Financial Services Outsourcing: Alive and Well

Includes: ACN, BR, STT
by: Outsourcing Insider

By Audrey B.

With the global recovery and mounting tension within the outsourcing industry, one sector that has quietly faded into the background is the financial services outsourcing industry. It has taken a backseat amid healthcare outsourcing troubles early this year and the ever-growing information technology outsourcing industry.

The subject of the state of the financial services outsourcing sector is still of particular interest however, and has been closely monitored by different firms such as TPI and Everest. According to data and advisory firm, TPI, in its TPI Index reports for the 1st and 2nd quarter, they have observed a decline in the outsourcing of financial services. Everest, offering its two cents on the topic, indicated on its report which was released on the 4th of August, that outsourcing among the BFSI or the banking, financial services, and insurance sectors have seen the highest volume of activity since 2008, and has actually had a 41% increase in transactions during the second quarter.

Outsourcing provider, Broadridge (NYSE:BR), on the other hand, says that demand does not seem to be lacking. According to the company on the 15th of September, they are expanding their services in order to meet the demand and offer greater flexibility among financial institutions beyond securities processing and would include securities clearance and settlement, corporate actions, tax reporting, mutual funds, as well as accounts payable, treasury, risk, and compliance, similar to other outsourcing providers in the financial services market.

In the meantime, financial services provider State Street Corporation (NYSE:STT), announced on the 28th of September that they would be expanding their partnership with company, Babson Capital. In a relationship that began in 2001, State Street, aside from continuing to provide custody, trustee, and private equity and hedge fund services to Babson, will also provide other global operation services allowing Babson to further focus on core processes.

Meanwhile, outsourcing company Accenture (NYSE:ACN) released its report of their fourth quarter results and FY 2010 results on the 30th of September. Taking the company’s results as an indicator, the company saw substantial business in the financial services sector, even as compared to other segments. According to the results, financial services comprised more than 20% of the company’s net revenue for the year. Notably, only the financial services group among the company’s other operating groups saw an increase in revenue, and this was by 3%. For the company’s fourth quarter results, they saw a 10% increase in revenues, or an increase of almost $100 million dollars in net revenue from financial services.

Another company with substantial business in the financial services sector is Indian outsourcing provider Firstsource Solutions [NSE:FSL], who was able to sign global credit card and loan provider, Barclaycard UK. According to the company’s Executive Vice President, Sanjeev Sinha, the five-year agreement would make Barclaycard UK one of its top five clients based on the financial aspects of the deal. Currently, Firstsource attributes about 24% of its revenue to the BFSI sectors.

While financial services outsourcing still remains behind its more controversial counterparts, healthcare and IT, it certainly seems that 2010 will be the year that it resumes growth after previous years’ decline. As John Buscher, Managing Director and Partner from TPI said:

For political reasons, some offshore work is being kept quiet, but outsourcing is alive and well in the financial services industry.

Disclosure: No positions