While the popularity of offshoring is growing in most business sectors, retail banking appears to be a notable exception. According to a Datamonitor survey, just 18 percent of retail banks had outsourced any of their business processes offshore, although 40 percent had used outsourcing. This article reveals some differing results.
When we've mentioned banks here in the past, it’s been about their activities as consumers of outsourcing services, including their apparent reticence in working with offshore providers.
A recent article in Bank Systems & Technology offers an interesting twist, quoting a Celent analyst who believes banks could earn a little outsourcing revenue of their own by partnering with third-party firms that provide accounts payable and accounts receivable services and selling them to their commercial cash management customers.
That's exactly what Cincinnati's Fifth Third is doing, with a partnership with invoice solutions provider API Outsourcing. It didn't make sense to build internal capabilities, a Fifth Third SVP says, "For us to develop the technology and the subject matter expertise, we were losing vital time."
Emerging technologies such as Web-based portals make it far easier for banks to forge these types of partnerships, the Celent analyst tells Bank Systems & Technology.
Through their strong brands and existing relationships with commercial customers, banks offer outsourcing providers a shot at business they might not otherwise have a chance of winning. Banks can enhance those customer relationships by offering a new service.
Banks will also make a little money - though Celent points out it's a relatively modest revenue opportunity, currently a $300 million annual business that could grow to $1.6 billion. But unlike bigger money businesses like mortgages, it's nice and stable.
A few banks have even purchased invoice solutions providers, the article notes, mentioning Mellon's acquisition of SourceNet Solutions.
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