Bank cost-cutting driving uptake of financial industry utilities
Top tier banks are increasingly open to the adoption of utility-based shared service models to drive down costs and increase efficiency in back office and compliance functions, according to research conducted by Finextra.
The survey of 102 financial services professionals from 69 financial institutions across 26 countries, conducted by Finextra on behalf of Capco, found that three main areas noted as ripe for growth include: market and reference data management, reconciliation and exception management, and regulatory and compliance-related reporting. As many as 73% of respondents are prepared to use a utility model in the data management space, while 61% see it as a driver for straight-through processing in reconciliation and exception management. Banks polled believe the third party utility approach can help to cut costs, cope with variable volumes and achieve predictable service and quality levels. Scott Claus, head of the Technology Services Domain, Capco, says: “The greatest single insight from the survey is confirmation that, by failing to take full advantage of the utilities model, especially in the compliance context, banks are unnecessarily leaving money on the table. They are paying too much, and still experiencing too much internal disruption and distraction, just to play catch-up.” Roughly two-thirds of those surveyed agreed compliance is a significant driver of utilities uptake, but only about a third have begun actively working towards implementation of such a model. Attitudes are changing, however, with an additional third readily admitting they would now consider a utility model to help them achieve regulatory maturity. “A utilities approach can deliver very significant benefits, both for institutions that have already exhausted traditional sourcing routes and, even more so, for those who have not yet engaged with extensive process rationalisation,” says Farzine Fazel, head of Sourcing Offerings, Capco. “The timescales to reaping cost savings benefits are typically quite fast, around 24 months. And the benefits are greater and more sustained than ‘traditional’ sourcing.”