FIS Consulting Services
Platform-based Business Process
Outsourcing
Platform-based Business Process Outsourcing
Overview
Continued pressure on financial services firms’ profits is forcing bank executives to do more with less. A true picture of the decline in profitability, from an overall industry perspective, is highlighted in the following graphic.
Source: FDIC Call Reports, December 2013
Revenue (net margin income and noninterest income) continues to decline as a percent of assets. Total revenues are down by more than 100 basis points in the 11-year period seen above. Expenses have dropped, but unfortunately at a slower pace than expenses have fallen. This pressure to reverse revenue trends and continue to reduce expenses causes executives to seek innovative sourcing solutions.
As more financial institutions adopt outsourcing as a tactical tool for cost reduction, its value as a competitive differentiator will erode. If everyone outsources their call center to an operation in Bangalore, for example, how is one organization different from another? The answer to creating differentiation lies in platform-based business process outsourcing (BPO).
5.82% 5.43% 5.39% 5.20% 4.91% 4.36% 5.01% 5.08% 4.85% 4.73% 4.58% 3.35% 3.22% 3.16% 3.01% 3.00% 2.81% 3.11% 2.99% 3.06% 2.98% 2.85% 2.47% 2.21% 2.23% 2.19% 1.91% 1.55% 1.90% 2.09% 1.79% 1.75% 1.73% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Total Revenue Expense Gross Profit
Income, Expense and Gross Profit
Before Extraordinary Gains/Losses, Loss Provision & Taxes Source: FDIC, December 2013
Platform-based Business Process Outsourcing
Combining Technology with Process Outsourcing
Outsourcing offers immediate benefits. However, one major drawback of the traditional outsourcing model is that no single vendor has offered both business and technical expertise.
Savvy executives are looking for a solution that will provide not only the labor to perform a business function, but also the banking technology combined with ancillary support functions (like collections, loan origination, call center, etc.). These solutions must include a transactional pricing model to be attractive and viable. Combining people, process and technology into a single cohesive solution available on a “pay-as-you-go” basis is known as based BPO. In banking, platform-based BPO can cover very broad to highly specific banking functions. A range of possible tasks to outsource is shown in the following graphic.
Broad Range of Functional Tasks to Consider
Transitioning to Virtual Back-Office
By no means will the switch from traditional outsourcing to platform-based BPO be easy for vendors and buyers. Developing a shared services platform is a tall order for most traditional providers. The endeavor requires capital, time, technical skills, domain expertise and the ability to run the platform in a shared services environment. Buyers of this solution may have to convert from one technology product to another, which is a huge shift in itself. However, the impact
After-hours Call Center Support
Loan Origination and Servicing
Signature Card
Management
Reg E Dispute
Management
Platform-based Business Process Outsourcing
Companies that already have developed and deployed industry-specific technology in a shared services environment are best suited to capitalize on this new virtual outsourcing model. Extending this offering by adding sourcing capabilities is much easier than developing a new platform. For buyers, expanded services provide them more leverage in pricing, contract terms and service level agreements (SLAs). They can also hold a single entity accountable for technology integration, process improvement and standardization, turnaround times, technology maintenance and support, system availability, etc. Since the vendor provides all the services at a fixed unit price, it is in the vendor’s interest to address any inefficiency immediately. The reduced need for management bandwidth in operations management will also allow companies to focus on business issues and allocate newly freed resources to new product development.
The difference between traditional outsourcing and platform-based BPO is similar to the difference between owning a car and using a chauffeur-driven car. With your own car, you are responsible for driving, oil changes, flat tires, gas, etc. With a chauffeur, you arrive at your destination without worrying about details and with time to focus on what’s really important to you.
The graphic below depicts the evolution of outsourcing from the simplest administrative task to the business
transformation of platform-based BPO. Technology designed for the financial services industry, combined with on-shore, virtual resources, offers the ability to transform any financial services enterprise.
Platform-based Business Process Outsourcing
Bringing It All Together
BPO solutions create a deep relationship between a financial institution and their outsourcing provider. As a part of the partnership, the following key elements are critical to success:
• The discipline to conduct proper due diligence
• The ability to communicate performance standards to the partner
• The ability to maintain a residual organization to govern the outsourcing relationship
The ability of a platform-based BPO provider to function as an extension of a bank’s organization gives them an inherent advantage in the above tasks. As banks conduct due diligence, they should seek providers that can bring technology, process and people together into a single, unified solution.
Examples of Platform-based BPO
Here are two examples of bringing technology, process and people together in an integrated Virtual Back-Office™ solution. These are real-life examples of combining outsourcing with integrated banking technology to offer platform-based BPO.
Atlanta Postal Credit Union
The Atlanta Postal Credit Union has delivered exceptional customer service to their member since 1925. They continue to grow at a steady pace with assets of nearly $2 billion and almost 100,000 members. The credit union sought an outsourcing relationship that would allow them to:
• Provide financial products to members to allow them to save money • Deliver personal, “live contact” customer service
• Maintain strong policies and procedures
The Atlanta Postal Credit Union leverages FIS’ Virtual Back-Office Services using the Call Center Lender capability that supports their loan application process. The platform-based BPO allows the credit union to:
• Offer “live” lending resources to handle members’ loan applications with minimal issues • Extend loan application availability to 24/7
Guaranty Bank
In 1955, a group of local businessmen formed a bank to serve the Denver business community. Through internal growth and key merger transactions, Guaranty Bank and Trust Company has grown into the premier business and community bank it is today – with 34 branch locations serving the Colorado Front Range. Guaranty Bank wanted to provide after-hours call center support for its growing retail customer base – without having to staff a second and third shift for an unknown volume of calls.
The platform-based Virtual Back-Office solution leveraged by Guaranty manages the bank’s after-hours call center support. This allows the bank to: