Virtual Back Office Services Realizing the Value of Outsourcing Beyond Cost Reduction. FIS Consulting Services

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1 Realizing the Value f Outsurcing Beynd Cst Reductin FIS Cnsulting Services

2 Outsurcing slutins available t financial services rganizatins shuld enable business transfrmatin. Outsurcing has evlved frm a pure labr arbitrage alternative (ding the same tasks cheaper) t value added business prcesses that prvide bundled banking technlgy alng with the skilled, variable peple resurces that mst efficiently leverage the technlgy. This shift in thinking evaluating business prcess utsurcing (BPO) prviders n their abilities t add value is displayed in the fllwing criteria frm a TwerGrup 2011 reprt describing hw financial institutins shuld evaluate lending BPO prviders: Criteria fr Evaluatin f Vendrs f Business Prcess Outsurcing in Cnsumer Lending Vendr Evaluatin Criteria Business strategy and service emphasis Breadth f lending prcesses perfrmed Ttal size f BPO peratin BPO lcatin strategy Technlgy strategy Service pricing ptins Details f Criteria Services: lending BPO prcesses the vendr has dne Grwth strategy: industry fcus, expertise in the prcess type, custmer size Scpe: financial services fcus r multi-industry Number f lending services prvided, lan riginatin vs. servicing, custmer facing vs. back ffice, vice vs. data Ttal number f clients and emplyees Ability t prcess lans ffshre r near-shre nly, nshre nly, r bth nshre and ffshre Ability t prcess lans n vendr s wn platfrm r the lender s platfrm Number f pricing ptins ffered: per wrkstatin, per transactin, vlume-based tier pricing, nshre/ffshre hybrid pricing, value and perfrmance pricing While traditinal utsurcing has been successful in reducing perating csts, banks have nly just scratched the surface f the benefits that can be realized. The TwerGrup and a wave f ther industry analysts depict this new thinking. In their 2011 Glbal Trends n Surcing, Mrrisn & Ferester describe innvatin as a key aspect f utsurcing: Innvatin is back n the agenda. Fr the past tw years, all the talk in the utsurcing sectr has been abut cst saving, and all the prjects have been abut restructuring r re-negtiating utsurcing cntracts. That is changing. A recent U.S. study abut cmpanies seeking innvatin in business prcessing utsurcing shws that 43% f executives in utsurcing custmers view innvatin as a critical element f BPO. Management teams within all industries seek t leverage their investment in utsurcing and BPO services. They seek better cash management, imprved prcurement plicies, greater agility in respnding t market cnditins, and mre effective gvernance structures. Within banking, these types f benefits apply mre readily if the prviders f the utsurced service als supply the related banking technlgy--and their human resurces are fcused slely n banking slutins. In FIS, this cmbinatin is characterized as Virtual Back-Office (VBO) Services. 1

3 The benefits f VBO slutins supplied with experienced resurces deeply familiar with banking technlgy platfrms are depicted in the fllwing graphic. Outsurcing Benefits Faster speed-t-market Shrtened implementatin cycle Rapid scalability Imprve custmer satisfactin Wrkfrce trained n technlgy and business prcesses Drive additinal crss-sale revenue Level the cmpetitive playing field Match the service fferings f larger institutins Spend mre time with custmers and build lng-term relatinships Cnvert fixed csts int lwer variable csts Pay by the drink pricing mdel Access newer technlgy, etc., with minimal upfrnt csts r capital expense Single vendr fr platfrms and services Reduced need fr management versight Increased leverage with partner Maximize the value f skilled bank staff Fcus n high-value client interactins Eliminate heads dwn repetitive prcess wrk Speed-t-Market Outsurcing can greatly aid prduct launch effrts, prviding resurces t supprt new custmers by supplementing help desks with expertise n new banking fferings. Beynd supprt functins, knwledgeable resurces can streamline develpment activities with their familiarity f the banking technlgy that creates the fundatin fr the new prduct. Custmer Satisfactin Custmer service levels can be raised by extending call center hurs with utsurced resurces. This staff, familiar with banking, can als be trained t crss sell additinal banking prducts and services. One example wuld be an ebanking help desk crss selling mbile banking services. Level Playing Field Additinal supprt resurces will imprve custmer cverage and help cmmunity bankers t cmpete n with persnal service as a unique selling pint. The cst effectiveness f traditinal utsurcing cmbines with banking expertise t create additinal virtual staff when yur bank may mst need it. Leverage Variable Cst Mdels Pay as yu g pricing with Virtual Back-Office Services limits large capital utlays and creates scalability at minimal up-frnt investment. Variable csts create imprved flexible staffing mdels. 2

4 Single Vendr Slutins With services and technlgy surced frm ne prvider, vendr versight and gvernance becmes greatly reduced. Fewer hands in the slutin als creates faster issue reslutin. Maximize Existing Staff Value Outsurcing t skilled, banking resurces creates greater flexibility fr yur bank s current staff. The reductin in heads dwn repetitive tasks frees existing resurces t fcus n mre strategic tasks and utcmes. The many, varied benefits f utsurcing beynd a simple cst reductin exercise are described best in the fllwing three Virtual Back-Office Services Case Studies. Virtual Back-Office Case Study 1 The Client: The bank was funded ver 100 years ag and has grwn t ver $4 billin in asset with lcatins thrughut the sutheastern United States. Business Objectives: Grwth thrugh acquisitins while maintaining efficiencies Maintain high custmer services levels Achieve regulatry cmpliance with variable cst resurces FIS Slutin: The FIS Virtual Back-Office Service prvides transactin dispute management fr electrnic debit card transactins submitted by retail custmers that need t be reslved within ten days. Benefits Achieved: Ten percent reductin in charge-ffs Transferred back ffice FTE handling disputes t anther psitin Avided adding FTEs with increase in dispute vlume due t acquisitins Increase in bank emplyee mrale Streamlined previusly disjinted dispute management prcess Reg E Challenges f Transactin Disputes A less publicized aspect f Reg. E ffers bank custmers certain safeguards against fraudulent/unauthrized accunt activity regarding electrnic transactins. Cnsumers have right t dispute these transactins, placing the burden n the banks t: Investigate such disputes and, if necessary, credit the cnsumers accunt fr the disputed amunt and chargeback the merchant 3

5 Handle disputes via a phne call r in writing Reslve issues within Regulatry time limits allwing fr investigatin and making a final determinatin. With the rise in adptin f check cards, the number f fraudulent and unauthrized transactins has gne up and caused banks t search fr a better way t reslve these disputed transactins. Leveraging a Strng Relatinship The Bank was a lng time FIS Integrated Banking System (IBS) custmer with a deep relatinship with FIS. Many aspects f the bank s peratins relied n FIS technlgy, s executives at the Bank felt it a lgical step t cnsider FIS fr handling transactin dispute management. As the Bank gained an educatin n Virtual Back-Office Services, they realized what a natural extensin it became fr FIS t handle their electrnic debit card generated dispute management. FIS managed the technlgy t issue and track disputed transactins. It was a natural fit t let their banking prfessinals dcument, cmmunicate and reslve these issues, relates a Depsit Operatins executive at the Bank. Benefits Exceed Original Expectatins In the eighteen mnths FIS VBO Services has managed disputed transactins, the Bank has been pleasantly surprised with the results. Charge ffs fr these disputes have decreased 10% and emplyee mrale has gne actually gne up! Reg E dispute management had been a series f disjinted prcedures that nly came t play with a very small minrity f custmers. The retail staff were cnfused by the frms and rules gverning Reg E transactin reslutins. Training t imprve the situatin prved difficult t recall, as transactin dispute management did nt cme up in the vast majrity f custmer interactins. Nw with FIS experts handling Reg E transactin dispute management and all the custmer interactin and tedius paperwrk, the retail staff f the bank n lnger wrries abut what they dn t knw abut Reg E. This utsurcing frees the client-facing staff fr mre prductive sales tasks, allwing FIS t efficiently handle this cmpliance burden. Hw the Prcess Wrks FIS VBO resurces review, research and reslutin f the cnsumer's dispute. The steps in the prcess cver the fllwing steps: 1. FIS Call Center receives the dispute infrmatin 2. FIS analyzes the dispute alng with merchant supplied infrmatin and makes a decisin 3. FIS makes apprpriate financial adjustments and handles decisining fr credits, chargebacks, etc. 4. FIS ntifies the cnsumer and merchant regarding the final dispsitin 5. FIS handles all cnsumer cmmunicatin required by the regulatin 4

6 The team handles transactin dispute management in partnership with the Bank s frnt line staff. The ptin t select a dispute management specialist exists n the Bank s VRU menu ptin. The VBO team updates bank management n any exceptins and prvides regular management reprts fr the mnitring f the prcess. Virtual Back-Office Case Study 2 The Client: This nn-traditinal bank started by a leading financial services enterprise has grwn t ver $12 billin in assets with a sales frce f ver 16,000 thrughut the United States. Business Objectives: Rapidly scale cnsumer lending peratins withut incurring time and expense t build infrastructure and expertise Maintain high custmer services levels Create next generatin nn-traditinal bank FIS Slutin: The FIS Virtual Back-Office Service prvides lan servicing utsurcing fr ver 450,000 cnsumer lans with an emphasis n autmtive and hme equity prducts. Benefits Achieved: Natinal market cverage with the FIS slutin handling individual state titling requirements Saving client time and resurces with FIS handling exceptins and special custmer cases Handling client gaps in lending prcess, paperwrk as this nt their mainline business Streamlined management reprting and cmmunicatin prcesses Establishing a Lng Term Partnership In 2001 a large, natinal prvider f financial services and prducts apprached FIS abut nt nly their lending technlgy, but als wanted the peple expertise t manage the lan servicing prcesses driven by the technlgy. In essence, the client wanted t jump start a glbal lending peratin and wanted t hit the grund running. They wanted t grw their pilt prtfli f 13,000 lans quickly, withut taking the time t build ut their wn infrastructure. Once the client decided the FIS technlgy and Virtual Back-Office slutin met their timing and scalability requirements, they quick rlled ut a natinal cnsumer lending prgram that has grwn t a 450,000 autmtive and hme equity cnsumer lan prtfli. 5

7 Unique Services within Lan Servicing VBO FIS cntinues t supprt the servicing n this prtfli handling all aspects f the lan maintenance, pay-ffs and lending administratin. One particular key value-add f the FIS slutin its flexibility. The client s sales agents are nt bankers by trade and smetimes gaps becme identified traced back t the riginatin f the lan. FIS staff helps fill the gaps and anticipate issues befre they becme real cncerns. Anther critical aspect f the lan servicing utsurcing slutin is the FIS ability t handle the intricacies f titling requirements per each f the 50 states. FIS keeps current with all the varius state regulatins fr titling, taking ver a significant administrative burden fr the client. Beynd titling, cmpliance prcedures fr examiners such as the Bank Secrecy Act and disaster recvery prcedures are well-dcumented and ready t assist the client in their examinatin prcess. Standard Lan Servicing Functins Prvided Beynd the specialized aspects f this lan servicing arrangement, ther functins prvided by FIS serve t rund ut the client s rbust servicing slutin including the fllwing: Accunt and custmer maintenance Payment prcessing and maintenance Payment schedule Payment methd Custmer services Answer questins regarding lan, payments, billing, etc. Research questins and reslutin Payff and maintenance supprt Payff qute and prcessing Lien release and perfectin The FIS lan servicing team leverages nt nly familiarity with FIS lending technlgy, but they handle the crdinatin between multiple client call centers, the client riginatin and cllectin teams, and the ther staff at FIS integral t the cmplete lan servicing slutin. Expanding fr the Future While currently aut and hme equity lans are serviced by FIS, there have been discussins abut expanding the relatinship t include mrtgage servicing a sign that this lng term partnership will cntinue t expand ver the next ten years. 6

8 Virtual Back-Office Case Study 3 The Client: This glbal financial services firm with significant brand recgnitin wanted t jump start their wn direct bank within a very aggressive timeframe. Business Objectives: Create a direct bank within 90 days Maintain cnsistent custmer experience between FIS Call Center and ther channels Prtect sanctity f client s brand FIS Slutin: The FIS Virtual Back-Office Call Center Service prvides 24 by 7 supprt fr direct bank custmer inquiries and nline prducts Cnsumer ebanking and Online Accunt Opening. Benefits Achieved: Gathering $10-15 millin in new depsits daily On track t becming $10 billin institutin Call Center fills gaps in banking knwledge Laying Dwn the Challenge t FIS In early 2009 an established financial services pwerhuse wanted t get int the direct bank business in 90 days! They desired t leverage their brand name and marketing acumen rder t quickly capture cre depsits In essence, the client wanted t jump start a direct bank and hit the grund running. Once the client decided the FIS technlgy Cnsumer ebanking and Online Accunt Creatin met their requirements, they then turned t FIS fr assistance fr call center services. FIS had already prven they culd deliver Call Center Services arund an HSA prduct, s banking expertise fr the direct bank was a decided plus. Add t the fact the client had t start a direct bank in 90 days--and the Virtual Back-Office Call Center slutin became their nly lgical alternative. Keeping the Brand Distinct One f the mre challenging aspects f prviding this VBO Call Center slutin was the strng desire the client had t leverage their brand with their custmers. High yield savings accunts and CDs were ffered thrugh the direct bank, with the brand recgnitin a central feature f marketing campaigns. The VBO Call Center became fully trained n the client s prcesses and prcedures; the client s culture became embedded within the dedicated Call Center staff. The nw 80 FTE emplyees even decrate their ffice with messaging frm the client s CEO! 7

9 Results Speak fr Themselves The direct bank was brught nline quickly meeting the 90 day timeframe required. The VBO Call Center came nline just days after signing the VBO cntract. Virtual resurces std ready t handle any questins clients had regarding changes t their accunts, interest rates r prduct questins. They als cntacted prspect wh attempted t pen an accunt nline, but may nt have finished the prcess. Acting in bth a supprt and service capacity the VBO Call Center helped prpel the grwth f this nline bank t $10 t $15 millin in depsits cllected n a daily basis! All the while they maintain the high standards f service that accmpany this financial services client s brand name. Rely n FIS An utsurcing partnership is nly as strng as the trust bth parties bring t the table. In relying n FIS fr Virtual Back-Office Services, the bnds f that trust are further cemented. Fr further infrmatin n FIS Virtual Back- Office Services call r visit fisglbal.cm.. 8