Ten years ago, the financial services (FS) industry was a very different place to operate in for IT outsourcing vendors. With a conservative, traditionalist approach to hiring external suppliers, outsourcing in any form was placed low down on the list of priorities for FS decision makers. Today, however, it’s a different story entirely, with the financial services sector now commonly perceived as the biggest consumers of IT outsourcing in industry today.
So what’s behind this increased appetite for IT services amongst banks and other financial institutions? Put simply, it’s an increased willingness to see the customer as king. Traditionally, banks in particular, would rarely engage with customers beyond promotional activity for specific products.
In an industry that has never been so competitive and tough, the banking sector has been forced to wake up to the importance of building a relationship with its customers if they are to thrive. They’ve also begun to understand and appreciate the importance of connecting with a new, technologically savvy generation of customer.
Today’s new breed of customer is totally different proposition from anything the financial services industry has witnessed before.
Whereas in years gone by, customers would happily stand in line in branch to cash in a cheque, today’s customer demand instant action on mobile devices, in the cloud and online. They demand the ability to have information at their fingertips, and feel that speaking to their bank how and when they want to do so is a fundamental expectation.
With increased pressure placed on financial services companies to build bridges with Generation Y, banks realised that the infrastructure was not in place to offer mobile solutions and more innovative solutions such as cloud computing need to be considered.
Crucially, they also understood that they did not have the requisite skills in-house to implement this change. As a result, it wasn’t long before the industry discarded its traditional conservatism and turned to external specialists to provide the foundation of technology and infrastructure required to make this dream a reality.
There have, of course, been other considerations that explain the increased number of opportunities for IT services vendors in this sector. For example, there’s no doubt that, even today, cost is still a significant driver for banks, which continue to come under pressure to lower their cost/income ratios from historical highs.
As a result, it’s becoming more and more common to see IT outsourcing specialists brought in to try and extract greater value and efficiency from existing legacy systems that are inflexible and not adaptable to new technology. Equally, an increase in industry regulation which, paradoxically, used to restrict opportunities for IT services vendors, now means that these same suppliers are now ideally placed to provide systems that can process regulatory reports with the level of consistency that has been mandated.
However, although both of these are examples of how IT outsourcing has been used within financial institutions to create value, it’s true to say that the increased willingness to engage with customers across multiple platforms is what will continue to drive this trend. As mobile, digital and cloud technologies continue to evolve, FS companies will continue to react with more offerings designed to enable them to connect even further with customers. For both vendors and end-users, there seems very little doubt that when it comes to IT outsourcing in the financial services industry, the customer is, and will continue to be, king!