Robotic process automation, analytics and consumer-facing technology solutions drive 10 percent growth in banking BPO market.
“If banks do not get their act right, they might soon lose their relevance,” claims Everest Group in new research addressing the business process outsourcing (BPO) market in the banking industry. The fight to remain relevant in an evolving market of new-age consumer preferences and unprecedented external pressures is driving demand in the banking industry for technology solutions and third-party assistance, as reflected in an approximately 10 percent compound annual growth rate in the banking BPO market.
Describing the future outlook for banks, Everest Group points to evolving consumer preferences, macroeconomic and regulatory pressures, and increased competition from non-traditional players. Traditional, brick-and-mortar bank branches are losing significance as consumer interest in traditional banking channels declines. Banks are also under serious pressure to reduce costs, increase profitability and respond to greater regulatory and compliance requirements. Furthermore, competition from non-traditional sources is on the rise. Financial technology companies (FinTechs) are a serious threat as they provide a better consumer experience and benefits such as ease of use and improved functionality. Also, the market for digital wallets (e.g., Apple Pay), person-to-person (P2P) transfers (e.g., Facebook Messenger and SnapCash) and new-age banking solutions (such as applications for wearables, voice-activated assistances and personalized interfaces) is growing rapidly.
“Consumer preferences are evolving fast, and banks need to align themselves with consumers’ desires,” said Anupam Jain, practice director at Everest Group. “The consumer wants their financial partner to be integrated with their daily life and to be easy to access. They want real-time advice based on their own transactions and behavior. This is why we are seeing growth in banking BPO: service providers can support banks by offering domain expertise and analytics; by leveraging technology to offer modern services; and by using tools like robotic process automation (RPA) to improve efficiency and cut costs.”
Jain points to four case studies cited in the research:
- A leading bank in Europe replaced its in-house core banking solution with a modern core banking platform and outsourced back-office services with the aim of improving efficiency and cutting the costs of regulatory compliance.
- A leading UK investment bank leveraged RPA to achieve 80 to 85 percent time saving in its management reporting and indexing processes
- A leading bank was able to reduce the time needed to identify problem loans from greater than 100 hours to less than 5 minutes using an analytics solution
- With the support of a service provider, a leading bank was able to streamline its anti money laundering (AML) process and thereby realize a 30 percent cost advantage.
Other key findings:
- The US$3.8 billion banking BPO market is poised to grow at a steady pace of 7 to10 percent compound annual growth rate, driven by increasing adoption of technology and automation.
- Traditional banking faces pressures from FinTechs, telecoms, retailers, etc., driving demand for innovation
- The macroeconomic environment, regulatory concerns, changing consumer preferences, and growth in adoption of automation, analytics and risk management services are some of the key factors influencing the market
- BPO demand drivers vary by banks’ size, with smaller banks seeking operational support and larger banks using service providers to drive regulatory initiatives.
- Robotic Process Automation offers an opportunity for service providers to help banks in the short term by fixing broken systems and in the long term by aiding the transition to new-age systems
- Among the service providers covered by Everest Group, Genpact, TCS and Xerox continue to dominate the banking BPO market
- Service providers are looking for new opportunities such as delivering more complex processes to counter the fading labor arbitrage and efficiency drivers.
- The US and UK led the establishment and growth of the BPO market. North America accounts for the highest share of global BPO revenue, followed by Continental Europe and Asia Pacific, which are driving the next growth wave.
These results and other findings are explored in a recently published Everest Group report: Banking BPO Annual Report 2016: Riding on the Digital Wave and Advancing in Automation. The report provides comprehensive coverage of the global banking BPO market including detailed analysis of market size and growth, buyer adoption trends, solution characteristics and the service provider landscape.