FIS Capital Markets’s head of managed services Tara Winters believes financial services firms are waking up to the benefits of outsourcing. 

Tara-Winters

Tara Winters, FIS Capital Markets

While the concept of outsourcing may not be new within investment banking, doing so is becoming increasingly common, with greater numbers of banks delegating certain operational functions to outside providers. There are some obvious benefits to doing this, from basic cost saving to freeing up resources to focus on value-added areas where they can really differentiate from others in the market.

Tara Winters is global head of managed services at FIS Capital Markets, a division of one of the world’s largest providers of financial technology and outsourcing services, and a company at the vanguard of facilitating this shift. She says the reason outsourcing has become so attractive is that it allows banks to focus on their core business activities. “There are many processes within their operations that are non-differentiating, that don’t provide a competitive advantage. These are key areas where a partner can handle such processes on their behalf,” she says. 

Shifting regulatory landscape

Regulatory reporting is a good example of this, as it is the number one area that clients say they are willing to outsource, Ms Winters notes. “There’s no differentiation: everybody has to provide regulatory reports. It’s just a cost of doing business.”

Meeting shifting regulatory requirements, particularly for banks operating across different jurisdictions, is now a permanent feature of the landscape for investment banks. “We’re continuing to see an increasing level of regulation, which firms need to accommodate,” Ms Winters notes. “It is driving a significant proportion of their operational expenses, with regulatory reporting and compliance accounting for [at least] 25% of those costs.”

A lot of firms, she says, initially explore outsourcing due to the need to meet a specific regulatory requirement, but “once they’re leveraging regulatory reporting and compliance solutions, they see a wider range of other opportunities”.

Enabling focus

The Covid pandemic, Ms Winters believes, has also prompted many firms to take a step back and consider their wider strategy, and how they are going to create growth. “Companies are taking a good hard look at their operations and their businesses going forward, [and asking] what’s our strategy coming out of the pandemic?” she explains, adding that they want to free up resources so they can focus on areas of growth and innovation.

In the capital markets space alone, FIS offers a range of services including accounting, risk management and regulatory reporting, as well as more general offerings, such as client onboarding and customer service solutions, application hosting and business-process-as-a-service (BPaaS) solutions. It serves clients in a wide range of locations worldwide, although is seeking further expansion — she believes Asia-Pacific, Africa and the Middle East are going to be key growth areas for the business in the coming years.

Into the cloud

Clients opting to move data centres onto cloud-based hosting is one of the key areas where FIS is seeing growth. “About two-thirds of our capital markets use cloud services, and our 2021 readiness report [an annual survey of more than 1100 fintech business leaders] found that around 98% of our clients indicate that they are planning to increase their reliance on managed cloud services,” she says.

The pandemic has been a key accelerant of this, with many companies finding themselves forced to shift their workforce to working from home and needing to tackle the associated operational challenges. “The pandemic highlighted some of the challenges [firms] may have had around employees working from home,” Ms Winters says. “For example, the security arrangements that they previously had in place may not have been tested, or completely ready to handle the volume of people working remotely that we have witnessed over the past 18 months. So, improving that robustness has been a key driver.”

Career history: Tara Winters 

  • 2018 SVP, Head of global managed services, FIS Capital Markets
  • 2017 SVP, Head of buy-side managed services, FIS Capital Markets
  • 2015 SVP, Head of managed and client services, FIS Insurance
  • 2014 SVP, Head of Americas, FIS Insurance (Heritage SunGard)
  • 2012 SVP, Head of core and legacy solutions, FIS Insurance (Heritage SunGard)

Operational resilience is not the only major driver of increased outsourcing — improving efficiency is also a key attraction. Ms Winters highlights that those interested in BPaaS solutions are often looking to improve their speed to market for a new product offering and outsourcing enables them to expedite this. Unsurprisingly, cost saving is another strong motivator, with Ms Winters highlighting another key finding of their client survey: the significant pressure that their clients are facing around capital expenditure, heightened by the pandemic. “BPaaS can also really cut down the initial capital outlay that is needed to launch a new product,” she adds.

Building confidence

With concerns around areas such as data privacy, cyber security and operational resilience, firms could be forgiven for having reservations about giving away responsibility for parts of their services. Ms Winters acknowledges that there is still some reticence around the loss of control. Although that can be mitigated by service-level agreements with strong standards around availability of applications, security provisions, speed of response and accuracy, these are ultimately “strategic decisions being made at the highest level of an organisation, because it can impact their employees and they are, effectively, giving up an entire function in some cases. They need to take the decision that this is the direction that they want to take forward in order to achieve the benefits around things like efficiency and improved focus.”

There is so much investment that is being made by cloud providers in their security

Tara Winters, FIS Capital Markets

Ultimately, Ms Winters says, outsourcing should enable firms to feel more confident in the resilience of their systems. “Across our services, we have clear procedures and protocols in place, and we have regular testing of our ability to support our clients in case of a disaster,” she adds.

Cyber security efforts

Interestingly, cyber security concerns are also leading to more firms using cloud services, despite the same concerns previously making them wary of using external partners. “There is so much investment that is being made by cloud providers in their security,” Ms Winters says. “Clients are seeing this and realising they can’t invest to the same degree, on an ongoing basis, to ensure the required level of security.”

She believes regulators have also warmed up to the idea that cloud services and other aspects of outsourcing can increase the robustness of firms’ security and improve the integrity of their operations. This is helped in large part by the EU General Data Protection Regulation and broader data sovereignty questions, which have forced cloud providers to place due consideration on how to configure their systems to serve clients in a range of geographies and satisfy local regulatory requirements around data transfer and housing.

“I think regulatory bodies were initially concerned about the cloud and how to ensure the security of the companies they supervise, and national security more broadly, was maintained,” she explains. “Regulators have been doing their own due diligence and asking questions, and they’ve been warming up to the fact that it is a secure way for firms to run their applications. It is certainly a lot more accepted in the regulatory environment.”

Like regulation, cyber security and operational resilience have become areas that banks need to remain on top of. Firms should constantly be assessing their ability to recover from a major event. “In the past, when thinking about disaster recovery, that would have been around natural disasters like an earthquake or a hurricane,” she notes. “That expanded to include terrorist attacks, and now cyber security is up there as well.

“I think a few years ago, there was more of a sense for firms that they were going to make a big investment in this area and that would protect them. But there has been a realisation that this is an ongoing issue and as industry involves its security, so too will cyber criminals make advances on their side. It’s not something that is ever going away.”

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