PUNE: Over three-fourth of all BPOs in India offer services to financial services industry, a study said.
The study conducted by ValueNotes on 50 leading BPOs also revealed that more than half caters to insurance and banking verticals. BPOs catering to financial services primarily comprise of transaction processing and product administration services.
Pune-based ValueNotes is a research firm that conducts research in the area of outsourcing and BPOs in India. Its study suggests that processes in financial services segment were one of the first to be outsourced to the country.
While other services such as medical transcription went through a bad phase, financial segment has been maintaining a healthy growth over the years. Various financial institutions such as banks, mutual funds, insurance companies, investment firms and credit-card companies outsource their work to India.
What started as mere back office functions has gradually grown to encompass the high-end jobs including equity analysis, financial research, investment analysis and modeling. According to the study, the financial services outsourcing in India commenced when Citigroup set up its outsourcing center in India about two decades ago.
India has now emerged as the largest destination for outsourced financial services achieving revenues of $820 million in 2003-04. The global industry size is expected to touch $47.6 billion by 2008.
The primary reason for outsourcing was definitely the cost advantage - with a qualified Indian earning about 14% of the salary his US counterpart gets. Other factors that worked in favor of offshoring were the time lag which worked out to be extremely beneficial for the companies located in the US and mitigation of risks with multiple locations.
Transaction processes drive financial services outsourcing. The huge volumes and the growth of the vertical can also be adjudged from the fact that one of the leading Indian financial services outsourcing company, ICICI OneSource, has earned about 70% of its revenues from the financial services industry in 2004 as against about 40% in 2002.
The study states that India is currently the market leader, ahead of Philippines, Ireland, Canada and China. However, recent stray incidents of security breach and fraud in India have put several outsourcing companies on the red alert, the study pointed out.
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