Any task outside of the banks core business would be best outsourced. That means non-mission critical operations like customer service or email management should be delegated to a third party vendor. Banking outsourcing allows the financial institution to focus on its core competencies and upstream operations. What hinders them from trying out outsourcing however is due to the perceived risks.
Risk to overall strategy choosing the wrong vendor will supposedly impact on the companys financials which might arise from the wrong decisions. But this can be averted by migrating only non-mission critical operations to the third party organization like payment processing outsourcing or customer relations.
Risk to reputation poor service from the provider could backfire and negatively affect the banks reputation. While this is a very real threat, this can easily be rectified by insisting on regular customer feedbacks to evaluate the service.
Legal risks the bank will end up assuming all the legal and regulatory penalties if the service provider has less than stellar standards. Its important that the bank should implement oversight functions apart from conducting thorough background check on the provider to mitigate the risks.
Technological risks if the vendor uses substandard technology, it could impact on the type of service it provides. Again, track record and background check would lessen the dangers.
Steps to mitigate risks
There are ways to lessen the risks involved with banking outsourcing. The main takeaway should be to create an extensive guideline that will serve as a beacon in monitoring and oversight of the service provider. The policy should also include a study of the banks operations to determine which need to be outsourced and which should remain internal.
Again, a background check is necessary in this case. It would also be prudent for the bank to also check offshore companies which offer better value for investment while maintaining quality service. It seems obvious but some outsourcing agreements are not governed by a comprehensive contract that outlines the responsibility of each party. So insist on one.
Lastly, the company should adopt a risk management strategy that will anticipate possible problems and craft plans to immediately address these issues to avoid downtimes. Third, regular evaluation of the payment processing outsourcing activities will allow the bank and the service provider to adjust accordingly with the end view of providing excellent customer service.
Build on relationships
When you do find that ideal service provider for banking outsourcing, its important to build on the relationship for a long-term collaboration. The only way for the relationship to prosper is if the agreement is a win-win solution for both parties.