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Outsourcing in the Indian Banking Industry

ValueNotes Database Pvt. Ltd.
July 1, 2008
45 Pages - SKU: VN2207351

Abstract Table of Contents Related Reports

Countries covered: India

The Indian banking industry is witnessing robust growth under the influence of a changing regulatory environment, rapid technological advancements, heightened competition and consolidation. This changing landscape in the banking industry is driving banks to explore the outsourcing option to achieve efficiencies.

Apart from the growth in the industry, centralization and penetration of IT systems, need to focus on core services, rapid scale up and introduction of new services are driving outsourcing in this industry.

Outsourcing revenues from the Indian banking industry are estimated at Rs. 4 b for FY08 and are expected to grow at a CAGR of 47% to touch Rs. 19 b by FY12. According to Arun Jethmalani, CEO, ValueNotes, “The outsourcing potential in the Indian banking industry will increase rapidly as banks strengthen their IT systems. Large international BPOs with their experience of serving global banks and an end-to-end services portfolio are better poised to capture this market in the long term.”

The vendor landscape has over 50 large and small vendors. Large BPOs like WNS and Genpact traditionally catering to the international market are focusing on building their domestic BPO divisions. We have classified the vendor landscape in the domestic banking BPO into four categories:

International leaders (established BPO vendors with strong presence in international BPO market like MphasiS)
India leaders (primarily focused on domestic market like Aegis, InfoVision 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)

In the absence of cost arbitrage, creating value from outsourcing will be a critical challenge in the domestic BPO. Building and maintaining meaningful differentiators will be critical to growth and profitability. Says Pranav Dixit, analyst and co-author of the report, “With high growth in this space, international multi-service BPOs will leverage on the expertise gained from global banks to garner business from Indian banks.”

Large scale multi-city operations, partnerships, ability to quickly ramp up operations while maintaining quality and developing advisory capabilities will be key success factors for outsourcing vendors focused on the banking industry. According to Neeraja Kandala, analyst at ValueNotes, "With further de-regulation in the banking industry and entry of several new private and foreign banks, the addressable market for banking BPO is expected to grow to 10 times the current revenues.”

This report provides an in-depth analysis of the buyer as well as the vendor landscape. This study is based on extensive interviews with banks as well as vendors. The report is designed to help:

Banks looking to outsource their services
Existing vendors to assess the competitive environment in India
Other potential vendors to assess opportunities in India
Venture capital companies looking for investment opportunities in BPOs
Researchers looking for information on domestic BPO industry

1. Executive Summary
2. The Indian Banking Sector: 2.1 Structure of the Indian Banking Industry; 2.2 Market Presence; 2.3 Market Share; 2.4 Trends and Insights in the Indian Banking Sector
3 Outsourcing in the Indian Banking Sector: 3.1 Banks - Early Adopters of Outsourcing; 3.2 But Indian Banks Lag Behind…; 3.3 Drivers and Constraints; 3.4 Services Outsourced by Indian Banks; 3.5 The Buyer Perspective; 3.6 Current Outsourcing Opportunity and Market Size; 3.6.1 Future Opportunity: 3 Scenarios; 3.7 Key Trends and Insights
4 Vendor Landscape: 4.1 Vendor Evolution; 4.2 Vendor Groups; 4.3 Vendor Analysis; 4.4 Key success Factors in Banking BPO
6. Research Methodology: 6.1 Data Collection; 6.2 Data Analysis
7. About Valuenotes: 7.1 Research Publications; 7.2 Recent Custom Projects
Table of Figures: Exhibit 1: Structure of the Indian Banking Industry; Exhibit 2: Types of Entities in Indian Banking Sector; Exhibit 3: Commercial Banks (FY07); Exhibit 4: Private &Foreign Banks have 40% and 83% of their branches in Urban areas; Exhibit 5: PSBs Losing Market Share to Private and Foreign Banks; Exhibit 6: Banking Sector Growth from FY02 to FY07; Exhibit 7: Proposals by Raghuram Rajan Committee and Implication on Outsourcing; Exhibit 8: CBS Deployment in Indian Banks; Exhibit 9: Outsourcing Maturity: Global vs. Local; Exhibit 10: Outsourcing : Drivers and Constraints; Exhibit 11: Outsourcing in the Banking Sector; Exhibit 12: Banking Value Chain; Exhibit 13: Type of Banks and Readiness to Outsource; Exhibit 14: Banks and Services Outsourced; Exhibit 15: Opportunity and Market Size; Exhibit 16: Revenue Share by Function Type; Exhibit 17: Revenue Share by Type of Services; Exhibit 18: Three Scenarios for Outsourcing in Banking; Exhibit 19: Market Size of Outsourcing in Banking; Exhibit 20: Factors Driving Outsourceability; Exhibit 21: Banks and Services Outsourced; Exhibit 22: Banks to Leverage on IT Outsourcing; Exhibit 23: Sample Contracts in IT and BPO; Exhibit 24: Vendor Evolution in Domestic BPO; Exhibit 25: Vendors in Domestic BPO; Exhibit 26: Banking BPOs; Exhibit 27: New Domestic Focus for Large International Vendors; Exhibit 28: Strengths and Concerns of Vendor Groups; Exhibit 29: Large Players Account to 63% of Total Opportunity in Banking; Exhibit 30: Frontrunners

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