Finance Services Overview – Offshoring

Offshoring processes in the Banking and Financial Services industry, like most sectors, is a generally recognised and widely used method of doing business. Offshoring was rapidly adopted by the Financial Services sector in the 1990s, especially in the back and middle office. This early excitement was based on traditional, routine transactional processes like credit card processing, and offshoring more complex processes like Finance and Accounts has yet to gain traction. What does the future hold for this sector, given the recent market turmoil? Offshoring developments in Banking and Financial Services (FS) and Finance and Accounting (F&A) are discussed in this article. You may want to check out E.A. Buck Financial Services – Kailua-Kona Financial Planning for more. I examine the overlap between these two markets to see whether there is an untapped potential. Finally, I’d like to look at how the current financial market volatility could affect the future of offshoring in the financial services industry.
Offshoring Trends in Financial Services
Offshoring in the financial services industry can be traced back to some of the first groundbreaking contracts signed in the 1990s. UBS and Citigroup were among the first to recognise and reap the advantages of offshoring. Many financial services firms establish captive shared service centres in cities like Mumbai and Chennai to handle their IT and transactional back office functions. Some companies, such as Credit Suisse, chose to team up with a third-party vendor rather than go it alone.
Surprisingly, the FS outsourcing industry profile has remained relatively unchanged. The FS offshore industry in 2008 also represents its history, with IT and back office areas accounting for more than 80% of the market.
Mortgage, credit card, and loan collection, as well as retail banking, are examples of back office transactional work.
Offshoring is still common, according to a recent study by FS Outsourcing, which estimates that the FS outsourcing market was worth about £25.2 billion in 2007. They also expect the FS market to expand at a rate of 25-30% per year, which is incredible. Indeed, given the current economic environment and volatility, there is a case to be made that the expected growth of this sector has been underestimated, and that many financial services firms would seek to further leverage offshoring to achieve the requisite efficiencies and cost savings to survive in these trying times.