Outsourcing is no longer primarily about cutting costs. Thanks to fast-changing, tech-driven markets, it has become a crucial strategy in finance-related industries. Here are some of the key trends in outsourcing that are now happening within the banking, financial institutions, and insurance (BFSI) business sectors.
Strategic Partnerships
Gone are the days of basic vendor-client relationships. Today, financial institutions emphasize partnerships that offer more comprehensive services in alignment with their long-term goals.
For example, imagine a bank outsourcing data analysis to a fintech company. This partnership isn’t about saving costs but rather about using the fintech’s advanced analytics to gain deeper customer insights, which lead to more personalized banking services.
Innovation and Agility
Innovation is central to modern outsourcing. Financial entities expect their partners to introduce new solutions and technological advances.
Insurance companies often outsource claims processing to specialized providers, which streamlines the claims process, reduces turnaround times, and boosts customer satisfaction. These partnerships empower insurers to adopt new tech more quickly and with less risk.
Access to Global Talent
Outsourcing lets the financial sector go beyond borders to tap into a global talent pool. For example, a U.S.-based investment firm can partner with analysts abroad, using the latter’s market insights and analytical skills. This global approach improves the investment firm’s research and brings diverse views that drive innovation.
Focus on Core Competencies
Outsourcing lets financial organizations delegate peripheral tasks. They can then focus on their primary strengths.
Consider an asset management company that outsources IT management to a tech firm. This move lets the company devote more resources to managing portfolios and serving clients, once again improving core services.
Risk Management
Effective risk management is crucial in modern outsourcing, particularly in the financial sector. By delegating certain operations, firms can mitigate associated risks.
For instance, a bank might outsource its cybersecurity to a specialized firm to help reduce the risk of data breaches and improve its overall systems security.
More Examples
Here are more examples of strategic outsourcing partnerships within the banking, financial services, and insurance industries:
- Banking and Technology: A major bank works with a top tech firm to develop a blockchain-based payment system, improving the bank’s global payment network.
- Financial Services and AI Startups. A financial services company and an AI startup are partnering to install sophisticated fraud detection systems, strengthening transaction safeguards.
- Insurance and Health Tech: An insurance company partners with a health tech firm, using big data analytics to create highly personalized health plans.
- Investment Firms and FinTech: A global investment firm collaborates with a FinTech company specializing in algorithmic trading, improving the investment firm’s market performance.
- Wealth Management and Robo-Advisors: A wealth management firm adds robo-advisor technology through a technology partnership and can now offer automated financial planning services.
- Credit Unions and Payment Processors: A network of credit unions works with a payment processor to improve digital payments and boost member satisfaction.
These examples show how partnerships can drive innovation, efficiency, and customer satisfaction and help BFSI companies achieve their goals by using their partners’ strengths rather than trying to do it alone.
Beyond the Bottom Line
Outsourcing in the financial sector has evolved far beyond mere cost-saving measures. Cost efficiency is still important, but in the world of financial institution outsourcing, it now has broader goals. BFSI firms are empowered to excel in a dynamic global marketplace, succeeding through partnerships, innovation, and global talent. They prioritize outsourcing decisions that support their business strategy and expect their outsourcing partners to bring fresh ideas and technological advancements.
Outsourcing provides nimble responses to shifting financial circumstances. The trajectory of outsourcing within the BFSI sectors promises even greater opportunities as technology continues to advance.