Forward-thinking banks increasingly rely on digital innovation and personalized services to grow their customer base and increase competitiveness. However, one critical factor in many digital transformation initiatives is often underestimated: designing an effective sourcing model to partner with a portfolio of specialist providers.

The importance of refocusing sourcing strategies

An effective sourcing model is not only a means to reduce costs but also a tool to maximize a bank’s flexibility and agility. By realigning sourcing strategies, banks can expand their ability to respond more quickly to changing market demands without compromising the quality of their services.

The role of digital innovation

Integrating digital innovation into the sourcing model enables banks to automate processes and increase efficiency while delivering a seamless customer experience. From automating back-office tasks to implementing AI-powered analytics tools, innovative sourcing strategies can create a decisive competitive advantage.

The security and compliance challenge

Security and compliance are essential in the banking industry, and an effective sourcing strategy must include mechanisms to ensure data security and compliance to maintain customer confidence and meet regulatory requirements.

Shaping the future

In a world of constant change, banks must be ready to adapt and innovate. Refocusing sourcing strategies strengthens a bank’s agility and ability to innovate while ensuring a personalized and secure customer experience. By harnessing the transformative potential of sourcing strategies, banks can shape the future and position themselves as leaders in the digital age.

The sourcing and shoring provider landscape has changed significantly, and the scope of outsourced processes is constantly increasing and becoming ever more modular due to falling integration costs, emerging regulations, and service-specific solutions.

Sourcing-Trends

Demand – a bank’s perspective

The strategic question for banks: Do we have appropriate service aggregation, integration, and delivery platforms?

  • Specialization and innovation: Specialized financial service providers enable banks to reduce operating costs, quickly offer customized solutions, and promote their innovative strength through co-creation approaches.
  • Customer-focused business models: Banks are under enormous competitive pressure. Outsourcing financial services to specialized providers is becoming more attractive in order to concentrate on core competencies such as efficient sales.

Supply – a provider’s perspective

The strategic question for providers: What processes and technologies will support continuous improvements of modular solutions as well as integration options?

  • Provider ecosystems: Providers aim to establish strategic collaborations to create a comprehensive ecosystem, offering banks tailor-made services that integrate with other solutions for a holistic and versatile financial offering.
  • Modular solutions: Providers focus on specialized areas within banking operations, enabling expertise reuse, efficient resource allocation, and reduced development, maintenance, and operational costs.
Suitability

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Which sustainability activities are sourcing candidates involved in?

Risk

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What degree of risk is acceptable?

Market

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How do the services offered by the service providers differ?

Value

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Which sourcing model suits individual requirements?

Readiness

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Are the tasks and responsibilities within the activities for outsourcing clearly defined?

A holistic make/buy/share sourcing strategy should be based on a thorough analysis of a bank’s value chain. It should align with (a) the bank’s business strategy, (b) sourcing partners’ strategic interests, and (c) customer demands. Banks that successfully design such strategies can leverage sourcing for business outcomes and innovation.

Need for change

  • Banking operations: Ever-increasing personnel shortages in the banking sector (war for talent, tied-up capacities).
  • Emerging technologies: AI and event streaming have the potential to massively transform the outsourcing landscape.
  • Vendor landscape: Rise of increasingly specialized managed and financial service providers and Fintechs.
  • Business strategy: Growing importance of building business-centric digital ecosystems.
  • Time to market: External service providers can help optimize and automate business processes, which leads to faster handling of processes and, therefore, a quicker time to market.

Possible business cases

Sourcing strategy

A holistic sourcing strategy should be based on a thorough analysis of a bank’s value chain. It should align with (a) the bank’s business strategy, (b) sourcing partners’ strategic interests, and (c) customer demands. Banks that successfully design such strategies can leverage sourcing for business outcomes and innovation.

Financial service factories

Factory business models play a key role in enabling service providers to efficiently support banks in a wide range of operational activities, from reporting and account management to compliance. When implemented correctly, they can drive consistency, scalability, risk mitigation, compliance, and innovation in banking operations.

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