There is a common misconception that outsourcing certain services and operations within your financial institution is costly and inefficient. However,by outsourcing through experienced service providers, a financial institution can quickly improve the quality of its services, increase operational efficiencies, and reduce costs. In addition, outsourcing frees up time and resources that can be devoted to more important business functions, like creating better products and services, or improving customer experience.
Here are eight services your financial institution should consider outsourcing:
1. ATM Services
ATMs are a critical service offering for financial institutions. These services include cash replenishment and settlement, deposit pickup and processing, and maintenance and security. Many banks still service their own ATMs which leaves the ATM and bank’s employees vulnerable to high-risk situations. Outsourcing ATM services keeps your employees safer, saves time and resources, and improves overall efficiency in cash operations.
2. Cash Forecasting
Banks have some of the most intricate cash supply chain systems in the world. This growing complexity is due to sophisticated technology such as ATMs, video tellers, recyclers, kiosks, and more. Outsourcing cash forecasting does the following:
3. Cash Management Services (CMS)
Cash is the lifeblood of your financial institution, and in the past many financial institutions in the United States have handled most of their cash management services (CMS) in-house. However, handling these processes internally results in tremendous expenditures for labor, transport, and facilities overhead, not to mention lost time and efficiency. In the past five years there’s been a large shift toward outsourced CMS, with financial institutions opting to work with a partner that specializes in cash handling. Outsourcing CMS services like cash, coin, and check processing allows your financial institution to have a larger geographical presence, significant time and cost savings, improved operations, and a higher standard of quality and service.
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4. Person-To-Person Payments (P2P)
Over the last few years, person-to-person payment options (P2P) have grown exponentially due to the convenience of popular applications like Venmo and Zelle. Due to this rise in popularity, many financial institutions such as Bank of America, Chase, and many other financial institutions have joined the Zelle community to be able to provide this service to customers. Outsourcing P2P payments helps meet customer expectations, increases customer user experience, and saves on costs associated with in-person/tangible payments.
5. Regulatory Compliance
Compliance and regulatory reporting requirements for banks have increased because of regulations such as Basel II, MiFID SOX, and the PATRIOT Act. uncertainty is a “defining characteristic” for the current state of business. Outsourcing regulatory compliance can cut down on that confusion.Banks can worry less when it comes to compliance for both operations and auditing purposes as a result of the integrated accountability of outsourced reporting.
6. Internal Profitability Analysis
One of the important projects bank leadership is tasked with is conducting an internal profitability analysis. This is to make sure your financial institution is maintaining a competitive edge in the market by checking that your pricing is competitive, and you’re offering the correct products and services. The internal process of doing this requires tedious mystery shopping of your competitors and an in-depth, comparative analysis of your own pricing and services. This could take employees away from their responsibilities for months depending on their role. By outsourcing this project to a third party you will obtain more accurate data, unbiased recommendations, and your employees can stay focused on more important revenue-growing tasks.
7. Loan Underwriting
The financial lending landscape is constantly evolving and with rates predicted to remain low, consumers are seeking out more loans. Some of the major difficulties banks run into with internal loan underwriting is the expectation of keeping customer data safe and making sure you have fast data access when undergoing audits. Outsourcing loan underwriting through artificial intelligence (AI) and machine learning (ML) technology and software improves your credit team’s productivity and satisfaction, increases loan approval, and eliminates bias in the loan underwriting process.
8. Information Technology (IT) Department
In the past, outsourcing IT was perceived as too costly and unreliable. However, the costs and complexities of supporting in-house operations have skyrocketed in recent years due to banks taking on more digital transformation initiatives. Today, outsourcing has evolved to better meet the needs of modern banking service providers, and by outsourcing basic IT infrastructure and data management, financial institutions can free up resources and prioritize business-related growth.
The needs of financial institutions are constantly evolving. It is recommended that banks evaluate services and operations that can be outsourced to help them reach growth and revenue goals, while also creating a positive customer experience.
