Benefits and Considerations
With the rise of digital technologies and the growing demand for specialized expertise, outsourcing is becoming an increasingly popular strategy for companies to improve efficiency, reduce costs, and provide better customer service. Particularly for the BFSI industry, it can help businesses take advantage of outside expertise to improve customer service and provide other significant benefits such as an automated KYC verification process, increased fraud prevention capabilities and much more. Let’s delve into the benefits as well as the considerations to keep in mind while leveraging outsourcing in the BFSI industry.
Streamline KYC Verification and AML Compliance
One of the most significant benefits of outsourcing for the BFSI industry is the ability to simplify and streamline KYC verification and AML compliance. Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations require financial institutions to verify the identity of their customers and monitor their transactions to prevent illegal activities such as money laundering and financing terrorism. Outsourcing these functions to specialized service providers can save time and money while ensuring compliance with regulatory requirements. According to a 2020 survey by Deloitte, outsourcing KYC and AML compliance can reduce costs by up to 50% while improving process accuracy and speed.
Improved Fraud Prevention Capabilities
Outsourcing also provides the BFSI industry with improved fraud prevention capabilities. Fraudulent activities such as credit card fraud, identity theft, and phishing attacks are increasingly sophisticated, making it difficult for financial institutions to keep up with new threats. Specialized service providers can improve fraud detection rates while reducing false positives. A report by S&P Global Market Intelligence found that outsourced fraud detection systems can detect up to 50% more fraudulent activity than in-house systems.
Greater/Omni-Channel Customer Support Capabilities
Customers today expect personalized and seamless experiences across multiple channels such as phone, email, chat, and social media. According to a Forrester report on UX Customer Experience Index, 73% of consumers say that valuing their time is the most important thing companies can do to provide good customer service. Outsourcing customer support functions to specialized providers who use advanced technologies such as chatbots, voice recognition, and natural language processing can improve response times, reduce costs, and enhance customer satisfaction.
Reduced Operational Costs and Increased Operational Flexibility
In addition to the above benefits, outsourcing can help the BFSI industry reduce operational costs, increase operational flexibility, and access specialized expertise. For example, outsourcing back-office functions such as accounting, HR, and IT can reduce costs and free up internal resources for more strategic tasks. Outsourcing also provides BFSI companies with access to specialized expertise in areas such as risk management, regulatory compliance, and digital transformation, which may not be available internally.
Considerations When Outsourcing
While outsourcing can provide numerous benefits for the BFSI industry, companies should approach it with caution and carefully select service providers based on their experience, expertise, and reputation. Data confidentiality, regulatory knowledge, ISO certification, industry experience of the team, and quality of deliverables are a few points to consider when choosing an outsourcing partner.
Outsourcing can be an effective strategy for the BFSI industry to improve efficiency, reduce costs, and provide better customer service. Automated KYC verification and AML compliance, improved fraud prevention capabilities, greater and omni-channel customer support capabilities, and access to specialized expertise are just some of the benefits that outsourcing can provide. However, companies should carefully consider the risks and benefits of outsourcing and select service providers based on their experience, expertise, and reputation to ensure success.