18 Apr 12 Australian banks prefer mature model for BPO

As the credit market slows, Australian banks are under pressure to maintain profits. The four largest banks in Australia by market capitalization are planning on a major restructuring through outsourcing . Westpac and the Australia and New Zealand Banking Group (ANZ), two of the big banks, are already on the outsourcing path. The initial trend is predominantly  ITO , including system maintenance. Infosys is currently fulfilling Westpac’s need for IT services. A successful outsourcing relationship here could mean a foot in the door for its BPO service line, thus opening up the field for other BPO service providers.

The worldwide banking sector and BPO
Our report, “Banking BPO Services: Getting Back to Basics ”, concluded that worldwide demand for core banking processes is increasing. These core processes include asset management, mortgages, and cards and payments. Banks are also looking to consolidate and streamline back-office processes by outsourcing horizontal services. These horizontal services are Finance & Accounting, Human Resources (HR), Supply Chain Management (SCM), and Reporting & Analytics. The exhibit below, titled “BPO services in demand by banks”, lists these horizontal services, and their sub-services. They are repetitive and not unique to an individual business, for instance payroll. On the other hand, some sub-services are more ad-hoc and knowledge-driven. They require significant client interaction, and thus, are categorized under knowledge process outsourcing (KPO).

According to our report , only 2% of the BPO deals by banks, from 2008 to 2011, were from the APAC (Asia-Pacific) region. As banks in this geographical location become more comfortable with outsourcing, this could mean an increase in the number of BPO deals.

 
Outsourcing models favoured by banks

Banks can choose from various outsourcing models for BPO. The degree of affinity to their choice of outsourcing model is depicted in the exhibit titled “Outsourcing models deployed by banks”. The initial phase in the lifecycle of an outsourcing service provider is the captive centre model. The goal shifts to better customer experience as the captive centre model evolves to a shared services model. This evolution requires SLAs for all processes and sub-processes, and with clearly defined responsibilities for both the client and service provider. A shared services model lets the banking organizations retain some functionality based on their own unique requirements. A service provider must be an expert in process management to evolve to the last stage depicted in the exhibit.