Topic: Regulatory Compliance in Banking and Capital Markets All About Good Data Governance Banking, Financial Services, and Insurance (BFSI) IT Outsourcing Market Report: June 2014 Preview Deck
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Background and scope of the research Background of the research Banks and financial institutions are inundated by regulations introduced in the aftermath of the financial crisis of 2008. Lack of regulation and supervision in financial services, lax attitude of banks for managing risk, and easy evaluation standards by rating agencies are cited as some of the reasons that contributed to the crisis. The devastating impact of the financial crisis on the global economy led to regulators enforcing stricter regulatory norms and ensuring increased transparency, accountability, and risk management. Through the introduction of these regulations, the authorities primarily want to prevent another systemic breakdown and financial collapse The regulatory compliance space, while complex and overbearing, has been a top priority for senior executives at banks and financial institutions for the last few years, and will continue to be so for the foreseeable future Through this report, Everest Group explores the different regulations that banks and financial institutions need to comply with, and the key business, technology, and sourcing implications these regulations have. The report also captures the key trends for regulatory compliance-related transactions in banking and capital markets, and regulatory compliance-related investments made by service providers Scope of this report Services: Application outsourcing and infrastructure services (includes development, maintenance, enhancement, testing of custom / packaged apps, datacenter, desktop, helpdesk, and network) for regulatory compliance and management Industry: Banking (retail banking, commercial banking, credit cards, loans, and mortgages) Capital markets (asset management, investment banking, custody and funds administration, and brokerage) Geographies: North America and Europe 3
Table of contents (page 1 of 2) Topic Page no. Background and methodology 5 Executive summary 8 Section I: Overview of regulations in banking and capital markets 13 Summary 14 Regulatory compliance in the banking and financial services industry: Evolution 15 Regulatory compliance in banking and financial services IT outsourcing: Market size and related trends 17 Description of key regulations for banking and capital markets 19 Key business, technology, and sourcing implications of regulations 27 Section II: Key trends for regulatory compliance-related IT transactions in banking and capital markets 31 Summary 32 Number and TCV of BFS ITO contracts with regulatory compliance in scope 33 Transaction characteristics renewals and scope 34 Line of business and geography 35 Deal duration and buyer revenue 36 Section III: Service provider investments 37 Summary 38 Trends related to proprietary solutions launched and alliances formed 39 4
Table of contents (page 2 of 2) Topic Page no. Section III: Service provider investments (continued) Coverage of regulatory compliance specific solutions by service provider 40 Comparative assessment of regulatory compliance-specific domain investments 43 Details of regulatory compliance-specific domain investments 44 Appendix 56 Glossary of terms 57 BFSI ITO research calendar 59 References 60 5
Overview and abbreviated summary of key messages This report provides an overview of regulatory compliance related IT outsourcing in banking and capital markets. It captures key regulations in this space along with their business, technology, and sourcing implications. The report captures key adoption trends and growth in value/volume of regulatory compliance related transactions, and key regulatory compliance-related investments by service providers. Finally, the report provides insights into evolving trends in the market and implications for buyers and service providers. Some of the findings in this report, among others, are: Market size and growth In 2013, IT outsourcing market size for regulatory compliance-related initiatives is estimated at US$12-14 billion This spending is expected to grow at 15 to 20% in the future, driven by the announcement of new regulations, amendments to existing regulations, and approaching timelines Besides these regulations, revised Office of Comptroller of Currency (OCC) guidelines were issued in 2013, which mandate higher scrutiny of third-party vendors Key implications Emerging service provider trends Service provider investments These regulations combined together have different business, technology, and sourcing implications for banks and financial institutions. Banks must review these and revamp their Governance, Risk, and Compliance (GRC) function accordingly Nearly 75% of the regulatory compliance related transactions started in 2013 were new deals as compared to only ~10% in 2009 North America and Europe are the key geographies driving demand for regulatory compliance related IT services. Together the two geographies accounted for more than 75% of regulatory compliance related transactions in banking and capital markets Service providers have developed significant capabilities to meet the key IT needs arising due to regulatory compliance mandate such as increased reporting, data governance, client onboarding, and risk management Service providers invested in proprietary solutions, formed alliances, and acquired strategic targets for this purpose; investments into proprietary solutions witnessed a spike in 2012 6
This study offers three distinct chapters providing a deep dive into key aspects of regulatory compliance in BFS; below are four charts to illustrate the depth of the report Market size and growth Regulatory compliance in banking and financial services (BFS) IT outsourcing market size US$ billion XX% Year on Year (YoY) growth Key regulations driving investments Share of key regulations in driving compliance-related IT spend in BFS US$ billion Service provider 7 Service provider 1 Service provider 6 Service provider 5 Service provider 4 Service provider 2 Service provider 3 2009 2010 2011 2012 2013 Regulatory compliance related transactions Number of BFS ITO contracts with regulatory compliance in scope 2009-2013; Number of transactions Benchmarking of domain investments Size of circle denotes breadth of regulatory experience 2009 2010 2011 2012 2013 TCV of BFS ITO contracts with regulatory compliance in scope 2009-2013; US$ million Number and expanse of alliances High Medium Low 2009 2010 2011 2012 2013 Low Medium Number and depth of proprietary solutions High Source: Everest Group (2014) 7
BFSI ITO research calendar Topic IT Outsourcing in Capital Markets Service Provider Landscape with PEAK Matrix Assessment 2013 IT Applications Outsourcing in Capital Markets Service Provider Profiles Compendium 2013 IT Outsourcing in Insurance Annual Report 2013: SMAC is the Panacea for all Insurance Industry Problems IT Outsourcing in Insurance Service Provider Landscape with PEAK Matrix Assessment 2013 IT Outsourcing in European Banking and CM Service Provider Landscape with PEAK Matrix Assessment 2013 IT Applications Outsourcing in Insurance Service Provider Profiles Compendium 2013 Mobile Banking Adoption Trends Regulatory Compliance in Banking and Capital Markets All About Good Data Governance IT Outsourcing in Banking Annual Report 2014 IT Outsourcing in Banking Service Provider Landscape with PEAK Matrix Assessment 2014 IT Outsourcing in Banking Service Provider Profile Compendium 2014 IT Outsourcing in Capital Markets Annual Report 2014 IT Outsourcing in Capital Markets Service Provider Landscape with PEAK Matrix Assessment 2014 IT Applications Outsourcing in Capital Markets Service Provider Profiles Compendium 2014 Published Current Release date October 2013 December-2013 December-2013 December-2013 December-2013 January-2014 May-2014 June-2014 Q2-2014 Q2-2014 Q2-2014 Q3-2014 Q3-2014 Q3-2014 8
Additional research references The following documents are recommended for additional insight into the topic covered in this report. These documents either provide additional details on the topic or complementary content that may be of interest. 1. IT Outsourcing in European Banking and Capital Markets Service Provider Landscape with PEAK Matrix Assessment 2013 (EGR-2013-11-R-1029). This report provides an overview of the Application Outsourcing (AO) market for the banking and capital markets industry in Europe, through an in-depth analysis of large-sized AO contracts (i.e., contracts over US$25 million in TCV and over three years in duration). The report analyzes key demand drivers, adoption & scope trends, emerging priorities of buyers, key investment themes, and future outlook for IT AO in the European banking and capital markets sector. Further, the report includes an assessment of the capability and market success of 22 banking AO service providers and 15 capital markets AO providers in Europe and their mapping on Everest Group Performance Experience Ability Knowledge (PEAK) Matrix 2. Mobile Banking Adoption Trends (EGR-2014-11-R-1109). This report provides an overview of the global mobile banking and payments market, including mobile payment transaction volume, number of users, and degree of investments in mobility. It also includes region-wise adoption trends in mobile banking and payments across North America, Europe, Middle East and Africa, Asia Pacific, and Latin America along with an in-depth analysis of the mobile banking apps launched by the top American, European, and APAC banks 3. IT Outsourcing in Capital Markets Annual Report 2013: Deploying Technology to Counter Environmental Challenges (EGR-2013-11-R-0939). This report provides an overview of the Application Outsourcing (AO) market for the capital markets industry, through an in-depth analysis of large-sized AO contracts (i.e., contracts over US$25 million in TCV and over three years in duration). The report analyzes key trends in market size & growth, demand drivers, adoption & scope trends, emerging priorities of buyers, key investment themes, and future outlook for 2012 with regards to such large capital markets AO deals For more information on this and other research published by Everest Group, please contact us: Jimit Arora, Vice President: jimit.arora@everestgrp.com Rajat Juneja, Practice Director: rajat.juneja@everestgrp.com Pallavi Saxena, Senior Analyst: pallavi.saxena@everestgrp.com Everest Group Two Galleria Tower 13455 Noel Road, Suite 2100 Dallas, TX 75240 Phone: +1-214-451-3110 Email: info@everestgrp.com 9
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