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The New Genpact Focuses on Pain Points in Banking Sector, Creating Utilities & Differentiating Services with Systems of Engagement

I recently attended Genpact’s industry analyst and advisor conference, at which the vendor described its approach to success in a time of rapid change for enterprise operations delivery. It believes that most enterprises are ‘cemented’ in the wrong place due to challenges with legacy processes underpinned by legacy technology, and that enterprises unable to adapt quickly will die.

Accordingly, Genpact is taking a dual approach to BPS:

  • Looking to embed advanced technologies such as machine learning & process automation, natural language processing, cognitive computing & AI, and algorithmic decisioning & service orchestration, not to mention RPA, in support of traditional BPS contracts based on wider end-end-to-end processes
  • Targeting narrower process pain points, supported by systems of engagement (SoE) that can be embedded with analytics to provide packaged, typically BPaaS, services.

These approaches are particularly applicable to the banking sector, an area of particular importance and focus for Genpact, with BFSI now accounting for a third of Genpact’s target sectors. Here Genpact has been particularly active in acquiring IP in the form of systems of engagement that can be packaged with analytics to provide highly targeted BPaaS services. Examples include:

  • OpenWealth, supporting a wealth management BPaaS service for U.S. and U.K. markets. The service supports investor acquisition, portfolio construction and administration and interfaces with the client trust accounting & custodial systems of record and is based on a carve-out of a wealth management platform from a global financial services company
  • LoanPath, providing a centralized desktop for multi-product administration ensuring data consistency across systems of record
  • Quantum, for mortgage origination
  • Multi-channel Customer Acquisition & Servicing (MCAS), in support of the delivery of multi-channel customer management to retail banking customers

In addition, Genpact has been active in forming partnerships both with the banks themselves (to spin-out systems of engagement and to create utilities) and with specialist consultancies to enhance its ability to provide differentiated services. Examples include:

  • Development of a Know Your Customer (KYC) utility offering with Markit. The KYC utility involves a number of “design partner banks” to provide industry practice, compliance standards, and policy inputs; Markit for platform capability; Genpact for operations. The utility uses a cloud-based platform and looks to separate out document & data collection (performed by the utility) from risk management & decisioning (performed by the client), taking out ~50% of the KYC process
  • Partnering with Oliver Wyman for risk management services. Together with Oliver Wyman, Genpact is supporting a major capital markets firm in Dodd Frank Act stress testing. Oliver Wyman created the DFAST submission document with Genpact then gathering, reviewing, compiling and documenting business forecasts, loss projection models & stress testing models.

Genpact provided several client case studies to illustrate the ways in which the banking sector’s use of BPS is changing.

One was a global universal bank, a long-time client of Genpact, who is changing its risk management operations to comply with new regulations. The effect of the regulations is to require banks to ring fence individual operations to mitigate the effects of risk failures. Ring fencing requires banks to decentralize operations. At the same time, the requirement for consistency of risk management across the bank requires replication of operations. Finally, as regulations adapt and mature the bank will need to continuously adapt its risk management operations. This is especially true with CCAR compliance, which as a matter of policy adapts to changing risk factors in the marketplace and does not fully reveal regulatory criteria to banks to mitigate attempts to “game the system”.

By engaging Genpact and Oliver Wyman, for risk consulting, the bank believes its risk management operations can adapt to a continuously changing environment by:

  • Adaptation of best practices in non-differentiating risk management practices
  • Standardization of operational delivery across a proliferating range of ring fenced risk management operations
  • Scaling of services to meet line of business cyclicality (e.g. global mortgage portfolio has grown 400% in past two years)
  • Cost control from Genpact using best practices from in-field experience across multiple clients.

Most industries (and especially the financial services industry) are in a state of continuous change which requires adaptable operations. Most BPS vendors, and much of Genpact’s business, is built on labor services, which are not very sticky over the long term. Genpact is building IP which will add stickiness to client relationships. Banks in particular do not have internal staffs with the bandwidth to address both operational delivery and operational change across their entire range of offerings. Most bank offerings do not have the profit margin to justify any attention or investment, which is why bank business models are changing so rapidly. Cost effective support for offering transition and regulatory compliance (the prime driver for third-party support today) is critical to bank success and requires continuous change in operational delivery scale and methodology. The banks are increasingly open to new business models and approaches to service delivery and Genpact is on the right path, certainly in financial services, for today’s markets.

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