PROJECT REPORT ON ROLE OF BPO IN BANKING SECTOR BACHELOR OF COMMERCE BANKING & INSURANCE SEMESTER V SUBMITTED TO, UNIVERSITY

Y OF MUMBAI

In partial fulfillment of the requirements for the award of Degree of bachelor of commerce e banking & insurance

PREPARED BY KANCHAN RAMESH VALECHA ROLL NO. 43 UNDER GUIDANCE OF PROF. JAYA GEMNANI

SMT. CHANDIBAI HIMATHMAL MANSUKHANI

COLLEGE, ULHASNAGAR - 421003

DECLARATION

I KANCHAN VALECHA at SMT. C.H.M. COLLEGE, T.Y. B.COM. Banking & insurance (Semester-v) hereby declare that i have completed the project on ROLE OF BPO IN BANKING SECTOR academic year 2011-2012.

The information submitted is true and original to the test at my knowledge.

SIGNATURE OF THE STUDENT (KANCHAN VALECHA) ROLL NO.43.

SMT. CHANDIBAI HIMATHMAL MANSUKHANI COLLEGE, ULHASNAGAR- 421003

CERTIFICATE

This is to certify that student MISS. KANCHAN VALECHA have submitted the report for the project titled ROLE OF BPO IN BANKING SECTOR in the partial fulfillment of degree of bachelor of commerce banking & insurance semester-v in the academic year 2011-2012 under the guidance of prof. Jaya Gemnani

COURSE H.O.D PROF. KAJAL BHOJWANI.

PRINCIPAL BHAVNA MOTWANI.

PROJECT GUIDE PROF. JAYA GEMNANI. INTERNAL EXAMINER.

EXTERNAL EXAMINER.

ACKNOWLEDGMENT. It is my pleasure to be indebted to various people, who directly or indirectly contributed in the development of this project and who influenced my thinking, behavior and acts during the course of study.

I express my sincere gratitude to the UNIVERSITY OF MUMBAI and my college for giving me this opportunity for taking this project, which has enhanced my knowledge about ROLE OF BPO IN BANKING SECTOR.

It is with my deep gratitude, I would like to thank PROF. JAYA GEMNANI, under the guidance of whom I was able to complete my project successfully. I wish to thank her for all useful discussions and timely suggestions of the related topic and invaluable help during preceding the project.

I also extend my sincere appreciation to all the people who helped me to complete this project by their suggestions and valuable information.

SIGNATURE OF STUDENT KANCHAN VALECHA.

PROJECT OBJECTIVE.
The project report is submitted as the partial fulfillment of B.C.B.I. course under University of Mumbai.

THE MAIN OBJECTIVE OF THE PROJECT: To set up an infrastructural network that can support the BPO Industry in Uganda. To establish partnerships with the private sector to enable the sustainability of the industry once it is set up. Creation of employment.

Increase in government revenue.

Increased investment in infrastructure and skills development.

Increased economic development.

Poverty reduction.

EXECUTIVE SUMMARY
This project is related to role of bpo in banking sector, role of bpo in banking refers to:

Bpo is not just another term for outsourcing, but brings strategic value by creatively examining the processes that underlie the business function and changing the way they are performed BPO vendors claim savings of between 10 and 30 per cent, which can jump to 70 per cent if the outsourced work is off shored. As well as savings on labor costs, offshore outsourcing offers round-the-clock work benefits and hence reduces time-to-market The perceived risks surrounding BPO are generally misguided. BPO has matured as an industry in recent years services are now efficient, robust and secure, with best practices having been finely tuned in many areas of BPO, such as human resources, finance and accounting and Customer Relationship Management (CRM) outsourcing. Human resources BPO (known as HRO) is one of the most mature and largest sectors of the market, driven by the need to reduce costs, the desire to improve service levels and quality of delivery and, increasingly, by the desire for HR to be more global and strategic in nature. Finance and accounting BPO otherwise known as FAO is still an immature market, but is expected to take off in 2006 and 2007. Offshore BPO providers claim to offer cost savings of between 3070 per cent, mainly as a result of labor arbitrage. In addition, offshore BPO can reduce the headcount of organizations as function or process expertise is taken on by

the BPO provider. The BPO market is the single fastest growing area of the IT services sector. Growing 8 per cent annually, spending on BPO services is expected to grow from $112.1bn in 2005 to $144bn in 2008, an increase of 40 per cent. By 2008, BPO spend will account for 22 per cent of all IT services revenues. The range of CRM BPO services available is continually expanding in addition to Customer-care and transaction services, companies now can contract for more knowledge-based tasks, such as customer data mining and analysis. Organizations are using BPO in customer relationship management to accomplish a wide range of objectives at both the process and the enterprise levels. There has been a shift in the demand for CRM services in the past two or three years partly because organizations are overwhelmed by customer data from their CRM systems and do not have useful ways to organize and apply the data. Bpo Providers are plugging some of those gaps. Indian providers are some of the most significant players in the customer care BPO market and have taken advantage of the move of the call center offshore and lower labor costs.

The market for CRM BPO is predicted to grow from $41.3bn in 2004 to $56.7bn in 2008, at a CAGR of 8 per cent. The size of contracts in the CRM BPO sector is generally much smaller than those seen in the general BPO market, with a wide range of vertical industries represented. Cost savings from CRM BPO can be significant, but for real success improved productivity is needed. At the same time, while cost savings can be extensive, they are becoming more difficult to achieve due to the labor market in developing countries becoming more competitive and leading

to higher salaries. Those purchasing BPO services often guarantee savings of 10 to 20 per cent (onshore) and 30 to 70 per cent (offshore). Human resources outsourcing is one of the largest and most mature sectors of the BPO market. Nearly all HRO deals involve transitioning to a self-service model whereby automation reduces headcount and many employee services are delivered through an intranet. Companies have three primary drivers in making an HRO decision: to reduce the ongoing cost of HR, to free up time and resources for the company to focus on its core business objectives and to improve HR service to its end users. In recent years, there has been a deluge of entrants to the market. Accenture, ACS, Convergys, EDS and IBM have all won major deals in the last few years, and a number of the HR specialists have broadened out their services to offer end-to-end HRO. Hewitt Associates is the HRO market leader by some way.

Current pricing levels of HRO contracts are estimated at around $600 per person per year (pppy), down from $1,100 pppy in 2000 2002 Recruitment process outsourcing (RPO) has gained a lot of publicity over the last year. In recent quarters, many of the major HRO players have highlighted recruitment (as well as training) as an area of high demand in which they need to increase their skill sets. The HRO market is predicted to grow from just under $23bn in 2004 to over $30bn in 2008, at a CAGR of 7 per cent

RESEARCH METHODOLOGY
Methodology shows how and through which source the data or information is collected.

PRIMARY DATA:

In this project primary data has been collected by visiting nationalized bank. I personally had visited the bank and collected the information of their services regarding role of bpo in banking sector.

SECONDARY DATA:

I have also collected secondary data through the help of websites, books & newspapers.

Index
Sr. no. 1. Content of topic Introduction to banks. Meaning. Definition. 2. 3. History of banks. What is bpo? What is banking bpo? Why outsource? Banking bpo overview. Comparative analysis. Kinds of call-centres. 4. 5. Needs & importance of bpo in banking. Bpo infrastructure. What skills are required to work in banking bpo? Potential in the north American banking sector. The providers. Who is outsourcing? What process is being outsourced? The utility model for payments bpo. Banks as providers of payment outsourcing. 6. Challenges faced in banking bpo. Major opportunities for bpo outlined. 7. 8. 9. 10. Case study. Conclusion. Annexure. Bibliography. Page no.

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CHAPTER-1

11

1.1INTRODUCTION TO BANKS:
In the past i.e., before the introduction of money there was a barter system. When the Money came into vogue its use was limited to buying and selling activities

only. Growth of economy consequent upon development in the fields like

communication, science, transportation has necessitated the increase in the usage of money. With the growth of money the use of credit instruments also increased. The origin of Banks can be traced the money lenders who used to lend money for business purpose and also used to accept the deposits from friends, relatives and others in a limited sense. The growth in the fields like trade, commerce, industry, science and technology has accelerated the growth of banking sector. Today the Banking industry has become a part and parcel of the Economic system and we today cannot imagine economy or growth in the economy without Banks.

A bank is a profit seeking Business firm dealing in money and credit. It is a financial institution dealing in the money in the sense, that it accepts deposits of money from the public to keep them in its custody for safety. So, also, it also deals in credit, i.e. it creates credit by making advances out of funds received as deposits to needy people. It, thus, functions as mobilize of savings in the economy. Commercial banks are the main important sources of institutional credit in the money market. A bank is therefore, like a reservoir into which flow the savings, the idle surplus money of households, and from which loans are given on interest to businessmen and others who need them for investment or

12

productive uses. A bank is an important institution of the money market as it gives short-term loans to its customers. A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:
A central bank circulates money on behalf of a government and

acts as its monetary authority by implementing monetary policy, which regulates the money supply.
A commercial bank accepts deposits and pools those funds to

provide credit,

either

directly the capital

blending, markets.

or

indirectly the

by investing through

Within

global financial markets, these institutions connect market participants with capital deficits (borrowers) to market

participants with capital surpluses (investors and lenders) by transferring funds from those parties who have surplus funds to invest (financial assets) to those parties who borrow funds to invest in real assets.
A savings bank (known

as a "building society" in the United Kingdom) is

similar to a savings and loan association (S&L). They can either be stockholder owned or mutually owned, in which case they are permitted to only borrow from members of the financial cooperative. The

13

asset structure of savings banks and savings and loan associations is similar, with residential mortgage loans providing the principal assets of the institution's portfolio. Because of the important role depository institutions play in the financial system, the banking industry is generally regulated with government restrictions on financial activities by banks varied over time and by location. Current global bank capital requirements are referred to as Basel II. In some countries, such as Germany, banks have historically owned major stakes in industrial companies, while in other countries, such as the United States, banks have traditionally been prohibited from owning non-financial companies. In Japan, banks are usually the nexus of a cross-share holding entity known as the "keiretsu". In Iceland, banks followed international standards of regulation prior to the recent global financial crisis that began in 2007. The oldest bank still in existence is Monte dei Paschi di Siena, headquartered in Siena, Italy, which has been operating continuously since 1472.[1] A Bank's main source of income is interest. A bank pays out at a lower interest rate on deposits and receives a higher interest rate on loans. The difference between these rates represents the bank's net income. The name bank derives from the Italian word banco it means desk/bench.A bank is a financial intermediary that accepts deposits and channels those deposits into lending activities. Development of Banking is evolutionary in nature. Bank performs a multitude of functions and services. In brief, Banking is what bank does. The Oxford Dictionary defines a bank as an establishment for the custody of money which it pays out on a customers order. The origin of modern banks is traced to three important sources. They are, The

14

goldsmiths, The moneylenders and, The merchant bankers. Bank may be defined as a financial institution which is engaged in the business of keeping money for savings and checking accounts or for exchange or for issuing loans and credit etc. A set of services intended for private customers and characterized by a higher quality than the services offered to retail customers. The importance of banking sector is immense in the progress and prosperity of any State or country. The economic progress and prosperity comes from the well-rounded development and an impeccable banking management. Banks in general, governmental and private, have eased our financial transactions, security, and facilitated the funding for establishing a business or industry. Now a days banking is not in its traditional way , with the advancement of technology its focusing on more comfort of customer providing services such as: Online banking. Investment banking. Electronic banking. Internet banking. Mobile banking.

E-banking.

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1.2 MEANING OF BANK:

Actually meaning of bank is not specifies in any regulation or act. In India, different people have different type of meaning for bank. Normal salary earner knows means of bank that it is a saving institution, for current account holder or

businessman knows bank as a financial institutions and many other. Bank is not for profit making. It creates saving activity in salary. A bank is the place where they accept deposits from people and lend loans and charge interest on them and performs agency functions, and provide certain facilities like providing lockers facilities and perform certain on the basis of its motive.

The word Bank associated with the Institution dealing in money raised from the public. In other words Banks is an institution which borrows money from public in the form of deposits and creates credit by lending it to the needy. Bank refers to an institution that deals in Money. An establishment authorized by a government to accept an

deposits, pay interest, intermediary in transactions,

clear checks, make loans, act as and provide other

financial to

its customers. This Institution accepts deposits from the public and advances loans to those who are in need. These days banks perform various other functions such as credit creation, agency work and general services besides dealing in money. Bank is an intermediary which handles other peoples money both for their advantage and to its own profit. Today the word bank is used as a comprehensive term for a

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number of institutions carrying on certain kinds of financial business. In practice, the word 'Bank' means which borrows money from one class of people and again lends money to another class of people for interest or profit. Banks offer many different channels to access their banking and other services:
A branch is a retail location Call center Mail: most banks accept check deposits via mail and use mail to

communicate to their customers, e.g. by sending out statements

Mobile banking is a method of using one's mobile phone to conduct

banking transactions
Online banking is a term used for performing transactions, payments

etc. over the Internet

Relationship Managers, mostly for private banking or business

banking, often visiting customers at their homes or businesses

Telephone banking is a service which allows its customers to

perform transactions over the telephone without speaking to a human

Video banking is a term used for performing banking transactions or

professional banking consultations via a remote video and audio connection. Video banking can be performed via purpose built banking transaction machines or via a videoconference enabled bank branch. A banking company is one which transacts the business of banking which means the accepting for the purpose of lending all investments, of deposits of money from the public, repayable on demand or otherwise and withdraw able by cheque, draft or otherwise.

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There are two essential functions that a financial institution must perform to become a bank.

THESE ARE;
a) Accepting of the chasuble deposit form the public b) Lending
.

MAIN FEATURES:
It accepts deposits from the public. These deposits can be withdrawn by cheque and are repayable on demand. A commercial bank uses the deposited money for lending and for investment in

securities. It is a commercial institution, whose aim is to earn profit. It is a unique financial institution that creates demand. Deposits which serves as the medium of exchange. Money created by commercial banks is known as deposit Money.

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DEFINITIONS: Section 5(b) defines banking as accepting for the purpose of lending or investment of deposits of money from the public, repayable on demand or otherwise and withdraw able by cheque, draft, and order or otherwise. Crowther defines bank as, one that collects money from those who have it to spare or who are saving it out of their income and lends the money so collected to those who require it. According to World Bank Encyclopedia, Bank is a business establishment that safeguards peoples money and uses it to make loans and investments.

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CHAPTER -2

20

2.1 HISTORTY OF BANKS.

Without a sound and effective banking system in India it cannot have a healthy economy. The banking system of India should not only be hassle free but it should be able to meet new challenges posed by the technology and any other external and internal factors. For the past three decades India's banking system has several outstanding achievements to its credit. The most striking is its extensive reach. It is no longer confined to only metropolitans or cosmopolitans in India. In fact, Indian banking system has reached even to the remote corners of the country. This is one of the main reason of India's growth process.

Banck German

Banco Italian

Bacus/ Banque

Bank- English

Bank- English
The government's regular policy for Indian bank since 1969 has paid rich dividends with the nationalization of 14 major private banks of India. Not long ago, an account holder had to wait for hours at the bank counters for getting a draft or for withdrawing his own money. Today,

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he has a choice. Gone are days when the most efficient bank transferred money from one branch to other in two days. Now it is simple as instant messaging or dial a pizza. Money have become the order of the day. The first bank in India, though conservative, was established in 1786. From 1786 till today, the journey of Indian Banking System can be segregated into three distinct phases. They are as mentioned below:

Early phase from 1786 to 1969 of Indian Banks Nationalization of Indian Banks and up to 1991 prior to Indian banking sector Reforms.

New phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991.

The General Bank of India was set up in the year 1786. Next came Bank of Hindustan and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency Banks. These three banks were amalgamated in 1920 and Imperial Bank of India was established which started as private shareholders banks, mostly Europeans shareholders. In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and 1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up. Reserve Bank of India came in 1935. During the first phase the growth was very slow and banks also experienced periodic failures between 1913 and 1948. There were approximately 1100 banks, mostly small. To streamline the functioning

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and activities of commercial banks, the Government of India came up with The Banking Companies Act, 1949 which was later changed to Banking Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of India was vested with extensive powers for the supervision of banking in India as the Central Banking Authority.

During those days public has lesser confidence in the banks. As an aftermath deposit mobilization was slow. Abreast of it the savings bank facility provided by the Postal department was comparatively safer. Moreover, funds were largely given to traders. Government took major steps in this Indian Banking Sector Reform after independence. In 1955, it nationalized Imperial Bank of India with extensive banking facilities on a large scale specially in rural and semiurban areas. It formed State Bank of India to act as the principal agent of RBI and to handle banking transactions of the Union and State Governments all over the country. Seven banks forming subsidiary of State Bank of India was nationalized in 1960 on 19th July, 1969, major process of nationalization was carried out. It was the effort of the then Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country was nationalized. Second phase of nationalization Indian Banking Sector Reform was carried out in 1980 with seven more banks. This step brought 80% of the banking segment in India under Government ownership. The following are the steps taken by the Government of India to Regulate Banking Institutions in the Country:

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1949: Enactment of Banking Regulation Act. 1955: Nationalization of State Bank of India. 1959: Nationalization of SBI subsidiaries. 1961: Insurance cover extended to deposits. 1969: Nationalization of 14 major banks. 1971: Creation of credit guarantee corporation. 1975: Creation of regional rural banks. 1980: Nationalization of seven banks with deposits over 200 crore.

After the nationalization of banks, the branches of the public sector bank India rose to approximately 800% in deposits and advances took a huge jump by 11,000%. Banking in the sunshine of Government ownership gave the public implicit faith and immense confidence about the sustainability of these institutions. This phase has introduced many more products and facilities in the banking sector in its reforms measure. In 1991, under the chairmanship of M

Narasimham, a committee was set up by his name which worked for the liberalization of banking practices. The country is flooded with foreign banks and their ATM stations. Efforts are being put to give a satisfactory service to customers. Phone banking and net banking is introduced. The entire system became more convenient and swift. Time is given more importance than money.

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The financial system of India has shown a great deal of resilience. It is sheltered from any crisis triggered by any external macroeconomics shock as other East Asian Countries suffered. This is all due to a flexible exchange rate regime, the foreign reserves are high, the capital account is not yet fully convertible, and banks and their customers have limited foreign exchange exposure. Though there is no unanimous opinion regarding the origin of the word Bank, for study purpose we can trace the word Bank to the Italian word Banco, Latin word bancusor French word Banquet. In fact the Jews in Lombardy used to transact their banking business by sitting on benches. Since the Banking activities led to profits there is lot of growth of banking business and in the modern economy it has acquired the status of Industry viz., Banking Industry. All the nationalized commercial banks are now considered as public sector banks. They are owned, managed and controlled by the

public authority. Profits earned by the public sector banks will be a source of income for Govt of India. In other words the Banks contribute to the Exchequer of the Government. The profits thus contributed by the banks will be used to promote social welfare and this is how the word banking has transformed as social banking in the Indian context. The first bank in India, though traditional, was established in 1786. From then till today the Indian Banking System can be segregated into three different periods as under.

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CHAPTER-3

26

3.1What is BPO?
BPO as expanded sounds as Business Process Outsourcing and can be aptly defined as the act of utilizing the services of a third party by a company in order to perform its back office operations that might be customer payroll help

administration,

desks/ call centers, tele- marketing, accounting, billing; the list is endless. Business Process Outsourcing includes the following areas and a lot more: Back office operations. Customer Relationship Management. Call Centers and telemarketing. Tele-servicing and product support. Finance / Accounting/billing. Human Resources. Medical transcription. Back Office Operations. Insurance Claims Processing.

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3.2 WHAT IS BANKING BPO?

Banking business process outsourcing (BPO) is a specialized field of BPO specifically for banks and lending institutions. It allows such companies to outsource many of their regular operations. Some of the jobs outsourced by banking BPO are account processing, customer acquisition, credit card and loan tracking, and fraud mitigation. This is done so core employees can work on high-priority matters, and so the bank can get the work done while saving money. Many backoffice banking BPO businesses can add extra benefits, such as complex data mining and lead generation, to make outsourcing business more lucrative for the bank. When a bank grows, it needs more employees to handle the extra work of handling loans and processing deposits. Hiring new employees will ease the extra workload, but outsourcing the work is much more cost-effective. By using banking BPO, banks are able to take daily functions and pass them off to a BPO business. There are several reasons, aside from cost, why a bank would want to use outsourcing. This frees up employees so they can work on getting new customers, tracking important data, focusing on collecting credit card debt and helping customers. Banks will not have to worry about building new centers to house employees, because the BPO business will take care of that arrangement and the bank can focus on building the bank itself, not buildings.

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3.3WHY OUTSOURCE?
Outsourcing is a ground breaking trend happening all over the world. Offshore locations continuously receive more and more outsourcing opportunities. A lot of services can be found around the world that is being outsourced by large and

medium scale companies. Pay roll, billing and collections, customer service and tech support are just some of the types of jobs being outsourced. More nad more companies get involved in outsourcing because most outsourcing jobs can be found in developing nations? A company can have a more stabilized monthly overhead cost due to the reduction of investment in hardware and software, manpower, and even customer support. There are a lot of reasons that arise as to why you have to outsource a specific area of your business. Businesses gain more economic advantage due to outsourcing. Outsourcing services enables many companies to save million. India and the Philippines are now home to several call centers that specialize on customer care, technical support, billing and credit cards. Developed countries have higher wages for their employees compared to employees who are in the developing nations. Costs such as electricity and rent are much lower in developing countries that you wont have to worry about spending too much on these. The thing that attracts many companies towards outsourcing is the lower operational costs due to lower wages, more affordable benefits and the more affordable rent.

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Many companies outsource in order to achieve a higher quality of service due to a specific focus of the supplier. Having to deal with only one type of service for the company and not having to multi task many different responsibilities all at once makes the employee more efficient therefore making the quality of service better for the customers. Employees can be experts in specific field in no time due trainings done by batches. This makes the outsourced service more accessible to customers by providing them with more employees that can deal with whatever they need done. One factor that can affect the encumber the quick response that a company can give to market demands is its complicated internal administration that most large companies tend to have. Services being outsourced to third party companies give you better control of your overall business. Focus on the core responsibilities and tasks are one of the best benefits that you can get from outsourcing some services that you have. Having the ability to concentrate on core functions can increase to flexibility of the company in order to meet changing business conditions and introduce possibilities of expansion. Outsourcing offers a seemingly limitless potential that all a company need to realize is what type of service it needs to outsource and carefully select the right offshore location to operate it. India and the Philippines are the two leading providers of offshore services to the United States of America and Europe. These two countries excel in different services and it is best to look into these two countries and keep in mind which of you specific service you want outsourced to which country.

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3.4 BANKING BPO OVERVIEW.

BPO stands for There Business is a Process common

Outsourcing.

misconception that B.P.O. and call centers, mean one and the same. A call centre is a remote location in India wherein calls made by customers abroad are routed to India by means of telecommunication equipments. This

call is answered by call centre agents who are trained to speak in an accent which the customer can understand. This accent is commonly referred to as Neutral Accent Coming to the term Business Process Outsourcing; let us understand the term in a simple way by breaking it up. There is a business. Each business has got a process. A process means a specific way or method of doing a job. Those jobs which are routine in nature, are given to countries outside India, to save money by way of salaries. It is said that the Indian BPO Industry has come of age. This is very true if we analyze both the past and present scenarios. Defying all the permutations and combinations, the Indian outsourcing industry has registered a massive growth over the years. It has withstood the pressure and negative campaigns by the media and others to emerge as the hot destination for young job seekers. It is very necessary to judge the mood of the people working for BPO companies as success of an organization completely depends on the satisfaction level of their employees. If they are satisfied with their job and work with a peaceful mind, then it will enhance the quality of their

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work and their company will witness better productivity results. These results are most essential to convince the foreign investors who outsource their businesses to India. It is believed that if an organization can satisfy their own employees, they will definitely be able to meet the expectations of their clients. Business process outsourcing (BPO) is the act of giving a third-party the responsibility of running what would otherwise be an internal system or service. For instance, an insurance company might outsource their claims processing program or a bank might outsource their loan processing system. Other common examples of BPO are call centers and payroll outsourcing. Revenue of the Indian BPO industry increased from USD2.1 billion in 2002 to USD6.02 billion in 2005, which includes about 20% from banking, 70% of this is voice-based services and the balance 30% from non-voice services. The contribution of banking is expected to rise to 30 % in the next 3 years, with regulatory, cost and competitive pressures forcing banks to outsource a greater part of their operations. Likewise, share of non voice is expected to go up to 35% in the same period, as it provides more business benefit. As the voice services become commoditized, the non voice services provide better profit margins to the service providers.

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BUSSINESS PROCESSING:

This report is focused on non-voice offshore banking BPO services industry in India. It covers the banking industry primarily in the US, Europe, the UK and Australiathe target markets of Indian banking BPO service providers. It includes the structure of the industry, major business processes, processes that are mostly outsourced, government policies, and profiles of the leading banks in the large as well as medium sized segments in the above geographies. This report will help BPO service providers to sharpen their focus and identify new markets and crystallize strategic plans. Banks, which are already outsourcing or plan to, will find the report useful to know the outsourcing trends in the banking industry. Others such as government departments, analysts, students, consultants and entrepreneurs will gain a comprehensive understanding of the fast-growing industry.

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 THE PERCEIVED IMPERATIVE:

Attrition in Indian BPOs has increased to 55 per cent in the last four months mainly due to erratic working hours and perceived lack of longterm career growth in the sector, an industry chamber study has said. During December 2010-April 2011, the attrition in the business process outsourcing (BPOs) has increased to 55 per cent from about 40 per cent in the same period

previous year, Assoc ham study said. "Although the BPO sector has been popular since the beginning as it has opened up plenty of job opportunities, the high attrition has plagued the sector now," Assoc ham Secretary General D S Rawat.

NO SINGLE PATH TO BPO:

While multi-tower outsourcing engagements in which a range of functions such as F&A, HR, IT and contact center are bundled into one contract awarded to a single provider may seem an

effective way to quickly reduce costs due to economies of scale and presumed truncated

solutioning phases, the reality is often quite the opposite. Think back to post-September 11 when cost reduction, just like today, was an outsourcing buyers primary driver. Then consider the multi-tower deals struck during this timeframe large utility and insurance company buyers top the list all of which resulted in missed expectations.

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History has proven that multi-tower engagements often miss the mark. Why? First, no single provider excels in all towers. Second, such massive outsourcing agreements are exceptionally complex, and the complexity is exponentially exacerbated by the number of included functions. Third, the needs and requirements of all client stakeholders related to each tower must be accounted for during the pursuit phase, as well as the subsequent solutioning, transition and steady-state delivery phases. Fourth, larger governance teams are required, and the governance function itself becomes highly unwieldy. And finally, industry-specific knowledge is necessary to achieve expected goals, and no provider has expertise in all domains. Although todays buyers, similar to those in the early 2000s, are trying to minimize their up-front investment and build as much volume flexibility as possible into deals, all of these issues can far too easily, and more often than not do, lead to client and end-customer dissatisfaction. In some cases, multi-tower deals take five years or more just to break even, and buyers forget to be wary of providers that are willing to buy deals. While the pricing may be attractive today, the provider that is making low to no margin will cut corners after the honeymoon period is over. The providers senior management will have long forgotten why such a low price was agreed, and require the account team to add on services or look to other more fruitful accounts to make up the difference. Accordingly, separately inked one- or two-tower BPO deals are most appropriate if the company is on a fast pace to cost reduction. Simplifying the process delivers a better-managed outcome. There are, of course, other decisions and determinations outsourcing buyers should make before embarking on a single-tower deal to help ensure banking

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objectives and both early and steady-state cost reduction targets are achieved.

RETHINKING THE BANKING VALUE CHAIN: THE OUTSOURCE:

Outsourcing has transformed global business. Over the past few decades companies have contracted out everything from mopping the floors to spotting the flaws in their internet security. TPI, a company that specializes in the sector, estimates that $100 billion-worth of new contracts are signed every year. Oxford Economics reckons that in Britain, one of the world's most mature economies, 10% of workers toil away in "outsourced" jobs and companies spend $200 billion a year on outsourcing. Even war is being outsourced: America employs more contract workers in Afghanistan than regular troops. Can the outsourcing boom go on indefinitely? And is the practice as useful as its advocates claim, or is the popular suspicion that it leads to cut corners and dismal service correct? There are signs that outsourcing often goes wrong, and that companies are rethinking

their approach to it. These are not new questions. These issues are central to the fields of international and strategy (see also Williamson and Transaction Cost

36

Economics). In fact, outsourcing has been one of the hottest topics in both literatures for at least the last 25 years. But the topic is certainly worth revisiting every once in awhile. And although the economics of outsourcing can be compelling, it is also important for managers to keep in mind that outsourcing is not without strategic consequences.

KEY DRIVERS: Alongside your choices in communication technology, the decisions you make in terms of how to deliver communication services play a key role in the success of your enterprise communication environment. And its not just about Out-sourcing. At Siemens Enterprise Communications, we prefer to think in terms of Smart-sourcing choosing a Service Delivery and support model that allows you to

37

achieve the optimum mix of in-sourced and out-sourced delivery for your business. Smart-sourcing is a key part of Open Scale Managed Services. We provide flexibility in a shared responsibility approach that allows you to complement your IT alignment and business strategies. There are a number of instances where it makes sense for you to continue to provide some service elements for which you already have the cost controls and skills in place. But equally there are out-tasking opportunities where, due to cost, skills or inflexibility, it makes sense to work with us.

Our Open Scale Managed services can play a vital role in helping achieve a lower cost of ownership and predictable monthly costs. And they can also help take the pressure off managing difficult transitions and accessing the skilled resources required in a complex

communications world. Fundamentally, our service approach is about flexibility and choice. From full outsource (walk in take-over of existing communications, people, process, technology and delivery) to selective out-tasking of the elements that make the most business sense, we have the right service mix. In 1995, research by United Nations Environment Program and Salomon Inc. of New York found that 70% of respondents in a group of 90 commercial and investment banks from four different continents believed environmental issues had a material impact on their business. In particular bankers are cautious about the financial implications related to the following:

38

 LENDER'S LIABILITY: Lender's liability is associated with the financial risks banks face when granting or extending loans. Banks and other lenders rely on financial statements of companies when deciding whether to grant or extend credit. They need to be fully and accurately informed about decommissioning liabilities in order to avoid unacceptably high financial risks. Under current reporting requirements, potential environmental liabilities can easily remain undiscovered unless a lender develops its own procedure to assess the environmental risks. Therefore, some banks can end up spending the money on clean-ups of sites contaminated through their clients' activities. BORROWER'S OBLIGATIONS: The borrower's obligation to clean up contaminated sites might impair his or her ability to repay a loan. The contamination might also reduce the value of the collateral. Prudent lenders are following the environmental trends and changes in regulatory framework to assess the possible implications of these changes on their clients' overall financial position. GROWING ENVIRONMENTAL CONCERNS: The last few decades have been marked by numerous changes in the regulatory framework relating to environmental protection. Recent scientific discoveries of environmental and health risks associated with pollution have contributed to an increase in public demand for environmental quality. These growing concerns have contributed to a major shift in public perception of corporate roles in society. Influenced ABILITY TO MEET FINANCIAL

39

by these trends, some banks have begun looking closely into their own environmental and social performance. In many cases this effort has resulted in adoption of energy and resource efficiency programs within the institutions themselves. BUSINESS OPPORTUNITIES: The traditional approach of the banking sector to sustainability is often regarded as reactive and defensive. However, several

international banks have recently adopted strategies opportunities innovative, to proactive the with

capture associated

sustainability. They have developed new products such as ethical funds or loans specifically designed for environmental businesses to capture new market opportunities associated with sustainability.

3.5.COMPARATIVE ANALYSIS:
Outsourcing is the best imperative for MNCs. According to Forrester Research Study, nearly half of all companies surveyed stated that they used off-shore providers to avoid high labor costs in US and Europe. The trend is not just in the area of outsourcing software development work but business-specific back-office process. India is the first choice of all multinationals of the world when it comes to off-shore business processing. But a now-a-days multi-country strategy to ensure business continuity makes some bad news to Indian BPO. Top US companies often begin their off-shoring decision-making

40

by short listing nations with specific language capabilities before choosing the off-shore destination. THE THREE FACTORS ARE TO BE CONSIDERED IN CHOOSING A COUNTRY AS THE OFF-SHORING DESTINATION ENVIRONMENT FACTOR: It includes economic and political risk, country infrastructure, culture compatibility, geographic proximity and security of intellectual property. Canada, Australia, Ireland have good English speaking people, better infrastructure, lower economic & political risk but they are poor in terms of labor cost. So the key constraints are language barriers, employee retention problems, poor IT and telecom infrastructure, political instability and corruption made India as a second level country in environmental factors. THE COST FACTOR: This includes cost of labor, management and infrastructure and tax and treasury impact. At present India is the top position in two factors costs and people. On the cost front, India scores the maximum points (3.4 out of 10) compared to China, Russia, Hungary, brazil and Czech Republics 3.1 each, Mexicos 3, Philippiness 2.9, Australias 2, Irelands 1.8 and Canadas 1.5. Although India is expected to retain its leadership position for the foreseeable future, its strong ratings may be tempered gradually rising labour costs and geographical concerns. In the long run, India is likely to become the location of choice for high value analytical tasks, while more generic commodity processes will eventually more to lower costs environment such as China says the AT Kearney report.

41

FINANCIAL OVERVIEW (COST FACTOR): PARTICULARS

INITIAL FIXED EXPENSES (EXPETED): INFRASTRUCTURE. FURNITURE AND FIXTURES. COMPUTER SYSTEM AND SET UP. LOGISTICS. MISSCELANEOUS EXPENSES.

AMOUNT

VARIABLE EXPENSES: SALARIES. RENT. EXTRA EXPENSES.

TOTAL.
THE PEOPLE FACTOR: It includes BPO & IT process experience, size of labour market, education level of workforce, language barriers, and employee retention. In this factor India placed in the first position scoring 2.3, while Canada (2.1), Ireland (1.5), Australia (1.4), Brazil (1.2), Mexico (1.3) are far beyond from India. China now going very fast in this area because china has large low cost workforce pool, language skills, overall support of MNCs Asia business operations etc.

42

COMPARATIVE ANALYSIS ON THE BASIS OF PEOPLE FACTOR

COUNT RY LABOR QUALI TY COST INDIA CHINA JAPAN HONG KONG LAB OR LABOR AVAILABIL ITY LABOR TURNOV ER AVERA GE GRADE

4.29 6.12 2.92 3.32

2.14 3.40 6.06 6.32

2.57 6.12 5.33 5.42

3.71 4.83 2.08 5.77

2.80 4.22 4.40 4.82

3.6. Kinds of call centers:

Inbound Call Centre. Outbound Call Centre. Web Enabled Call Centre. CRM Call Centre. Telemarketing Call Centre. Phone Call Centre

1.INBOUND CALL-CENTRES:
An Inbound Centre is one that handles calls coming in from outside, most often through toll free numbers. These calls are primarily service and support calls, and inbound sales. For Example: Customer Service. Toll Free Response. Help Desk. Seminar Registration.

43

 Inquiry Handling. Technical Support. Representatives in inbound call centers are called CSRs (Customer Service Representatives).

2.OUT-BOUND CALL CENTERS:

In Outbound Call Centers the calls are initiated by the representatives, mostly with the aim to sell a product or service to a customer.

Outbound Call Centre Services are:

Direct Mail Follow-up. Production Promotion. Debt Collection. Appointment Scheduling. Up Sell/ Cross Sell Campaigns.

3.WEB ENABLED CALL CENTRE:

Skydel InfoTech web-enabled Call Center allows our Agents to deliver superior service to your callers. Empowered with your in-house resources, applications and information, Skydel InfoTech web-enabled Call Center operators can assist your callers quickly and accurately, improving the caller experience and your business. Web Enabled Call Center services are access on the net. Some companies not allow to connect for live chat for solving customer's problem but Web Enabled

44

Call Center service provide live chat with customer and solve the basic questions. WEB-ENABLED CUSTOMER SERVICE AGENTS MAKE A DIFFERENCE: INCREASED

RESOURCES: Web-

enabled Operators can obtain information via the Internet, whereas traditional operators only have the resources available within the Call Center. INCREASED

PRODUCTIVITY: Skydel InfoTech Operators can access a

client's data to give information to the caller or even update the caller's information in the client's database or application. INCREASED EFFICIENCY: Web-enabled Operators can start a trouble ticket and immediately give the caller the ticket number by accessing the client's help desk program on their Intranet.

4.CRM CALL CENTRE:

CRM (Customer Relationship Management ) being the customer centred strategy of the decade and finding its roots in customer satisfaction and customer focus, has started to play a very prominent role in the call center sector. How has it achieved this? Call centers are finding that implementing this strategy brings them vast benefits. For example the high potential that call center CRM software has in collecting vital customer data and storing it. This data is entirely

45

essential to the call center and is utilized in its day to day activities. It helps them possess a clearer view of the customer being handled and enables them to give the right answers to customer queries, problems etc. Knowing the customer, his preferences, his purchase history etc all contribute significantly to the better handling of the customer

5. TELEMARKETING CALL CENTRE:

A telemarketing call center is an advanced call center that is able to manage inbound and outbound telemarketing campaigns for clients. The client has two options, they can provide their own prospect list or use the call centers prospect call list. Charges for this service are normally based on a nominal setup charge combined with a per minute charge for operator time. Clients can set a dollar cap to not exceed in minutes spent on the phone per day (i.e. the customer tells the call center how much they wish to spend on their campaign per day/week/month and we organize their campaign accordingly).

46

6. PHONE CALL CENTRE:

Our call center phone systems are capable of managing type of

virtually

any

outbound phone campaigns including voice broadcasting hundreds to thousands of calls at once. This technology can be used for both

commercial applications and for community notification programs. Commercial messages can be sent to call recipients in bulk. Likewise alerts and warnings can be delivered to community members in the event of an emergency. These phone dialers also can perform predictive dialing as well as other types of auto dialing programs. If our phone system detects a no answer condition or busy signal, calls can be rescheduled for a later time. Complete online reports are available to view the effectiveness of each of these calling campaigns.

47

CHAPTER -4

48

4.1 NEEDS OF BPO IN BANKING:

companies in India are providing many BPO banking services. Their main focus is on speed of implementation and process advancement with quality control. Banking BPO in India is providing various services like loan mortgage, consumer finance and financial market and credit cards. Banking is no more than just a place for financial transaction but involves many vertical functions of Banking BPO in India. The major solution Banking BPO in India provides is as follows: Recording. Client Verification. Paying off Loans. Collections. Telemarketing service. Processing addresses. Responding to client via email or chat

49

The major challenges faced by Banking BPO in India companies are as follows: Apparent lack of management. Service agreement disagreement. Efficient management. Risk Management. Privacy ownership of client. Incorporation of outsourced processes with business processes. Effectual Control. Mortgage Lending. Favorable economic climate and number of other factors such as, growing urbanization, increasing consumerism, rise in the standard of living, increase in financial services for people living in rural areas, etc has increased the demand for wide range of financial products that has led to mutually beneficial growth to the banking sector and economic growth process. This was coincided by technology development in the banking operations. Today most of the Indian cities have networked banking facility as well as Internet banking facility. Some of the major players in the banking sector are State Bank of India, HDFC Bank, Citibank, ICICI Bank, Punjab National Bank, etc. In the Insurance sector also, rapid expansion has created about 5 lakh job opportunities approximately in the past five years. These openings are mainly in the field of insurance advisors or marketing agents. The eligibility criteria for these jobs is graduation with some experience in marketing or become insurance agents after completing school but this needs some relevant training.

50

Earlier there were no training programs as such for insurance agents but on-the-job training only that was given once the new agent was appointed. But now the scenario has been changed, with the coming up of big players like ICICI Life Insurance, ICICI Lombard, HDFC Life Insurance, Tata AIG General Insurance, etc in this sector, people who've had some formal training are preferred while recruitment because it can be helpful in the insurance field. However, only the insurance degree in this field does not guarantee success. To be successful an agent must have strong interpersonal, networking, and communication skills. Number of opportunities in Banking and Insurance sector has increased than ever before. With this rapid expansion and coming up of major players like ICICI, HDFC, UTI, Bajaj Allianz, etc in the sector, the need of human resource development has increased.

4.2 IMPORTANCE OF SECTOR:

Previously, the Indian market was ruled by the government

BPO IN BANKING

enterprises but the scene in Indian market changed as soon as the markets were opened for

investments. This saw the rise of the Indian private which need sector

companies, customer's

prioritized and speedy

service. This further fueled competition amongst same industry players and even in government organizations. The post 1990 era witnessed total investment in favor of Indian private sector. The investment

51

quantum grew from 56% in the first half of 1990 to 71 % in the second half of 1990. This trend of investment continued for over a considerable period of time. These investments were especially made in sector like financial services, transport and social services. The late 1990s and the period thereafter witnessed investments in sector like manufacturing, infrastructure, agriculture products and most importantly in Information technology and telecommunication. The present trend shows a marked increase in investment in areas covering pharmaceutical, biotechnology, semiconductor, development. The importance of private sector in Indian economy has been very commendable in generating employment and thus eliminating poverty FURTHER, IT ALSO AFFECTED THE FOLLOWING:

contract

research

and

product

research

and

Increased quality of life Increased access to essential items Increased production opportunities Lowered prices of essential items Effected increased research and development activity and spending

Ensured fair competition amongst market players

The importance of private sector in Indian economy can be witnessed from the tremendous growth of Indian BPOs, Indian software companies, Indian private banks and financial service companies. The manufacturing industry of India is flooded with private Indian companies and in fact they dominate the said industry. Manufacturing companies covering sectors like automobile, chemicals, textiles, agrifoods, computer hardware, telecommunication equipment, and

52

petrochemical products were the main driver of growth. The Indian BPO sector is more concentrated with rendering services to overseas clients. The KPO sector is engaged in delivering knowledge based highend services to clients. It is estimated, that out of the total US $ 15 billion KPO service business around US $ 12 billion of business would be outsourced to India by the end of 2010.

53

CHAPTER-5

54

5.1 BPO INFRASTRUCTURES:

INFRASTRUCTURE: World Class Infrastructure for BPO.
BPO infrastructure is specifically designed to capture the unique requirements of BPO operations:

Designed for 24 x 7 operations. State of the art building management, security and power backup systems. Robust highly reliable network infrastructure with multiple redundancies.

INFORMATION SECURITY IS ENSURED AT MULTIPLE LEVELS:

PHYSICAL SECURITY: Building Security Systems: Ciphers facility has tight security round-the-clock and access to the building is restricted to authorized associates only. System/Network Level: LAN: Local Area Network is designed to provide logical separation for each customer, or even various projects of the same

55

customer,

if

required.

Need-based

access

for

permissions

and

authorizations, with adequate firewall and archival facilities, is ensured. Passwords and Restricted access: Cipher has Password-protected network and telecommunications access, with access to internet and e-mail restricted through a network firewall.

CLIENT/PROJECT LEVEL: Data Security between clients is ensured through dedicated/separate areas for different clients, restricted physical as well as network access and LAN separation for each client. ASSOCIATE LEVEL: Restricted and need-based access, based on roles which are reviewed periodically. More importantly, the attitudes of the people we recruit are tested through psychometric tests. Confidentiality contracts and non-disclosure agreements are signed with each Associate and background checks are run on them.

DELIVERY MODEL:
BUSINESS CONTINUITY AND DISASTER RECOVERY: At strongly believe that the best way to handle a crisis is not to have one in the first

56

place! Disasters can occur without a warning and the results are often, unpredictable. It can take weeks or months, even years for an organization to recover from the outages or service disruptions caused by adverse events such as natural or man-made disasters. At we have developed a Business Continuity Plan (BCP), based on the potential threats faced by the organization. Our BCP is geared to meet all possible contingencies, be it operational, infrastructural or unforeseen natural calamities. QUALITY: At Cipher, quality is not just about implementing a set of process or a methodology. It is more of an attitude where Associates are focused, fanatical if you will, on maintaining the highest quality standards and delivering defect-free services to customers. Cipher BPO focuses on maintaining the highest quality standards. We achieve it through the adoption of best practices, established models and methodologies, and an uncompromising approach to ensuring excellence in delivery. We have a formal quality program and are in the process of getting appropriate certifications for which we have a clearly defined road map. We also have well-established processes to obtain feedback from our clients and their end-customers. This helps us to regularly measure and continuously improve our quality standards. While the offshore (international) BPO market faces pressures with economywide slowdown in developed markets, the domestic BPO market is getting ready to take off. According Arun Jethmalani, Unlike the overseas business, labor or cost arbitrage does not drive the domestic BPO market. Its strategic factors such as the need to scale rapidly, focus on core competencies, enhanced productivity and reduced time to market that are driving domestic demand. Research indicates that the domestic BPO industry stands at an inflection point, with the growing scale of Indian buyers as well as the

57

emergence of significant vendors with greater capabilities. The recently released report by Value Notes estimates the share of third party revenues is 27% of the domestic BPO market, at Rs. 18 billion for FY08. This is expected to grow at a CAGR of 44% over the next four years reach Rs. 77 billion by FY12. According to Neeraja Kandala, analyst and co-author of the report, The outsourcing opportunity in the domestic BPO market will gain impetus over the next couple of years with the increased buyer awareness and adoption of outsourcing across industry verticals. Reforms in banking, financial services and insurance will further drive the future growth. The vendor landscape has over 700 large and small service providers. Large BPOs like WNS and Enact traditionally catering to the international market are focusing on building their domestic BPO divisions. We have classified the service providers present in the domestic BPO market into four broad categories: International leaders (established BPO service providers with strong presence in international BPO market like MphasiS). India leaders (primarily focused on domestic market like Aegis, Info Vision and Omnia BPO). Emerging companies (companies building capabilities and currently offering specialized services on a small scale like Caretel, vCustomer). 'Me-too players (offering undifferentiated low value services).

58

In the absence of cost arbitrage, creating sustained value from outsourcing will be a critical challenge for service providers in the long term. Currently, services outsourced by the Indian companies are largely limited to high volume, back office jobs and customer support activities. Pranav Dixt Analyst and co-author of the report says Most of the Indian companies are outsourcing for the first time. Further growth in outsourcing volumes will be largely dependent on performance of initial engagements and will unleash opportunities higher up the value chain. This report provides an in-depth analysis of the domestic BPO market. This study is based on extensive interviews with over 300 companies in various industry verticals and all major service providers. THE REPORT IS DESIGNED TO HELP: Indian companies looking to outsource their services. Existing service providers to assess the competitive environment in

59

domestic BPO market. Other potential service providers to assess opportunities across various industries. Researchers looking for information on domestic BPO industry. One-quarter of the top BPO operatives will not exist as separate entities by 2012, says Gartner. The market research firm said that market exit, acquisitions, and the ascent of new vendors will rearrange the BPO provider landscape in the coming years and enterprises should look for warning signs when evaluating BPO vendors to mitigate risk. Gartner has identified six key signposts to watch out for that might herald the predicted market shakeout and identified which BPO vendors might be candidates for acquisition or outright market exit.

60

5.2 WHAT SKILLS ARE REQUIRED TO WORK IN A BANKING BPO?

Good communication Language skills Accent Understanding team leadership Basic computing skills CRM.

5.3. POTENTIAL IN THE NORTH-AMERICAN BANKING SECTOR:

Bank of America India, location has been used for outsourcing the work related to collections of credit cards, retail and commercial banking. With this, many new jobs have been generated that in turn has created many employment opportunities. BPO jobs are the most abundant among other jobs for Bank of America. Along with these BPO jobs, IT sector is also flourishing, as these big companies need back up all the time that is provided by the professionals from the IT industry. India has mind with resources and cheap man power so it is the perfect destination for outsourcing. Considering this Bank of America in India is now getting bigger and really got an edge in the market. Bank of America Gurgaon Office has been running through BA Continuum. It is providing the Bank of America Gurgaon jobs and hiring to have good work force. Many jobs for freshers as well as experienced people are generated by this BofA Gurgaon Center. Thus various banking as well as IT domains have been covered. In the initial

61

phase of the complete set up, Gurgaon office was used to set up retail banking through voice as well as non-voice outsourcing. Then this business had expanded further to investment banking. With this Bank of America has become a 24-hour company, in which programmers work from California, who then delegate work to India. Bank of America BPO jobs in Gurgaon, India are now taken up by many keen freshers. Many of them are making careers in these BPO jobs. Working in night shifts, tackling the client pressure and giving the best performance without a chance of error are the basis of these BPO jobs. Bank of America Gurgaon branch is earning huge profit and has become very valuable to the bank. Bank of America Gurgaon office recruits people for its three key areas of operations which are Business Process Solutions (BPS), Knowledge Services and Information Technology Solutions (ITS). The persons hired for these departments are required to do jobs pertaining to Accounts Management, Loan Processing, Customer Service,

Transaction Processing, Global Banking Securities and Wealth Management Technology, Research, Analytics & Reporting,

Information Assurance and Sales Support. BPO jobs in Canada are attractive and high paying. Playing crucial role in the economy of Canada, BPO has become an extensive part of the North

American business culture. BPOs help companies cut down on expenses and generate benefit from the existing resources. BPOs include various

62

knowledge

based

functions

which

includes

IT

and

Non-IT.

Additionally, it requires intellectual capital and resources which are crucial for setting up a BPO and offer excellent BPO jobs in Canada.

5.4. THE PROVIDERS:

Banking Business Process Outsourcing or Banking BPO is a highly specialized sourcing strategy used by banks and lending institutions to support the business acquisition and account servicing activities associated with the customer lending lifecycle. These specific BPO services are usually offered through multi-year service level

agreements for all or portions of the credit card lending, consumer lending or commercial segments of the financial services market. Some larger financial services organizations choose to extend their sourcing strategy to include other outsourced services such as ITO systems and software, HRO and benefit, services, finance & accounting outsource (FAO) services, procurement or training outsourcing. Banking BPO Services are typically defined by industry analysts, advisors and leaders in the sourcing industry, such as the set of discrete processes or transactional activities that support the lending lifecycle as follows:
New customer acquisition services include telemarketing activities,

application processing, underwriting, customer or merchant credit evaluation and verification, credit approval, document processing, account opening and customer care and on-boarding.
Account servicing processes for credit cards or consumer loans.

These most commonly include payment processing systems and services, customer service or call center support operations (voice,

63

digital, email and mail services), product renewals, and loan disbursement; document management services such as printing and mailing of statements, networked printing and storage solutions; collections, recoveries processing, default management, risk management and foreclosure.
Consumer and commercial lending post origination transaction

processing services, such as check processing, clearance and settlement services, remittance, and records management.
Back office transaction process management for loans or credit card

portfolios,

including

custody

services, fraud mitigation

and

detection, regulatory and program compliance, portfolio analytics, reporting, conversions, management of technology platforms,

interface for customer data and custom development. The IT companies obtain a considerable portion of their revenues from the banking sector. Major companies earn as much as 30% of their revenues from the banking sector, but this is not so with BPOs despite having a huge addressable market. Though India is a pioneer in the BPO industry and home to some major BPOs, many large global banks like ABN Amro, Deutsche Bank, Bank of America and Wells Fargo prefer to work with their captive centers. The outsourced banking BPO market stands at around $12-16 billion, with traditional BPO service providers garnering just 15% of this market. While Indian BPOs have made some progress in tapping into lending operations, not much headway has been made in non-lending operations. Indian BPOs have also tended to stay away from voicebased work, which further limits revenues.

64

Hari Rajagopalachari, ED for consulting at PricewaterhouseCoopers India, said that business processes have data and voice content, and regulatory constraints in off shoring data work are stringent. Also, a lot of banks have transaction banking and global trade processing as core service offerings handled out of their own offshore captives and do not see these as being candidates for outsourced off shoring, reports the Times of India. The amount of low hanging fruit is much lesser in the banking space as compared to the insurance sector for example, which involves huge volumes of transaction processing. In the insurance space, traditional BPOs have about 40% of the $9-12 billion market. Sameer

Dhanranjani, country head, Fidelity National Financial, said that employee skill sets for the BPO sector in a specialized domain like banking is still found wanting. Most BPOs are located outside of Mumbai where India's financial expertise lies. Indian BPOs have also not built technological solutions or platforms for the banking sector. Though the banking sector has been slow to outsource its BPO work, BPOs are not ignoring the opportunities it presents. Some companies like Genpact are aggressively looking for acquisitions in the banking space; others are organically building domain capabilities through hiring domain experts or building tools over existing solutions, said the report.

5.5. WHO IS OUTSOURCING:

It is now a globally accepted fact that Banking Outsourcing is the methodology which; reduces cost, enlarging banking scope and optimizing the respective revenues. It is estimated that with a growth rate of approximately 35%, Indian revenues from banking and financial

65

departmental services would reach to a height of $6 billion by the fiscal year of 2011. The process of Banking Outsourcing consists of an aggregate of onsite as well as offshore delivery capacities, which rise to higher level based on the geographical and business priorities. This process in itself takes a combination of domain knowledge, process management and technology to deliver increased banking efficiency, better customer management and improved quality at lower operational risks The slow inclination towards International Banking Outsourcing specifies the requirement of establishing and picking vendors: according to their outgrown capabilities and provide the Outsourced Banking Services at specified locations. Understanding the demanding needs of banking customers in various locations helps the banks to develop new marketing products and strategies. This further leads them to stay ahead in the highly competitive global market. Banking Solutions generally include application processes, mortgage processes, data processing verification of applications, collections and record management, transaction processing, Banking Outsourcing capitalizes on cash receipts, transaction slips, sales journals, bank accounts, general ledger values and the necessary financial statements to create the banking ledgers and their corresponding statements. Round the clock servicing provision in India has facilitated customer service and ban. Solu which has grown to be the most popular in the outsourcing world.

66

Actually as a matter of fact, what happens is that due to difference in time when the States or London sleeps, Indian and Chinese work. More over due to the high availability of literate youth, looking for employment, it becomes a matter of saying that every professional gets ready to work in a 24*7 basis. Banking Solution Outsourcing calculates and intimates, the banks of their payrolls and tax returns. Outsourced banking solutions also provide assistance with the documents required during a payroll, by transmitting the information to their respective clients. Banking Solution Outsourcing puts forward a comprehensive scheme for tracking and control methods of the customers payables, track bills and thus enhances their proper receiving. This kind of a strategy would involve transfer of all accounts of transactions.

SERVICES PROVIDED BY THE BANKING BPOS: Banking & Finance. I.T & Telecommunications. Insurance & Mortgage. Public Transportation.
1. BANKING & FINANCE: In the face of increasing consolidation and global competition, many banks must rethink their business strategies in order to optimize resources and maximize customer satisfaction. By

67

managing their end-to-end operations, TCS ensures that these enterprises are better equipped to meet the growing demands of business, manage costs, eliminate risks and excel in customer service. One of the key challenges to banks and financial services firm has been to create, retain and leverage upon profitable relationships. To do this, banks require constant enhancement of their capabilities to: Gain unique insights from customer data. Process transaction in a straight through manner. Access risk and take proactive actions. 2. IT & TELECOMMUNICATIONS: The impact of technology change, globalization de-regulation, competition, mergers & acquisitions. The telecom services have been recognized the worldover as an important tool for socio-economic development for a nation. It is one of the prime support services needed for rapid growth and modernization of various sectors of the economy. Indian telecommunication sector has undergone a major process of transformation through significant policy reforms, particularly beginning with the announcement of NTP 1994 and was subsequently re-emphasized and carried forward under NTP 1999. Driven by various policy initiatives, the Indian telecom sector witnessed a complete transformation in the last decade. It has achieved a phenomenal growth during the last few years and is poised to take a big leap in the future also.

68

3. INSURANCE & MORTGAGE: While the insurance

in

industry

has

made improvements

the past few years, a

recent study shows that it still has a way to go when it comes to call center

satisfaction. According to the CFI Group's (Ann Arbor, Mich.) Call Center

Satisfaction Index, the insurance sector trails all other industries surveyed -- save personal computers -- in terms of call center customer satisfaction. Mortgage processing services provided by us at Advanced Call Centres involve information capture, verification of information on loan/ mortgage applications forms, and screening application against predefined criteria. The entire process includes handling of mortgage records, maintaining client payment history and preparing receivable follow up reports & custom reports for analysis.

4. PUBLIC TRANSPORTATION:
Customers of financial services companies obtain significant benefits from

information sharing, including increased convenience, personalized service, and real savings of time and money. Ernst& Young estimated the benefits to customers of the 90 large banks, insurance and

securities companies that are members of The Financial Services Roundtable (FSR).

69

Based on publicly available industry data and a survey of the FSR membership, the findings are: Trust and the Use of Information. Savings per Household. Money Saved. Time Saved. Sources of Benefit.

5.6. WHAT PROCESS IS BEING OUTSOURCED?

Business process outsourcing (BPO) is a subset of outsourcing that involves the contracting of the operations and responsibilities of specific business functions (or processes) to a third-party service provider. Originally, this was associated with manufacturing firms, such as Coca that outsourced large segments of its supply chain.[1] In the contemporary context, it is primarily used to refer to the outsourcing of business processing services to an outside firm, replacing in-house services with labor from an outside firm.

BPO is typically categorized into back office outsourcing which Includes internal business functions such as human resources or finance and accounting, and front office outsourcing which includes customer-

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related services such as contact centre services.BPO that is contracted outside a company's country is called offshore outsourcing. BPO that is contracted to a company's neighboring (or nearby) country is called near shore outsourcing. Often the business processes are information technology-based, and are referred to as ITES-BPO, where ITES stands for Information Technology Enabled Service.[2] Knowledge process outsourcing (KPO) and legal process outsourcing (LPO) are some of the sub-segments of business process outsourcing industry.

BUSINESS PROCESSES:
Various business processes are not core to a companys main line of business. Companies outsource such processes and focus on their core competence. The various business processes that are being outsourced include the following: Back office operations Customer relationship management (Refer to the report on Customer Service Outsourcing for more details) Sales and marketing (including telemarketing) Administrative support Payroll maintenance and other transaction processing Finance and Accounting Human resources and Training Logistics, procurement and supply chain management

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 Medical transcription Security Research and analysis Product development Legal services Intellectual property research and documentation

Synonymous with these services are various commonly used terminologies such as Business Process Outsourcing (BPO),

Knowledge Process Outsourcing (KPO), Legal Process Outsourcing (LPO), Research Process Outsourcing (RPO), Recruitment Process

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Outsourcing (this is also called RPO) and Education Process Outsourcing (EPO). As the market for each service grows, vendors coin a term for their service to showcase a distinct presence of their industry. The current business environment for banking and financial institutions is characterized by the need to aggressively manage costs and risks, while continuing to innovate, by developing new products and services. Our expertise across the banking and financial services industry helps you manage risk, comply with regulations, enhance product features and manage business transformation challengeswhile reducing costs. Our proposition in managing business processes goes beyond the transactional benefits of labor arbitrage. We focus on delivering business impact to our customers by bringing to bear our deep technology and domain expertise to all our BPO engagements. Our differentiated approach has created significant value for our banking and capital markets clients as illustrated by the following: Streamlining the investor on-boarding and cash-management functions using automated BPM workflows for a leading asset manager Mining and analyzing structured and unstructured data to deliver distinctive equity research insights Reducing the incidence of merchant fraud in the credit card industry, using predictive analytics Services Across Banking and Capital-Market Segments.

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CAPITAL MARKETS:

Investment Banking: Research, Order Management, Position Keeping, Risk Management, Post-Trade Processing, Clearing and Settlement, Reconciliations, Reference Data Management, and Asset Servicing.

Investment Management: Private Banking, Account Management, Portfolio Management, Fund Accounting & Administration,

Valuations & NAV Calculations, Investor Operations, and Investor Accounting & Reporting.

Securities Services: Back-Office for Debt, Equity & Structured products, Record Keeping, Reporting Services, Corporate Actions, Securities Lending, Reconciliations, and Brokerage & Fees .

BANKING:
Retail Banking: Reconciliations, Account Opening & Maintenance, Financial Accounting, Customer Service, Management Accounting & Reporting, Payment Processing, Lock-Box Services, Deposit

Administration, and Trust Services. Credit

Cards: Card

Analytics,

Fraud

Detection,

Application

Processing, Data Management & Reporting, Customer Service, Merchant Processing, Charge-Backs & Dispute Management, and Risk Management. Consumer Lending: Loan Origination, Underwriting Support, Closing & Post Closing, Loan Servicing, Secondary Marketing, Payment Processing, Loan Modifications, and Default Loan Servicing & MIS.

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5.7. THE UTILITY MODEL FOR PAYMENTS BPO:

Many corporations are challenged by lack of infrastructure to support routing and approval of payments. As a result, many corporations still operate off of spreadsheets in a highly manual environment. This causes poor visibility to cash out-flows, high operational costs and risk of fraud. Compounding these challenges, many companies also rely on a fragmented array of systems for connectivity to SWIFT, Banks, and ACH and check printing systems. The AvantGard Payments solution offers a unique payments suite for streamlining the processing of payments helping to improve routing, connectivity and integration; reduce transactional and operational costs; increase security; and improve the management of payment information, exceptions, and statement flows.

FEATURES:

Routing, workflow and approval of payment flows. Transformation and conversion of formats / protocols (SEPA, ACH...).

SWIFT, ACH, wire execution. Pay Net Exchange portal for payments execution.

Check printing.

BENEFITS:

Reduce operational costs.

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Improve visibility to cash outflows. Consolidate data across multiple systems. Reduce redundancy and manual processing. Mitigate fraud.

Payments processing is fast becoming the center of attention for corporations. As such, banks & BPO providers are looking for ways to improve their service offering by expanding their solutions and services. AvantGard can help create a more compelling business for a bank or BPO provider by offering a wide variety of payments options. From workflow & routing to check printing, outsourced check processing or ePayments processing via an online portal, corporations are now looking to their banking partners for a full array of solutions.

5.8. BANKS AS PROVIDERS OF PAYMENTS OUTSOURCING:

Simply put, payment execution is the process of initiating payments, whether by check, ACH, wire or card. Increasingly, companies are looking to outsource this portion of their A/P processing. Payment initiation is time consuming, labor intensive and expensive (in the case of checks) and certainly meets the definition of a non-core business function. In an era of hyper competition, outsourcing permits an organization to redirect its resources, most often people resources, from non-core activities toward those which add greater value. Your organization may require a business case before approval to outsource a particular function. A compelling business case captures both the quantitative and qualitative benefits of a proposed initiative.

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Costing models, risk analysis, capital costs and payback periods are key components to a business case and represent the quantitative analysis. Business case reviewers will also be interested in a qualitative analysis, i.e., the impact on the business in areas that are more difficult to quantify.

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CHAPTER-6

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6.1 CHALLENGES FACED IN BANKING BPO:

The idea of importing manpower and services from other countries has been around since the advent of international trade. Nevertheless, the substance of outsourcing as known today enables the global workforce to be integrated in various ways. However, there are some outsourcing barriers that we have to confront before we can regard it as suitable to our business. One significant element is the economic and political state of the country. Less developed countries have a high possibility to have unstable governments. Furthermore, the economic policies of these nations can switch from one political cycle to the next. Hence, there is a chance of volatility that increases the danger for enterprises who wish to invest in outsourcing. One more considerable obstacle is the language gap. Because of this challenge, not many nations are eligible for outsourcing. Developing countries that can speak the English language well like the Philippines and India are most favorable candidates. Businesses must also search for offshore partners that are entirely compatible the skill-set that they demand. One more outsourcing barrier is a nations current infrastructure. This includes the banking system infrastructure, telecommunications infrastructure, and the legal system that keeps everything in check. Without a mature infrastructure, the cost of outsourcing services and the risks that comes with this kind of investment can be greater than expected. Once all the large scale challenges are taken into consideration, companies will have to address other outsourcing hindrances such as knowledge transfer, cultural gaps, training, and ability to integrate

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operations. Working with outsource partners requires businesses to adjust their local operation to accommodate them. Beyond all of these, there are dynamic challenges that we need to consider. Some of these are human resource management, management challenges, time-zone, security risks, and many more. Not everyone is capable to outsource.

BPOs have proved a grand success. However, certain problems have cropped up in the process for which long-term solutions are necessary.

AREAS OF CONCERN IN BPOS:

Working in a BPO, many feel is a job that does not require much skill.

Anybody possessing a basic education, good communication skills is employable after some training. Companies do not mind taking in people who are middle aged, and homemakers. There is no sense of accomplishment among the employees.
Financial desperation on the part of some people leads them to take up

jobs in BPOs- People out of college join BPOs to earn money to finance their higher education, some as a way of improving their life styles. Some others join because they could not find anything else. In short, very few people take up employment in BPOs for the love of it.
The tasks that BPOs perform are diverse: telemarketing, technical

support service, customer support service, insurance processing, data entry and conversion services, bookkeeping and accounting and online researching, and form processing. The problem that this creates is that there can be no standardized training program suitable to all the BPOs that can be given to the prospective employees before they are actually absorbed into the company.

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 High expectations from the outsourcing companies tend to de-

motivate the workers. In many cases, the outsourcers think only of achieving targets. They are obsessed with quality work, business continuity, time frame, security of information. However, satisfying them is not always possible. The expectations should be realistic taking into account the work ethics of the region of the service provider, as well as, its culture and polity.

6.2MAJOR REASONS FOR BPO OUTLINED:

BPOs do not present attractive career prospects. They are not

challenging enough for the employees after a period. Most of them are stuck for good in their present placement once they start working in call centers.
People join BPOs because of the lucrative salaries offered to them.

They do not have the slightest hesitation in leaving their current employees for a firm offering a bigger paycheck. They do not experience a sense of obligation toward their employers.
Higher education in countries like India is expensive. A lot of money

has to be deposited as capitation fees in professional colleges. Young men and women just out school and graduates join BPOs as a means to earn and save money to finance their higher studies. The trend is for them to slog for 2-3 years in a BPO and get out of it for studies.
BPO employees suffer from many health problems. The strain of

working in changing shifts, of meeting deadlines and realizing targets take a toll on their wellbeing. Some of them end up being jittery and still others clinically depressed.

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 Social life eludes most BPO employees. The nature of their

employment is such that they are left with little time and energy for their family and friends. The miseries of the employees are compounded by managers who are not supportive and sympathetic towards their sub-ordinates, by policies that are unfriendly and ill advised. The employees do not feel secure in their job.

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CHAPTER-7

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CASE STUDY:

Bank Fusion is a family of software components that Misys is using to deliver a new generation of solutions for financial services. It is underpinned by the Bank Fusion Platform; an application development and runtime framework that provides capabilities to build, configure, integrate, and deploy Bank Fusion Solutions across multiple computing platforms using Java technologies. Following are the principal elements of the Bank Fusion Strategy:

UNIVERSAL BANKING:
This is the next generation Misys core banking system that is based entirely on Bank Fusion technology. It is live at two customers, and recently challenged and beat tough competition in winning a new name client at Actinver in Mexico.

SHARED DEVELOPMENTS:
Misys has created a Bank Fusion Business Solutions library; a set of financial components shared across the Misys portfolio. These provide a rich future roadmap for existing customers and accelerate the build out of functionality through consolidation Existing Misys solutions, starting with Equation and Midas, are being enhanced with functionality built using Bank Fusion.

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RENOVATION:
Existing solutions will use components from theBankFusion Business Solutions library that provide them with a rich roadmap of enhancements into the future. This been completed for Equation, and a Bank Fusion Midas solution is underway for delivery in Q4 2010. Misys will build on the benefits and techniques gained from the Renovation of Misys products to offer services based n the Bank Fusion Business Solutions library to Misys Partners and customers.

INDUSTRY PLATFORM:
Misys will provide Independent Software Vendors with a platform and pre-built financial components to build solutions for the financial services industry.

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CHAPTER-8

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CONCLUSION.
Before I conclude, I would like to say that Bank today, is much stronger, better equipped technology wise, appropriately organized and focused for business growth and well poised for sustained and profitable operations with deeper commitment and greater

determination. And it was a wonderful experience while working on this project. As the face of the banking sector is changing rapidly. It is the first time that I am working on such a vast topic like BPO in banking sector and it was really fantastic. From this project I got the knowledge of all the aspects, which are related to BPO in banking sector, the sectors covered and the sectoral caps for each and every sector. At last, I would once again like to thank my guide without whom this dreaming project would not be possible.

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CHAPTER-9

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APPENDIX-1: ANNEXURE

ARTICLE:1. ARTICLE FORM: ARTICLE DATE:

Accenture HR BPO services. Marketscape worldwide HR BPO. 29th july,2011.

ACCENTURE HR BPO SERVICES NAMED LEADER IN IDCS MARKETSCAPE WORLDWIDE HR BPO 2011 VENDOR ANALYSIS, PUBLISHED JULY 2011.

July 2011 evaluates the offerings and capabilities of HR BPO providers. The evaluation is based on a comprehensive and rigorous framework that assesses vendors relative to the criteria and one another and highlights the factors expected to be the most influential for success in the market in both the short and the long term.Based on a comprehensive analysis and comparative study of the marketplace success of competitors, IDC noted that, Accenture rose to Market Leader status in this analysis, with strengths in breadth of portfolio, transformative consulting strength, and vendor reputation and viability. Accenture has matured its services so that it can provide clients with guidance in improving workforce productivity in addition to cost reduction. Since platform varies by client, there is no standard database or user interface. IDC also noted Accentures ability to allow clients to maintain both flexibility and ownership with their HRMS providing ease of integration with their existing financial systems. Accenture also has alliances with leading providers of HRMS technology and provides Accenture proprietary systems that are designed to interface with the HR system.

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ARTICLE-2 ARTICLE FORM: ARTICLE DATE: AUTHOR:

Convict of use. Times of India. october.29th,2010. Ramalingam Raju.

When commercial BPO employees were found to have perpetuated fraud in the past despite the best security measures, what will be expectation of a BPO run from a Jail? asked my son reading the days news. I too could not avoid smiling at the irony of the practices of KYE (Know your employee) where other companies made sure their employees did not have criminal records. When the BPO was run by a jail, the qualification to be an employee itself would be to be in jail. How then will they twist the standards of KYE?

The administration issues of such an operation will be quite different from that of known enterprises. What the Jail Administration will have to face is oversupply of labour as all Indian jails are known to be overcrowded. Next, the

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computers will require appropriate clean air conditioned environment. To have a floor without rats and cockroaches running is a luxury for the inmates and since the computer area will be perhaps not only be clean but also carpeted, it will seem like fantasy for most and they will definitely jostle to be appointed to be working there. Since the computer programmers as well as BPO employees are known to have casual dress as the norm, I am sure Mr. Raju will recommend that and the operators will climb out of their uniforms to something more casual! Those with insomnia due to rats running over them in their sleep can find haven doing the night shift. The cost of dropping home, the BPO staffers will be saved, as the operators will just have to stroll over to their work zone that too, under heavy security. If the experiment is a success (and there is no reason why it should not) perhaps all Jail PBOs will do more business than commercial ones. Soon, even the Police will have less work as persons committing a crime no matter how petty, will walk in the nearest police station to confess. It would later transpire that the crime is just an excuse to get into jail to do some BPO work instead of remaining unemployed outside. Very soon, the police stations will be dubbed as BPO Employment centres. Very soon, the graduation class will have atleast one orientation day for the students to learn how to commit a crime sufficient enough to gain entry into jail an act which should be supported by some bumbling lawyer. All this should logically make the tax burden higher but in the long run, these jails will make so much money that our taxes will be lowered. When one BPO exercise tastes success, the Jail authorities will think of a way to employ better, the blue collared criminals. Since the BPO has a Bank as the first customer (see news) a Bank will also be the first customer for the blue collared inmates to collect over dues. It is naturally more effective when a known criminal gang calls up a defaulting borrower who will sweat just hearing the name and knowing rest of the gang members are still outside the jail.

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Consultancy firms will have a field day advising various jails of which best commercial service model they should use. I am sure they will develop more than blue and white collared category and we shall see reference to purple collared too as a reference to with their hand in the till. Here is where my musing stops with the picture of guilty persons of Common Wealth Games. When the dirty dozen are jailed, what commercial activities are they suitable for? Jail Olympics? If so, then surely the high jump will not feature there because during practice, inmates will surely jump over the wall of the jail itself.

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APPENDIX-1: BIBLIOGRAPHY.
www.google.com www.ask.com www.msn.com http://www.scribd.com http://www.hsbcbank.com

ARTICLES:
http://www.timesofindia.com http://www.hsbcbank.com

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