Private banks hive off back office functions
Investment managers, private banks and life insurers are increasingly sending back office operations overseas.
According to a new PricewaterhouseCoopers (PwC) survey, 21 per cent of financial services firms have been ‘offshoring’ activities for more than 10 years, and only 12 per cent do not offshore at all. More than 10 per cent of organisations expect to have offshored more than 30 per cent of their headcount in three years’ time.
Nigel Vooght, partner at PwC, said the trend was growing across continental Europe, as well as in the UK. He added: “This is a trend for all financial services companies with large back offices. A large number of respondents were in the asset management space.”
Nearly two fifths (39 per cent) of respondents were involved in investment management/real estate, private banking or life insurance.
Offshoring has obvious cost benefits, although the survey revealed these were not always as immediate or as extensive as firms hoped. Only 15 per cent of respondents were very satisfied with the level of cost savings achieved, 45 per cent were satisfied, 24 per cent neutral and 16 per cent dissatisfied.
Mr Vooght said problems in retaining human capital had undermined some of the cost benefits, as staff had to be frequently hired and trained. “Staff costs have been higher than expected,” he said. More companies coming into the market have driven up costs.
He added: “Another issue is that people have not simplified the processes put into the offshore centre. Survey respondents have not gained the advantage of simplification and consolidation of processes; it has not been used as an opportunity to improve the process itself.”
PwC surveyed 156 senior executives of financial services firms, and found the biggest risks of offshoring concerning organisations to be: deteriorating quality of service, cultural differences between the markets, and finding people of the right quality.
The activities most commonly offshored are IT activities and lower-value customer contact activities, such as scripted sales calls. Higher-value HR activities, knowledge-based activities such as financial research and modelling, and higher-value finance activities such as financial statements and reporting, are the least offshored.
