Hardships for Indian BPO firms in the Banking Sector

Effects of BPO

As everyone knows the Indian economy has grown significantly in the past decade. The quality of life has also improved in many areas. Rapid urbanization and improved infrastructure has been a major contribution to this growth.

The majority of this stride lies however in Metro cities. This scenario is mainly happening because of the dramatic growth of IT and ITES industries that are flourishing in major Indian cities.

The ITES or Information Technology Enabled Services are creating employment opportunities in a massive scale for today’s youth. The rise in employment has also resulted in the rise in disposable income.

The employees of such firms are mainly from the surrounding areas so their cost of living is reduced as they can easily access their work place form home thereby eliminating charges associated with accommodation and food. Their families also support them and so they have a lot of disposable income in their hand. This explains the rise in spending power of metro cities.

Of the ITES services the Business Process Outsourcing or BPO is the major industry. India is now a global hub in the BPO world and is home to one of the biggest talent pool in the world when BPO service requirements are taken into consideration.

Huge Presence in India

Well known Indian BPO firms like WIPRO BPO services and Infosys BPO services cater to prestige clients worldwide and have set benchmarks for efficiency and professionalism.

There are over 300 large and small BPO firms operating in India and a majority of their income is from outsourcing to foreign clients in the US and Europe. The availability of cheap workforce is the main reason for the explosive growth in the BPO industry. The rise in costs in Metros are now forcing companies to move to Tier 1 and Tier 2 cities where they have more advantage. The name of cities like Cochin and Trivandrum popping up in the IT map is proof to the above statement. These cities offer quality infrastructure and workforce at low costs as compared to cities like Bangalore and Hyderabad.

The BPO industry in general gets majority of their income from foreign clients. They have operations in all fields like healthcare, IT Backend, finance, travel and tourism, construction and many more. The areas of application of BPO services are limitless today.

Incompetence in Banking

However one major area where BPO firms in India do not have an upper hand is the Banking sector. The lack of appropriate talent in India suited for financial outsourcing services is one reason seen by many international financial organizations and banks to not to outsource their financial processes to Indian companies. But the Indian IT firms are doing a major role in the banking sector. Out the global share in the worldwide Banking sector automation, IT companies form India have almost 30 % share while the BPO arm in India has just around 9 or 10 % in the same sector.

This poor growth has been given a big blow by recent events happening in the International Banking sector. The withdrawal of BPO services of Mphasis technologies by one of England’s premier banks- the Santander Bank citing lack of quality services and support was a needle in the eye for Indian BPO companies. It tarnished the image of BPO companies. The global community regarded the turmoil of Mphasis as that associated with the entire Indian BPO industry.

Native Firms more superior to Indian counterparts

A major portion of US and UK based banks prefer to outsource their financial service processing to onshore companies rather than Indian ones as the onshore companies have more skilled workforce and also better technological implementations that are preferred by the banking industry.

The Indian companies are lacking proper technological support needed for precise banking solutions. The outsourced work in the banking sector includes lending operations, credit card processing, retail service processing and many more. BPO’s need strict and a strong back end if they are to offer support services to these banking areas.

Even though there has been considerable growth in the BPO services in the Lending sector much work has to be done in other areas. Also Indian companies’ engaged in providing BPO services to banks tend to stay away from voice based support which is the major revenue earner in the Banking sector. The non voice sector is not that big also as it can only be considered superior when we take into consideration the inferior voice based support and services offered.

Reasons for weak performance: Inappropriate location and staff

The location of BPO’s outside Mumbai which is India’s financial hub may be another reason for the weak popularity of Indian BPO firms engaged in banking services. Majority of the banking talents lie in Mumbai and BPO firms rarely recruit from these region thus raising questions about the credibility of their staff I performing core banking business outsourced processes.

The lack of specialized training force is also another problem. Even if the right employees are picked up by BPO firms, without proper persons to train them on core banking activities for which they will have to use their skills, the workforce is just a waste. The Insurance sector is the only major financial are where Indian BPO’s are finding success as they have more transaction processing which is a much easier task as compared to other banking tasks done.

Future Prospects

The BPO industry in general is having a prosperous time and they have a sustainable future. The only key areas where they face major hurdle is in the banking and allied financial services of Banks. Many international banks like ABN Amro, Deutchse Bank, Bank of America, Barclays and many more prefer to outsource their activities to native firms rather than Indian ones because the available technological platforms and solutions provided by native companies are far superior to Indian competitors.

If the BPO firms want to excel in this field just like Software companies have done in the past, they have to first select a good centre for financial services such as in Mumbai and then improve on their technological back ends to provide secure and reliable services to their banking clients.

The quality of their employees also need to be ascertained as they cannot afford to loose out on such a key area like banking which generates almost 40 % of the income for Software IT companies.

Latest Columns

Infosys to replicate rural BPO model in global destinations too

Bangalore, November 30, 2011: Bangalore based IT giant; Infosys has decided to go global with their Rural BPO strategy. The company which has recently launched BPO unit in Kaup is on the way to launch another one at Bagepally is thinking of implementing the new strategies in the international rural regions as well. According to […]

BPO performance of Southern states in India for 2002-03

How have the Southern states in India performed in 2002-03? State Revenues Comments Andhra Pradesh Rs 1,411 crore Andhra Pradesh already gets a hefty 40% of its IT revenues from ITES. Karnataka Rs 988 crore The number of approved ITES companies increased from 28 to 41 in fiscal 2002-03. Revenues earned by them also grew […]

Speak Your Mind