The financial services industry globally has undergone prodigious change over the last five years. Many banks have either undergone consolidation, restructuring or have been newly formed. Post-recession, many new regulations have come into place across the globe which has posed excessive pressure on the banking industry. This means the industry has to manage such monumental tasks wherein the size of compliance team is expected to double in the next few years. Additionally, demand for transparency has increased the pressure on small and mid-sized businesses as they require significant investment in addition to skills that are not found in abundance; it’s difficult to hire for them.
Similarly, another area where banks have been investing heavily is fraud detection and anti-money laundering. Post-recession, firms have already increased compliance staffing levels by more than 50%, adding to its existing cost. Furthermore, development of Internet-based business models in the banking industry is driving the need for huge investments in the financial services industry. Applications such as self-inquiry, remote banking, anytime banking, tele banking, mobile payments and electronic banking are examples of investments which institutions have made across the globe in the recent past. However, the investments would not stop there. Companies have to also keep in mind emergence of new technologies such as mobile remittance, digital banking, and the need for master data management and analytics platforms. All these have further increased the pressure on costs.
On the flip side, diffusion of technology has enabled various non-banking players entice customers away from banks. Companies such as PayPal, Square, Apple and Google have already shaken the payments industry. Alternative lending platforms such as Lending Club and Prosper are vying for the most profitable business of banks, i.e., lending. Besides, the weak investment climate has brought down the sales of automobiles and housing on the consumer side while corporate customers have also refrained from making investments on plants and machinery. All these factors have reduced the revenues of banks globally and have resulted in lower profit margins for banks. The erosion of margins will increasingly force banks to realize savings on the cost side although banks primarily focus more on the customer side (i.e. attracting new customer sectors, customer loyalty).
Pressured by dwindling margins and an increasing cost burden, banks are reviewing their business models to focus on their core competencies and outsource non-core areas to specialists. In this context, core banking business process outsourcing (BPO) stands as an increasingly attractive proposition. More and more banks are willing to select a standard industrial-class service for their core banking solution to increase efficiency, reduce risk and make costs more predictable. This is expected to drive the outsourcing of banking specific BPO processes over the next five years.
In order to assist banks select the right location for outsourcing business processes globally, GrowthPraxis has come up with a report on location selection. GrowthPraxis’ research report titled Location Attractiveness: Global Evaluation of Cities for Potential Setup of Financial Services BPO Center maps the performance of more than 75 cities in different countries on well defined and varied parameters and identifies 25 top cities for potential setup of Financial services BPO, including the five next-wave cities. The study provides rankings to these cities, indicating their attractiveness for setting up of a BPO services center.
Asia dominated the charts with 16 locations among the top 25, primarily due to the existing banking-specific talent pool and the large fresh talent pool which is available in countries such as India, China and Philippines. In Asia, India leads the race with seven locations followed by China with five. Countries such as Philippines, Thailand, Indonesia and Sri Lanka have one each.
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Table of contents:
- Executive Summary
- Current Scenario and Future of Global BPO Spending
- Changing Landscape of Banking and Capital Markets Industry and Its effect on Business Process Outsourcing
- Current Scenario of Third-party BPO vendors
- Need for Location-centric Strategies for Third-party Vendors
- Research Methodology: Location Attractiveness Factors, Scoring and Detailed Working
- Top 25 Cities for Setting up Banking and Capital Markets BPO and Detailed Description of Each City
- Conclusion and Recommendation for a BPO Firm on Location Attractiveness for Setting up a Banking and Capital Markets BPO
Key questions answered in the report:
- What are the key parameters which should be considered for location selection?
- Apart from traditional BPO destinations such as India and Philippines, where can I expand?