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IT Outsourcing Banking Industry: Facts and Insights
Iryna Kravchenko Iryna KravchenkoChief Editor
Business·Banking·

IT outsourcing banking industry: Technologies, services & trends

Traditional banking systems are closed and highly secure because they keep all processes and data inside their own ecosystems. The current market is based on ideas of trust and mutual responsibility. Outsourcing vendors sign contracts according to which they can lose up to 100% of revenue if they don’t meet the requirements.

Our company shares this vision and delivers custom products for the banking industry. We care about all stages and follow client’s needs strictly to get the best results. We offer to delegate certain tasks to our team but the exact list of them depends on your bank’s objectives, wishes, and possibilities.

Current outsourcing services for banks

Banks can outsource nearly everything from mailing campaigns to payment processing. But IT tasks come to the fore now as they provide for digital processes. Without a robust and comprehensive in-house IT department or trusted outside partner, your company has a little chance to survive and attract customers.

It’s good to check basic tools for the banking industry: administration, databases, data import, hosting, security, and support for both the front and back-office systems. Apart from traditional IT-related services, banks can outsource stuff that is moving to digital ecosystems, as well. Let’s look at three examples:

  1. Digital transformations. Banks actively migrate to the digital universe where they can meet new customers’ demands. IT companies serve as partners as they create and support online/digital versions of mailing campaigns, accounting tools, reports, HR management platforms, ETL processes and so on.
  2. Omnichannel solutions. Modern customers require more personalized and streamlined access to banks’ services. IT outsourcing companies can handle the migration to omnichannel platforms that provide for easy access from any device. Simultaneously, such platforms facilitate real-time data collection and its analysis, so financial institutions can improve customers’ experience.
  3. Blockchain technology. Innovations rapidly change industries and blockchain technology highly relates to the financial sector. While banks may face difficulties with decentralized platforms, experienced IT teams are ready to implement them. Thanks to blockchain-based storages and networks, your company can deliver and protect data much more efficiently.
  4. CRM. Banks rely on their customers’ loyalty a lot. This means that specific systems for attracting, retaining, and pleasing clients are vital for any bank that wants to grow. CRM platforms are considered as totally in-house tools because they keep sensitive information.
  5. BI and analytics. To deliver perfect services, financial companies have to study clients and learn their wishes. Business intelligence and analytical departments gather big data, create comprehensive reports and suggest changes.

Interested in banking software development? Our team provides free consultations for clients!

What do banks outsource these days?

The world’s leading consulting agencies have published their insights on the progress in various industries. Particularly, Deloitte and Elixirr issue new versions of their reports dedicated to banks and finance. Here are the five most important bank outsourcing services for 2019.

Bank outsourcing trends

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Bank outsourcing trends

However, the most global trend relates to the nature of outsourcing. Since the 1990s, banks have delegated only tech stuff to remote companies to cut costs and free resources but modern markets introduce new approaches.

For example, increased regulations, technological progress, and higher customer demands can lead to run-the-bank and change-the-bank strategies according to which financial facilities outsource even core and back-office processes like due-diligence systems, mortgages, risk management, HR tasks, and marketing.

Modern banks have to be agile by focusing on clients and predicting their needs. Currently, the age of digital transformation has started while outsourcing partners use BI and analytics to evaluate banks’ performances, new technologies, and consumers’ engagement levels. Remote vendors implement innovative technology to create and support modern mobile and cloud solutions for banks.

Bank outsourcing services evolution

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Bank outsourcing services evolution

Benefits of IT outsourcing for banks

We can distinguish the exact advantages of IT outsourcing for banks. Here they are:

Keep in mind also that financial institutions can pass on more activities besides the ones that are IT-related. Thus, banks can get even more benefits because they free more time to focus on strategic tasks.

Here are the top trends in the fintech industry.

  1. AI for personalization. Customers of bank services know what they want and they have precise requirements about the way banks treat them. The implementation of AI will help to learn the customer experience and predict their expectations.

AI for personalization | Diceus

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AI for personalization | Diceus
  1. Voice-first approach. You could have heard of “intelligent agents”. Customers can make payments with the voice commands or they can set up regular alerts with their voice. Some experts believe that people will use voice for communicating with the banking software in the future.

Voice-first approach in banking | Diceus

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Voice-first approach in banking | Diceus
  1. Open API. This is a major focus of Amazon, Facebook, Apple, and other global enterprises. The major reason that banks cannot implement it in their everyday operations is a lack of IT expertise. Here’s the outsourcing that comes to the rescue. There are a few fully digital products in the banking sphere like Koto or Citibank.
  2. Digital banks. These are completely new solutions that have a new approach to communicating with bank clients. The reason that there’s a small number of digital-only banks is a lack of technical expertise. The implementation of digital-only approach requires finding such expertise somewhere outside and outsourcing software development services may truly help.
  3. Technology for privacy and security. People tend to trust companies that are open for big tech companies like Google or similar ones. If you plan to introduce a new software product on the market, it’s good to have such enterprises as your partners.

Technology for privacy and security | Diceus

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Technology for privacy and security | Diceus

In-house IT vs. IT outsourcing

As we know both the current situation and the top tendencies in the IT outsourcing industry for banks, it’s time to ask if we need third-party partners to entrust them some services. Can own IT teams be better?

The main advantage of own solutions is their reliability and uniqueness. The in-house IT department consists of trained employees who know the features of your bank and focus on its needs exclusively. You don’t have to share key information with other parties because all processes are inside the bank’s ecosystem. However, remember about the higher cost of labor, security, and maintenance costs, as well as need in the proper HR department to hire and train your IT-related experts.

On the other hand, outsourcing services for banks are convenient as you can pass on daily tasks to the already formed team of professionals. Usually, these IT geeks are skilled and certified, so they can provide efficient expertise, save your time and money, and even deliver unique business analysis. By cooperating with companies that focus on clients’ needs, you get the same team but located outside. As for security issues, outsourcers also care about their reputation and don’t want to fail.

As a result, we can compare internal IT departments and outsourcing teams:

Comparison of IT departments | Diceus

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Comparison of IT departments | Diceus

Your first IT bank outsourcing project

It should be clear now that diversifying is essential for all modern businesses. It’s good to start with the analysis of the market and the IT outsourcing industry, consider the difference between internal solutions and delegating tasks. To facilitate it, we’ve prepared a few tips to help you get started:

  1. Define the company’s needs. Choose what processes you want to pass on and what processes will remain unchanged. Generally, managers keep core strategic initiatives in-house while they delegate daily IT operations.
  2. Secure an SLA. This paper specifies how and when the chosen outsourcer will maintain processes, how it will react to emergency cases, and so on.
  3. Foresee potential expenses. Outsourcing lets you move from CAPEX to OPEX. The latter costs are more flexible and can be easily represented in SLA. And don’t forget about force majeure.
  4. Know your laws. To avoid miscommunications and customers’ complaints, we recommend studying local regulations properly.
  5. Check the partner’s reputation. Security is vital in the IT outsourcing industry. Be sure to cooperate with reputable companies only.

Risk share with software development vendors

And here’s the most important step of our guide. We realize how banks risk when deciding to share their in-house data with other companies. That’s why we think that a proper research of the market and available outsourcing teams is crucial. In our company, we provide the necessary guarantees and sign key contracts.

We have successfully developed several solutions for leading banking facilities:

At DICEUS, we have great expertise in big data and we have gained a solid portfolio for the last few decades. We know how digital solutions can transform the whole way of operations in the front and back-office systems. We focus on building and delivering robust and reliable data warehouses, CRM systems, and other products. You can have a look at the cases made by DICEUS and make sure that we craft cutting-edge solutions only.

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