The emergence of captive industry has been a true success story over the last decades. After witnessing more than 20 years of tenacious growth, it is evident that the attractiveness of captives springs from an array of benefits.
BFSI as a sector has seen the largest number of captive operations. Not only has the change in its regulatory environment facilitated growth in internal processes and technology, the changes have impacted the manner in which banks can generate revenues.
There is a paradigm shift in the way today’s new age captive centres work. Moving beyond the role of service delivery, captives now take care of end-to-end sensitive processes at the upper end of the value chain, which includes credit and decision analytics, financial risk management and anti-money laundering.
“Most of the global financial giants are seeking opportunities for differentiation from competition through the use of powerful new technology areas such as mobile, cloud computing, social media and analytics. They would prefer to do such work within captive centres, than through third
parties,” says a report.
The number of captives levitating on pure technology services, especially on digital technologies like Artificial Intelligence and Blockchain, are thus growing. This has resulted in more and more banks and services to opt for cost-efficient locations to house their back-end operations, in line with efforts to contain costs, as part of their operating model.
Captive centres seem to be mushrooming all over India. Most captives of multinational banks are seeking to establish their presence in the country, owing to the fact that they benefit greatly from the ability to tap into skills from a vast talent pool of business graduates and ideas from across their
Today, many foreign banks have set up their global in-house centres (GIC) in cities such as Mumbai, Bengaluru, and Chennai, which are providing shared services in Operations, Analytics, Finance,
accounting and HR processing.
Most of the multinational captives in India are moving up the value chain in terms of hiring for not
just basic back-end work but also high-end processes, which includes hiring highly-skilled tech and
analytics professionals from multiple fields.
The management of huge volumes of data can often be handled with more skill by back office and
can minimize risk. Additionally, back office allows banks to manage transactional processes of a wide
varying nature on a high frequency basis.
Captives allow banks to keep pace with technological developments and meet evolving customer
demands more effectively. It is interesting to note how most of the captives have incorporated
automation for otherwise manually handled processes. Often they have thousands of
people processing customer requests which is both costly and slow, and can lead to
inconsistent outcomes and a high error rate. With technologies like Artificial Intelligence,
Robotics, Machine Learning and Blockchain, to name a few, automation offers solutions that
can help cut down back-office processing times.
Regulatory and Security Compliance
The data security compliance and regulation challenges alone can be daunting for banking and
financial services firms. The tougher regulatory environment being applied in the banking and
finance sectors has called for more ring-fencing of individual departments and strict separation of
certain processes and services. Captives can offer strength and resilience in this area of operational
exposure. They also offer improved compliance with quality as well as security standards.
Risk of data error is extremely expensive in banks. By applying specialist expertise or automation in
more recent times, back office teams can provide increased data quality and accuracy.
Improved Bottom Line
Captives provide for empowerment and enhanced business efficiency and an improved bottom line.
With more and more captive centres rising on the block, various bank tasks are being executed
meticulously, thereby delivering exponential growth for the banks.
(The author is Managing Director at Mashreq Global Services)