indian banks & the global challenges january 31, 2006 outsourcing opportunity: strategic &...

Indian Banks & the Global Challenges January 31, 2006

Outsourcing Opportunity: Strategic &

Operational Level

Mr.Shailesh HaribhaktiMr.Shailesh HaribhaktiManaging Partner & CEO Managing Partner & CEO Haribhakti GroupHaribhakti Group


What is Outsourcing

Bank's use of a third party to perform activities on a continuing basis that would normally be undertaken by the bank itself, now or in the future.

Specific feature of outsourcing is that the direct control of these operations is shifted to an external service provider.

External ServiceProvider

Intra-group Company

Independent third party

JV with Independent third party


Phase II2000’s

Phase I 1996-2000

Pioneers & Size Driven Factors

Increasing adopters & strategy factors

Phase III2003 - 2008

Bandwagon & Competition Factors

Captive BPOs: American Express,

GE Capital, British Airways

Accenture, EDS, Bank of America

AXA, Ford, HSBC, Citibank

Emergence of Outsourcing Industry in India


Banks are under increasing pressure today….

Pressures onPressures onBanksBanks

Evolving socio-economic & political

context (WTO etc)Changing consumer

concerns and buying behaviour

Increasing convergence

ShiftingRegulations

(RBS, BASEL II)

Broadening distributionpatterns Increasing customer

expectations

Changing basis of competition

Shift to a global / international market

Emerging technology


Types of Outsourcing in Banks

Outsourcing of activities Only parts- Individual activities of a whole process are outsourced

e.g. printing of accounts statements

Outsourcing of processes The whole business process- consisting of a set of activities is outsourced

e.g. the entire management of customer accounts

Core activities

Non-core activities

Types of Outsourcing


Draft Guidelines by RBI dated 06.12.2005

Activities that should NOT be outsourced

Management control

Corporate Planning

Management of investment portfolio

Compliance with KYC norms for account opening

Sanction for loans


Management Structure for outsourcing


Outsourcing Opportunities for Banks

Higher servicequality

Greaterefficiency

Greater flexibility

Focus on core

competencies

Lower Costs

OpportunitiesOf

Outsourcing


Evaluation of Risks

Types of Risks

StrategicStrategic RiskRisk

Reputation Reputation RiskRisk

SystemicSystemicRiskRisk

Operational

Risk

ComplianceComplianceRiskRisk

The service provider may conduct business on his own behalf, which is inconsistent with the overall strategic goals of the bank

Privacy, consumer and prudential laws not adequately complied with

Arising due to technology failure, fraud, error, inadequate financial capacity to fulfill obligations and/or provide remedies

Due to lack of control of individual banks over a service provider, more so when overall banking industry has considerable exposure to one service provider.

Poor service from the service provider, its customer interaction not being consistent with the overall standards of the bank


The Whole Range Of Core Banking And Support Processes

Sample processes

Telesales Customer service Technical support help

desk E-mail support Fax responses Live interaction

Customer

facing

Voice

Non-voice

Inbound

Outbound Telemarketing Collections (bucket

one)

Business process off-shoring services

Benefits administration

Payroll processing

Retail banking (account maintenance, opening, check processing)

Fund administration Reference data

management Claims

processing

Database integration & analytical services

Secondary research

A/R and A/P management

Reconciliation

Back office

Core business

Support

HR/ Admin

Consumer banking

Wholesale banking

Insurance

Research

Finance & Acctg.

Illustrative vendors


Key InitiativesCurrent Activities Outsourced

Hardware and software maintenance

Management of data centers

Outsourcing of data center operations

Disaster Recovery

Network management & monitoring

Maintenance of websites

Maintenance and management of

links at ATMs

Opportunities going forward

Help desk support

Outsourcing of customer complaints

Credit card processing & printing

Cheque processing & clearing

Cheque box clearing & collection

ATM cash replenishment

Loan servicing

Pay-roll & pensions

Data processing of day-to-day

clearing instruments like drafts and

dividend warrants


Contact:

Thank You

Address: 42-43, Free Press House215, Nariman Point, Mumbai – 400 021URL: http://www.haribhaktigroup.com

The Question is Not Whether to Outsource But What to Outsource

Mr. Shailesh HaribhaktiManaging Partner & CEOHaribhakti [email protected]

Tel: +91-22-5630 8232Fax: +91-22-2287 6249E-mail: [email protected]

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