of contraction of capital assets and the need to become more risk averse and wiser with how the investments are made to protect capital, it has caused the industry to change the way it is. It is quite a bit of stress in the head office. What has happened is that there is almost no margin for error, there has been no margin for error over the last 2-3 years for financial institutions and for chief executives to deal with this capital deficiencies that they have been faced with. Many of them have been bailed out by governments, not only in the US but in Europe and to a lesser extent in the AsiaPac area. But the focus, the pressure, the demand to drive larger capital growth and to replace the capital that’s lost is significant and extreme. The chief executives are under pressure from the board to replace their capital, but to reduce risk in the process - reducing risk is probably not the right term – to better manage risk. Financial institutions get paid the manage risk; they don’t get paid to eliminate risk. The chief executives job is to make sure that capital movement that capital flow is done with minimum risk because any loss of capital in this environment right now could be a deadly one for financial institutions. There is not much room for mistakes, they don’t have the cushions that they had a few years ago, they don’t have the confidence in the market and no one is confident of any bank in the world at this point in time or any financial institutions in the world at this point of time having seen some significant players drop out of the race and been taken over by or just gone away, taken over by bigger institutions or other institutions and just lost in the process. So, head office challenges - greater growth of capital, higher growth of capital, capital assumption at lower risk and also taking on lower risk in the rebuilding of the institution from a personnel perspective. WNS can help in many ways. One is we can bring new processes into the organization. One of the trades, I’ve worked in the financial industry for a lot of years and one of the trades of the financial services industry universally is that they are risk averse to a great extent and have a tendency to be somewhat conservative in coming up with new policies and procedures, new ways of doing things and bringing in new opportunities to create new wealth. With an organization like WNS with our mobility, our knowledge of the industry and the intelligent and productive people that we can bring into our financial institution, we can change the atmosphere and change the playing field by bringing in new attitudes, bringing in lower cost labour, bringing in much more productivity and bringing in the opportunity and the agency for change. That will align with and work with the initiatives of the board of directors and with the senior executives in the institution.

Q: Why is outsourcing a strategic business imperative for survival?

Ans: The question that often comes up about outsourcing or right-sourcing, which is a term that was invented a year years ago, and whether that’s a right thing for banks and financial institutions to do, what’s the strategic value, how do they make money on it, why is it good for the economy - all those things. I think the first thing we should talk about is I really like the term right-sourcing rather than outsourcing. The reason I like it is because it is a good description of what resources do they need to own directly and what resources do they need to own either temporary or on a shorter term basis than the full time employees. The right-sourcing opportunity for financial institutions is to bring in a different skill set, a different level of skills, a different view of the world, a view that is may be not quite colloquial and a view from a different vantage point. And that’s often very healthy for any institution, not just financial institutions, but any business anywhere in the world to bring in different view, different look, a different way of seeing things. One of the things that as a manager I have always told people is always look for opportunities and solutions from places that are unexpected. When people originally started thinking about doing outsourcing I think it was basically just the wage arbitrage. What they found though was as the workforce from the outsourcers moved in that they actually not only made a difference in the population, but they also made a difference in the view of the way things were done. That led to reinvention, reengineering, rebuilding of certain processes and transformation of other processes. So, the opportunities for those values to come to an organization are significant. Any time you can have a transformation that makes you more efficient and more effective. Whatever the source it is a great thing to have happened. Sometimes it can fire, outstrip any of the opportunities that you can get from the wage arbitrage, you get from an outsourcing deal with a company like WNS, which is significant. But rebuilding, reengineering, retooling, relooking at the way the business is run and the way the processes are done within that business to make the business effective and efficient can be very productive for a company. It can make the company more nimble, it can reenergize the company, it can create new revenue sources, it can create new capital building sources. These are things that should not be overlooked when looking at the key values of an outsourcing initiative or an outsourcing opportunity that takes place. You get a workforce in the outsourcing field that’s very motivated to do things differently than the people that work within the institution that they are working in. They have created processes, they have grown up through processes, they have been trained with processes and they have a tendency to be - I don’t want to say tunnel vision - it is not quite the right term, but they have a tendency to stay focused within their own atmosphere within their own biosphere or ecosphere. The thing that happens when you bring in a different mindset in a different culture is you get an opportunity to take a different view of the way things are done. And people will ask the question why do you do that, why is this process in place, why do we have to have this document flow this way, why do we have to this document at all, why do I have to do the things that I am doing. And they will ask it in a manner that is intelligent, is productive and is also energizing for an organization to begin to see there are different ways to do things, we can be more efficient, we can be more effective, we can bring new ideas to the world, which is a very exciting opportunity. I think that’s sort of the key value that we are going to see into organizations like WNS.

Q: What will be the next-generation strategies and products in the Banking and Financial Services space?

Ans: The world in the banking and financial services industry is changing dramatically. If you think back 50 years, the bank was the brick building on the corner, it was the place that you went to cash a cheque, take your savings book and open savings account, save little money, talk to the teller, make sure that may be your mortgage was there, you did everything with that one institution. It was sort of the institution, which is a good name in those days, in a core part of a city and an organization, the organization being the town, the city, the municipality, whatever you want to call it. Over time that institution has changed dramatically. So you go from 50s-60s to 2010 - what do you have? You have very large institutions, located across the country, still may be people that the local people can relate to, but a lot of people are like I am, I go to the bank inside the bank to face a human being may be twice a year, sometimes not even once a year. What that does is it creates an environment where the bank has to figure out how do I connect out to these people in a manner that creates stickiness, so they don’t just view me as a commodity. So there are several ways you can do that. One is you can do emails and websites and all of the social media type things, they are important, but also are just basically another technology mechanism for creating communication with the community. The other thing that I think is equally as important is how does the institution begin to understand what the industry is doing and how the industry interacts with the community that it is serving. It is very easy for large institutions; if you go back again to the bank on the block in the corner. It was very easy for them to interact with the city, people there work in the city, work in the town, they talk to people in the town, people came and visited, it was a lot of exchanged of information. The banking institution of today is sending you information to your telephone, it is sending information to your computer, it is sending you information to your iPad, it has become a much more ATM, you get your cash through your ATM, you do your banking through your ATM or through automatic deposit, automatic withdrawal, automatic bill paying - all those kind of things are things that have taken place over the past few years. In that process what we need to do is we need to figure out how do we maintain the human touch, how do we maintain the human contact within those organizations. I mentioned in another part of this talk the fact that there are transformations that need to take place within the company to make things work the way they need to work. You need new views of how we can do things in financial institutions to keep that human contact that human touch, the personal feel of doing business with institution. As you bring people in from the outside of the institution to take a look at processes, to work on processes and to understand how they feel coming into the organization, you get a different view, a different angle of how the bank is looked at. You get an angle from people who have a different way of looking things; they may even come from a different part of the world. That creates a social balance that helps the bank to try to understand how do they interact with the world; it also helps them to see that the world really is becoming one place. The bank is not sitting on the corner of the town, the bank is part of the world economy, it is part of the world social system, it has become part of one whole thing. So the people that you are bringing in the outsourcing business bring different dimensions and different views of the world to help the institutions understand how do they need to interact with other parts of the world, how they need to interact with that social community, how do they need to interact with the technology communities and do it in a manner that has social meaning, that it has a human touch to it and it is not just I am getting a message on my iPhone that says your bank balance just went down by USD 25. I think the other thing that is going to be a challenge for the financial institutions is how do they continue to scale and stay efficient. The regulatory environment that we are into now and it is coming at more severe than this is to say that the financial institutions need to understand how to manage their risk. Risk is going to be a big-big deal over the next 5-10 years, it is going to be global, it is going to be impactful and it is going to be intrusive. The capabilities that come from a right-sourcing model, we bring in people that have new ideas, new views of how things can be done, new understandings of processes and procedures is very important in creating a different sort of feel and touch of a financial institution. I think it brings new energy, it brings a different outside view, it will bring people that are intelligent enough to challenge the way things are done, it is an opportunity for transformation. Transformation is going to be sort of a key word here because it is going to have to occur within large institutions that resist change and it has to occur in a way that is accepted by the institutions, so the institution improves from that process and doesn’t become a destructive event. The opportunity for doing that exists in many venues, but one of the ones that’s really powerful and very doable and very usable and is also expedient is through using outsourcing opportunities or right-sourcing opportunities; bringing in the right people, bringing in people that can help get things done, bringing in people who understand how to manage risk, how to help install risk into the fibre of the way that the financial institution is run. Also that risk management process, what you are really trying to do is not only protect capital, but to build the capital through better risk management procedures.

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