Half of Global Banking and Financial Services BPO Growth in 2011-2012 Driven by Small Financial Institutions: Everest Group Report

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BFS BPO Market Sees 16 Percent Global Uptick in 2012, Driven Chiefly by Small Financial Institutions

Saurabh Gupta, Vice President, Everest Group

Saurabh Gupta, Vice President, Everest Group

As BFS BPO demand gets more sophisticated, the service provider landscape will become more specialized.

The Banking and Financial Services (BFS) Business Process Outsourcing (BPO) market grew by 16 percent globally in 2012, a robust growth rate driven by small financial institutions seeking to grab a portion of the efficiency benefits promised by BPO services. Adoption of BFS BPO from small financial institutions accounted for more than 50 percent of new contracts in 2012.

The data and insights are included in a new report issued by Everest Group, an advisory and research firm on global services.

The report, Banking and Financial Services (BFS) BPO Annual Report 2013 - Small is the New Big!, chronicles how a higher proportion of contracts in 2012 were extensions or renewals as compared to new contracts. The overall value proposition of BFS BPO continues to be strongly driven by cost reduction. This report aims to assist buyers, service providers and technology providers in understanding the changing dynamics of the BFS BPO market and help them identify the trends and outlook for 2013.

The salient points of the report are:

  •     Market size and buyer adoption
  •     Banking BPO solution characteristics across size and scope, Line of Business (LoB) adoption, analytics and risk regulatory services trends, technology model, global sourcing, and pricing structures
  •     Capital Markets BPO solution characteristics across size and scope, LoB adoption, regulatory reporting and risk management, technology model, global sourcing, and pricing structures
  •     BFS BPO service provider landscape, covering service providers’ market share and areas of investments

The scope of the study covers third-party BFS BPO contracts and does not include shared services or Global In-house Centers. Around 300 BFS BPO contracts signed as of 2012 were analyzed as part of the study. A service provider landscape covering 18 BFS BPO service providers includes Cognizant, CSC, Dell, EXL, eClerx, Genpact, HCL, Infosys, iGate, Mphasis, Serco, Sutherland, Syntel, TCS, Tech Mahindra, Wipro, WNS, and Xerox.

Insights from the study include:

  •     The market for third-party BPO in BFS reached US$3.8 billion in 2012, growing at a rate of 16 percent over 2011, on the back of similar growth rate in previous year.
  •     The average contract size and term decreased from recent years.
  •     A higher proportion of contracts in 2012 were extensions or renewals as compared to new contracts. More than US$1 billion in annualized spend will be up for renewal over the next three years.
  •     The United States continued to be the key buyer geography for BFS BPO in 2012, accounting for over 60 percent of contracts.
  •     The average size of banking BPO contracts was approximately 90 FTEs compared to a historical average of approximately 235 FTEs. This is due to increased adoption by smaller financial institutions and the trend toward a risk-averse, incremental adoption approach that resulted in contracts focused on a single LoB and/or geography.
  •     India continues to dominate delivery accounting for over 90 percent of capital markets BPO FTEs.
  •     The impact of stringent regulation (Dodd-Frank, NAFTA, Basel III, new CFTC rules) led to a significant increase in inclusion of risk management and regulatory reporting services in capital markets BPO contracts in 2012.

“As BFS BPO demand gets more sophisticated, the service provider landscape will become more specialized,” said Saurabh Gupta, vice president at Everest Group, leading the firm’s business process research practice. “The ascending influence of smaller financial services, the risk-averse and focused approach of large global companies, and the rising competitive intensity require service providers to bring their A-game that goes beyond arbitrage and economies of scale.”

About Everest Group
Everest Group is an advisor to business leaders on the next generation of global services with a worldwide reputation for helping Global 1000 firms dramatically improve their performance by optimizing their back- and middle-office business services. With a fact-based approach driving outcomes, Everest Group counsels organizations with complex challenges related to the use and delivery of global services in their pursuits to balance short-term needs with long-term goals. Through its practical consulting, original research and industry resource services, Everest Group helps clients maximize value from delivery strategies, talent and sourcing models, technologies and management approaches. Established in 1991, Everest Group serves users of global services, providers of services, country organizations and private equity firms, in six continents across all industry categories. For more information, please visit http://www.everestgrp.com and research.everestgrp.com.

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