Key Findings & Highlights:

Shared service centers (SSCs) have fulfilled a changing role in the banking industry over time. Originally SSCs were regional in nature, and were customized centers of excellence for operations execution. In their next stage of development, SSCs were designed to deliver cost efficiencies by sharing overheads across multiple banking units (often acquired banks). The third stage of development for SSCs created cost efficiencies by locating the delivery centers in cost advantaged geographies (usually to benefit from labor arbitrage).

Management and governance at SSCs was (and primarily still is) a continuation of internal management practices, with managers responsible as corporate officers for delivering high quality services efficiently. SSCs have overwhelmingly not adopted the 'arms' length' management technique of benchmarking or industry standard operations techniques. SSCs remain cost centers with virtually no pricing incentive for innovative efficiency gains.

Since the great recession, banks have faced declining volumes and SSCs have faced flat volumes, as a greater proportion of a declining volume of services were moved to the SSCs. Today, limited capital at the parent level is limiting the intended level of growth in SSCs, including investment limitations on technology, delivery centers, and new processes. Some SSCs are anticipating growth in operating expenditures such as additional labor, where overall cost of delivery will be reduced.

SSCs are anticipating increased investment in:

• Automation technology
• Compliance activities
• Revenue generating activities.

Despite capital constraints, SSCs are moving slowly towards changes in:

• Business model
• Processing techniques and methods
• Working with third parties.