IT Outsourcing For Financial Services
Why is IT Outsourcing Important in Financial Services?
Technology outsourcing providers are powerful partners for today’s financial services companies. They allow access to vastly improved data management technologies at a low price, so that companies can provide an improved user experience to their customers. Virtually all major financial institutions worldwide now offer online and mobile banking services, and are increasingly moving towards more customer-centric technology. Mobile payments continue to grow, and companies need to be able to keep on top of the challenges these trends pose. Increasingly, outsourcing is the ideal solution to that problem, and the majority of technical services are now provided by outsourcing vendors.
According to data from the World Retail Banking Report, over three quarters of retail banks now use outsourcing vendors to support at least one key function of their business. It’s estimated that banks save between 20-40% on these functions, depending on whether they choose offshore or nearshore outsourcers. This increased cost effectiveness is one of the main reasons why any smart financial services company should make the best use of outsourcing to complement their staff. The potential savings run into the millions, since by outsourcing non-business functions, employees are able to devote more time and resources to their core business.
As technology develops, financial institutions are becoming more flexible and agile, providing customers with an improved service as a result. Major banks are making use of technology-backed solutions that focus on digital services and mobility, to completely transform the customer experience and drive up growth as a result. The benefits aren’t just for the customers, though- improved efficiency within the business lets companies make huge savings on their operational costs. Thanks to mobile banking, one notable credit society’s operational efficiency improved by almost 20%- and other financial service providers large and small can see similar savings if they approach outsourcing in the right way.
While IT might not be a core function of financial services companies, it is still critical to performance. Most financial staff have limited capabilities when it comes to specialised IT functions, which is all the more reason to bring in specialist outsourced staff to back them up. Partnering up with a reliable outsourcing vendor is an opportunity for financial services organisations to completely re-haul their core IT technologies and architecture, as well as cost structures and operating principles.
When used properly, IT outsourcing can help financial service providers to overcome the issues that the industry has faced over the last decade. According to the latest estimates, the IT services industry will be worth $1.1 trillion by the end of next year, and more than half of this value will come from outsourcing. By relying on outsourcing vendors to take care of non-core operations, financial services firms can better focus on their key tasks and responsibilities, and outperform the competition.
However, it’s important that these financial services organisations ensure that their existing IT outsourcing contracts are properly managed and executed. This means senior management need to be involved on a supervisory level, to ensure that the project matches the company’s key needs, and to minimise potential issues that could lead to delays.
Since outsourcing can be so effective, many financial services organisations have moved from working to single outsourcing vendors to complex, multivendor models to tackle numerous different business procedures. However, this can have its downsides, and it is important to avoid sliding into a “patchwork” IT operating model without proper communication. Otherwise, the potential savings can be cut, and efficiency could actually decrease as the multiple vendors are unable to work with each other effectively.