Businesses in all industries across the globe, both large and small, are increasingly incorporating technology into their operations in order to improve efficiency, lower costs and generate higher returns. The adoption of outsourcing in the banking sector across various business functions—the so-called business-process outsourcing (BPO) sector—has been growing at an accelerating pace, in particular when it comes to information-technology (IT) outsourcing. Banking BPO is a specialized strategy for sourcing various services needed by banks and financial institutions—designed to support new-business acquisition whilst servicing everyday activities associated with a range of customer needs. Certain larger financial organizations choose to extend this outsourcing application to include a wider range of outsourced services—for example, adding human-resources outsourcing and finance-and-accounting outsourcing (FAO) services as well as others. All of these various outsourcing strategies have been implemented in order to reduce costs and apply the most expert, specialist talent to the right areas of business.
This has been helping banks stay relevant and current when it comes to technology. Banks are able to keep pace with technological developments and the commensurate client demands by offering applications and innovations sourced externally. This approach has been incorporated into departments and functions business-wide. Traditional DIY (do it yourself) in-house IT solutions are often slower to adapt and evolve. By applying IT outsourcing, banks can apply innovative changes as the market dynamics shift in almost real time.
A top goal of this strategy is to improve cost-cutting. Automation has played, and continues to play, a central role not only in streamlining efficiency and information management but also in reducing direct costs of processes. Automation also reduces the costs of errors through the application of more accurate and precise systems that eliminate and reduce human error. In addition, IT outsourcing companies continually retrain staff and build new tools and solutions to meet evolving demand. These IT outsourcing firms are also current when it comes to applying the latest regulation and cybersecurity solutions. Using the specialist, cutting-edge talent-and-resource pool can add a lot of value to banking business functions and can provide a quicker turnaround in meeting changing needs than in-house solutions.
IT outsourcing firms can offer banks technological creativity not only at a faster and more efficient pace and with higher accuracy but also on a number of angles. Robotic process automation is one area of innovation that will be increasingly adopted in 2017 and would have had a very low likelihood of ever being developed in-house—as it requires technical and engineering based skill at its core. This is a prime example of how IT outsourcing is driving technological innovation at banks.
A further key example of technological innovation at banks being achieved through IT outsourcing is in the space of developing consumer-facing solutions—outsourced IT firms can develop better technology for increasing the convenience, access and comprehensive nature of online solutions.
Banks need to keep up-to-date with technology to stay relevant against competitors. The shape of the financial industry is changing rapidly—and it is technological change that is driving this evolution. Banks must continually innovate their technological solutions and procedures to survive. A major threat to survival is the growing fintech (financial technology) sector. Fintech firms are making it a specialist area of business to target customer needs more specifically, with a niche perspective in many cases. These small businesses are able to take advantage of lower costs through a smaller overhead whilst delivering tailor-made solutions. Traditional bank branch-based services are losing relevance. Banks need to keep pace. As well as competition from fintech companies there is the growing digital-wallet (such as Apple Pay) market with which to contend as well as the plethora of new-age banking solutions (such as Facebook payments). Wearable technology in banking is also growing, and banks can address these market changes head-on with the proper outsourced specialist expertise.
Adding in IT outsourced firms for analytics and forecasting solutions is also going to be crucial for survival for banks going forward. Identifying trends based on customer and market data and keeping pace with competitors will be vital for maintaining relevance. Each and every type of customer is increasingly tech-savvy and expects even more digital solutions from their everyday bank. Only with the right technology can banks analyse and forecast the needs of their customers effectively. Consumer preferences are in themselves evolving at a fast pace, and IT outsourcing can help banks capture increased market share. This can be best achieved by aligning banking services and products directly with consumer desires. Customers want bank services to be more closely integrated with daily life with ease of access and real-time solutions to problems as well as suggestions based on their transaction histories. Analytics can help banks provide effective time-relevant advice. IT outsourcing allows specialists to apply their domain expertise in this area.
Overall, IT outsourcing can drive technological innovation on many fronts for banks—delivering an enhanced bottom line and better service to customers.
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