Business process outsourcing in the financial services industry has entered a new era: one in which streamlining business processes and reducing costs are not enough.

The challenges facing today's financial services industry—globalization, increased regulation, margin pressure, and heightened competition—are not only resulting in more demand for outsourcing, but for outsourcing arrangements which will bring significant industry expertise and contribution to top-and bottom-line results, according to a TowerGroup White Paper commissioned by Broadridge Financial Solutions, Inc.

The report reveals that financial services firms are looking for BPO providers to deliver on multiple value points that result in more efficient operations and revenue enablement. To that end, the TowerGroup suggests that firms should seek BPO providers that have strong financial services expertise.

For example, the research pinpoints three ascending levels of value that leading providers will have to meet in the near future:

• Defined value—Vendors must demonstrate that they can still perform basic services with a high level of competence. This is not only to ensure that current goals are met, but to exhibit how the vendor may be able to incorporate more functions in a seamless manner. For example, being able to extend domestic trade functions into an international capability would indicate that future expansion could be readily addressed.

• Refined value—Because of regulatory changes, increasingly complex products, and the need to operate more efficiently, manage risk better, and meet growing customer demands, vendors have to demonstrate full understanding of such a sea change. It must show that it is responding to it in modernizing, repackaging, and reformatting services where needed. For example, a financial firm’s ability to bring a new product to market and confidently scale its distribution depends on the ability of the firm’s back office to process the product in a cost-effective manner.

• Aligned value—Leading firms will look beyond mere doers to find leading thinkers and doers in their sourcing and resourcing strategies. Leading services providers will become embedded in their customer’s business, sharing not only the benefits and rewards of superior performance, but also the costs of failure. The best such firms will use their acumen and the data they have captured over years of cumulative business operations to analyze data for new insight and apply the insight to deliver marketplace foresight.

“The research revealed emerging practices and trends in financial services BPO, specifically the evolution of the value chain, delivery models, pricing models, and best practices in utilizing outsourcing to drive revenue,” said Joe Barra, president, International Securities Processing & Global Outsourcing Solutions, Broadridge. “BPO can make financial services firms not only more efficient but also better able to compete in key customer service dimensions, risk control, and operational and regulatory responsiveness. And it can enable financial services firms to enter new markets or launch new products much more quickly.”

The findings of the White Paper were a key topic at three recent industry conferences: the 2011 TowerGroup/CEB Annual Financial Services Strategy & Technology Conference (April 13th); the SIFMA Operations Conference (May 3rd); and the FSO Knowledge Xchange Transformation and Outsourcing Strategies Forum (May 5th).

Download a copy of the TowerGroup study [www.broadridge.com/bpo] (registration required).