Outsourcing Trends in Banking, Finance, and Insurance Industries

Do you ever wonder what’s behind the providers you hear so much about? You may have been on the receiving end of a pitch from some; read something online; or heard a name mentioned from a colleague. A team, as we all know, is only as good as its people—more specifically, as effective as its leader. So Barbara Hodge recently called up Keyur Maniar, who heads Wipro’s Banking, Financial Services and Insurance BPO vertical. This is the biggest vertical within Wipro's BPO, and as such we wanted to ask him why he felt that the BFSI sector was still leading the way in outsourcing, and how he was positioning Wipro to meet the demands of today’s customers Interview by Barbara Hodge Keyur, you head Wipro BPO’s biggest vertical. Why is banking, finance and insurance still the most important sector for outsourcing? And how are you meeting this sector’s requirement? The BFSI has always been the sector most open to leveraging outsourcing, perhaps because of its financial bias – in particular the following fuel BFSI as a torchbearer in outsourcing Regulatory landscape (perhaps most stringent in decades) Economic uncertainties that continue to grapple the major and now emerging economies Role technology plays, particularly in Financial Services, in moving the needle for top line and bottom line growth Ever evolving customer engagement channels and models and the role digital transformation is playing here The levers above are very distinct from other industries and hence demand customers to be agile and work with partners who could help them strategically bring efficiencies and win in the marketplace. With a market size of over $ 10 billion, BFSI is the most attractive vertical for BPO service providers. We have an extremely large BFSI BPO practice, and have been growing at alpha rates over the last two years. We have almost 6,500 FTEs spread across 13 countries across the globe, delivering to what is primarily a F1000 customer base. We are divided into three separate verticals within BFSI. The first is retail banking and financial services, the second is investment banking and capital markets, and the third is insurance. We are helping our customers differentiate at the front end, and standardize at the back end. To meet this objective, we’ve embedded focused domain and product-side solutions into our service. Obviously, given our heritage we harness technology extremely well, and to that extent BPO aligns with our technology practice to provide operations and technology services together, thereby delivering a level of improvement and transformation that you just cannot get through process improvements or process efficiencies alone. We’ve also developed a very robust global delivery footprint to be able to right-shore work for our customers. Depending on a firm’s political sensitivity type of work to be offshored, restrictions on data and regulation, we can offer a combination (via our 33 centers in 12 countries) of onshore, near-shore and offshore work. We have an extremely strong risk and compliance practice that monitors regulations across the various practices in the marketplace and incorporates their impact into our solutions. This means that of course we adhere to the latest compliance statutes, etc, while delivering a level of service excellence to our customers. [inlinead] So what are the main trends that have impacted outsourcing over the last couple of years and how have you reacted to support this sector? The BFSI industry is the frontrunner for outsourcing but it is also the most impacted across economic cycles. Trends include tighter regulation, which, as we have learned from experience, is the biggest driver of industry consolidation. So while regulations have tightened up, there has been a fair degree of scrutiny not only of the work that can be done offshore, but also the amount of work and compliance that banks themselves have to deal with. Also, since banks are typically (amongst the most) impacted by economic cycles we have seen a lot of volatility over the last years, and to that extent, there has been significant pressure on banks to define and add new revenue streams, as well as to take costs out and deliver an excellent customer experience at the lowest cost of ownership. That continues to be a big driver for banks and they are looking for service providers or partners that can help them augment revenue streams while taking costs out without degradation of customer experience — in fact, actually enhancing customer experience. Then there's the move to digital and mobility. Customers now obviously have unparalleled access through a variety of channels and devices. And most of the banks have struggled in trying to stay afloat with that in terms of providing access across devices anywhere, anytime 24/7. The appetite to take managed risks is also fairly evident amongst customers and has been accelerated, particularly in BFSI, and we are seeing new commercial constructs, new arrangements, like co-sourcing, monetization, people takeover, etc. By monetization, I mean that banks are willing to look at legacy assets and discussing the options for partners to take those assets (including systems and people) off their books, releasing capital into the system, removing the fixed costs and converting them to variable costs, and potentially taking those assets to market. In terms of people takeover, we are seeing significant appetite on the part of banks and insurance firms to have their staff re-badged as provider staff, and over time right-shoring the delivery model. For example, last year we executed a large deal for a leading UK bank and took over their Irish centre and employees. To do this, we had to set up a regulated TPA (Third Party Administrator) in Ireland as this center manages the administration of the insurance unit and is regulated by the Central Bank of Ireland and the FSA, UK. We re-badged almost 200 employees from the bank into our centre. Of course, we now continue to provide policy administration, customer service and complaints management via a right-shored construct. What is the appetite, in the BFSI sector, to taking on more risk—by which I mean the willingness to release its hold over some of its processes? Following on from the response to the previous question, banks are now keenly looking at monetization. Given the significant costs and capital pressures, they are primarily concerned with shaving off fixed costs, releasing capital into the system, selling off assets that can bring in some capital, but continuing to consume the services that were being offered leveraging those assets. So, for example, we are in conversations with several customers (across banking and insurance) to evaluate their platforms in select areas and potentially take over that platform and attendant operations — take it off their books, and continuing to upgrade or improve it. So we’ll carry on offering both the technology and the operation services on that platform, while at the same time taking the platform to market and potentially onboarding other customers to it, thereby creating a marketplace utility. Now, the bank/insurer from whom we would take over this platform would benefit because it would get immediate capital release, and we would commit to upgrading the platform on a year-on-year basis and run its operations at an equal or higher level of service. Therefore there will be a distinct shift from CAPEX to OPEX for the bank for this service. Also, the fixed costs start getting amortized over a larger number of customers, as these are on-boarded to that platform. Can you give me examples of solutions you’ve developed to meet concerns over risk, for example? Sure. So, we have encapsulated a lot of operational risk and controls into tools and accelerators from a delivery standpoint, that thereby minimize the opportunity to make errors on financial as well as non-financial transactions. These solutions address design issues around a process or act as good monitoring mechanisms for risk events. We have built a slew of process automation tools, as simple as desktop automation tools or encoding macros or more robust technology platforms. And again, these are available on a portal, easy to download with a very searchable, reference-able index. Examples are automated data entry tools to eliminate manual data entry work; email managers; duplicate payment finders, reconciliation tools; things like PDF to Excel and other data extraction tools; etc. for monitoring risk we define a new bucket of metrics called "Key Risk indicators" that measure outcomes and business impact of work managed by BPO teams. We’ve also used our technology platforms to ensure the robustness of leveraging programs for a large number of transactions simultaneously, across multiple users. So where automation can be leveraged we have de-risked operations from manual errors, as well as mitigated operational risk on the delivery platform. Separately, we’ve invested a lot in innovation, as this is what will drive our customers’ satisfaction. For example we developed what we call Transformation Intelligence, TI, a repository of reusable process assessment and improvement solutions. So what that means is that wherever we impact an improvement in the process, we ensure that it's available on an online knowledge-net, that can also be accessed through a mobile device. As we help our customers go digital we're also helping our end users, the operations users, go digital, and thereby help them search for solutions to particular issues they may be facing. And if we have a best practice embedded with a potential applet they'll be able to access it and reuse it in their customers' environment. Another point is that we are embedding analytics in all our operations, particularly in our front office operations. We do a lot of speech data and text analytics, including social media analytics, to create insights into the customers' brand franchise in the marketplace, plus end experience that we are delivering to their consumers, and then shape our associated behaviors and operations to improve on what we are doing. This has been a game changer for our customers. How do you deliver lower costs, which is what your customers all really want? We are constantly striving to optimize our operations – and standardizing and leverage best-in-class processes across our entire delivery footprint; this is of course in addition to recommending a right-shore delivery footprint for every customer. In addition, we are leveraging technology (most often proprietary tools and accelerators) to the maximum to eliminate non-value adds and automate routine tasks. We are therefore confident of underwriting improvement commitments in our contract, which we deliver on through embedding tools and automation. So, for example, over a five-year contract, it is not unreasonable to expect us to deliver from 45% to 50% productivity improvement. The focus is on delivering service excellence at a lower cost of ownership. [inlinead] What about the market’s interest in digital solutions to capture the mobile customer? How are you supporting this trend? Let me illustrate this with 2 examples. Four years ago we acquired a mortgage origination platform company known as Gallagher Financial Services. Now it's known as Wipro Gallagher Solutions. The product is an end-to-end cloud-based platform for originating mortgages. Over the last couple of years we have extended the front end and allowing access through smart phones and tablets and we call it the e-MO interface. So now, a loan advisor can actually take that tablet to his or her customers and complete the loan application as the customer is speaking, then digitize the documents, and send them either onshore or offshore, depending on where they are being processed, thereby eliminating delays in the supply chain as well as enhancing the customer experience. That is one example. A second example is that we have an extremely strong offering in our chat facility. Across the US and UK, more than two-thirds of the banks still do not offer push-to-chat or chat services as consumers move online to consummate a transaction. We have developed the ability to open up a push-to-chat window and help the consumer complete a transaction on the website, when we sense that the consumer is pausing or trying to figure out what next. And we are not stopping there, by leveraging the latest in analytics in digital transformation space like predictive analytics we have the capability to engage customer like never before. This continues to move traffic to lowest cost channels and ensures that transactions are completed every time a consumer logs on besides giving an impetus to CSAT scores. What are the main points that differentiate BFSI from other industries? What would drive a virtualization strategy? Clearly, regulation is the highest and most stringent in BFSI. In addition, the volume of transactions that one handles and the expectations of completion or consummation of processing of those transactions in real time, are probably the highest in this industry. Also, the financial and non-financial risk that is at play on every transaction is significantly different from that of other industries. Another factor is that, given that the banks have typically been proponents for technology spend and have typically led other verticals in terms of harnessing new trends, their customers are typically the most demanding. And so to that extent the banks or insurance companies are also extremely more demanding than any other vertical when it comes to outsourcing and offshoring. They are the most sophisticated users or customers from an outsourcing standpoint. This also reflects in the end customer behavior. You would appreciate that online banking today has taken customer maturity and expectations from a delivery and technology standpoint to the next level and banks have to stay ahead of the game. One way of doing that is working with partners who have the capability to bring those advantages to the footsteps of these banks. I also think this is the industry which probably has the most number of captives, so we do not compete as much with other providers as we are competing with captives. What are your core focus areas within BFSI? Let’s take investment banking and capital markets first. We service four of the largest i-banks in the world at this point. And we service very high-end and complex work, like clearing & settlements and trade processing, so we actually process millions of trades on a monthly basis across 50+ markets, across a slew of products - equity derivatives, FX, etc. Along with that, we carry out a fair amount of reference data work (customer, product, instrument), asset servicing, reconciliations, claims settlements, etc. We have over 2,500+ FTEs servicing capital markets. We also do a fair amount of transfer agency and trust accounting work In retail banking and financial services we are focused on two big areas. One is lending – both on the origination and the servicing side and I mentioned our platform model for mortgage. We have also built a Center of Excellence (COE) in Atlanta in the US – the biggest lending and mortgage market in the world. The second area where we specialize in is cards. We do end-to-end cards processing, both across the acquisition and the servicing cycle. And we have shaped our offering by productizing solutions in niche vertical stacks. An example is our disputes and charge-backs solution - RESOLV. This is an outcome-based service offering that demonstrates our ability to take on disputes and charge-backs processing for a fraction of the cost, as well as deliver significant outcomes that issuers are not able to achieve by themselves. The advantage is that we have made it adaptable such that it can be configured if the bank happens to be an acquirer thus serving the end to end disputes landscape. In insurance, we work across Life, General & Health insurance customers. We manage significantly large customer service, claims administration and policy administration operations delivered out India, Philippines, Ireland the US. As mentioned above, we’ve set up a formal TPA in Ireland and are regulated by the Central Bank of Ireland and the FSA, UK. Have you introduced any new ideas or strategies in serving clients? Any approaches that help clients meet their pressure points? I have enumerated several ideas in some of the responses earlier – be it in right-sourcing, asset monetization, employee re-badging, harnessing technology to optimize operations, etc. In addition, for large accounts we have put in a program that delivers enabling of systems change. This helps to look at the underlying systems, identify potential automation opportunities, develop business cases on the effort for automation, write the business case and requirements documentation for how the change would be executed and then queues the change prioritization. We also employ a slew of analytics on the delivery side to continue to present to customers a book of work that demonstrates the overall roadmap in terms of quick wins, medium term, long-term, etc. Given the increasing focus on business outcomes, can you give me an idea of how you and your customers are measuring the impact of your service on the customers' business outcome? We have developed a very formalized approach to this outcome measurement, that we refer to as a Business Value Meter (BVM). That focuses on three specific pillars: client experience management, cost optimization, and revenue enablement. That last one focuses on increasing/augmenting revenue streams for our customers? How do we collect payments faster from counter parties, let's say, in an investment banking scenario? Or how do we cross sell to our retail customers? So these are the three pillars on which we measure outcomes, and what we do is we take the BVM and monetize it (i.e. impute a financial value to the outcomes) and share it with our customers on a quarterly basis. That achieves two things. One, it gives great visibility to key client stakeholders about what Wipro has brought to the table. Second, it puts the onus on us in terms of demonstrating sequential quarter-on-quarter improvement, because once I have put a value of BVM into quarter one then in quarter two I'm expected to obviously notch that up and demonstrate an additional number on the BVM chart. Otherwise, in that quarter I've really not done something that has excited or exceeded my client's expectations, so it creates pressure on us as a team to ensure that we continue to be agile and not get swayed into complacency on long-term contracts. Let's move to your external competition for a moment. How is that shaping up? Is there consolidation taking part? Do you think you might see the emergence of more niche boutique types of providers? We are seeing a fair amount or fair degree of consolidation, and the consolidation is being driven by three or four factors. I think the first is the increasing affinity for customers to rationalize their partners, so that they achieve more mind share at the partner level. This also creates fewer overheads in terms of management of your partner ecosystem. If you have too many partners the work gets fragmented and allocation and overseeing partners and all can become a challenge by itself. I think a second factor is that customers are increasingly realizing is that CIOs and COOs are increasingly joined at the hip. For some of our customers, those roles report into one role, where the COO is actually looking at both technology and operations now. So there is better synergy and partners who are either technology only or operations only are increasingly trying to consolidate or trying to add to the missing capability to its portfolio. I think the third factor is that as partners, we are constantly on the lookout for inorganic additions to capabilities that we cannot bootstrap ourselves. That leads to buyouts of niche/boutique players that have done extremely well in a particular space or sub-space, if you will — that have scaled rapidly and are now looking for a liquidity option. And again, I continue to reiterate that at least in BFSI BPO one of the biggest competitive elements for us is really the captive mindset of some of the customers/prospects, the decision of doing it alone by forming a captive instead of leveraging a partner for outsourcing. Thank you, Keyur.

Outsourcing Trends in Banking, Finance, and Insurance Industries

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