Banks remain keen on offshore call centres

The wealth management industry has begun to follow the trend set by the likes of shoe brand Nike and fashion retailer Gap in moving parts of its operations to cheaper environments. As ever, the back and middle offices are the bits that wealth managers want to offload. Fidelity, Investec Private Bank, Barclays and Abbey are among the players that have already taken the plunge.

However, the wisdom of “offshoring” segments of the business for banks and fund managers has recently been called into question.

A Nike customer might well be oblivious to the fact that their trainers were made in Thailand. As long as the shoes look and feel right, they could argue, it makes no difference where they were manufactured.

Survey findings

But if the same person’s bank transported its call centre to India, the customer might not be able to shrug off the move so easily.

According to the latest report from research firm Contactbabel, Indian call centres deliver a service that does not look or feel as good as that of their UK counterparts. Calls from UK customers to India-based centres took longer to resolve, the survey found, because customers had more trouble explaining themselves.

Furthermore, a third of customers calling Indian contact centres have to ring back another time. In the UK, by comparison, call centres have a first-time resolution rate of 90 per cent.

Responsible business

In 2003 Barclays Bank created around 550 office and administrative jobs in India, “impacting” 250 jobs in the UK. Moya Galal, group PR manager, defends the move. “This only led to 43 people leaving Barclays, and the vast majority did so voluntarily.” She adds: “A very large part of being a responsible business is to ensure that the business is being run competitively, successfully and efficiently. We need to ensure that we operate in the most effective way possible while offering the best customer service we can. The decision to outsource is part of this commitment.”

Another UK bank, Abbey, which has recently announced plans to ship 400 call centre jobs out to India, is also defiant about the move. Abbey spokeswoman Christina Mills says the decision followed a successful pilot scheme, which involved the transplanting of 100 data-inputting jobs to Bangalore last year. “We had a wider plan to look at our UK business and we found we had too many, too small call centres. Now, parts of our operations may be moved to India step by step because India is a much less costly environment and we have the same quality of service out there.”

‘Lots of people in the UK don’t have English as a first language’

Christina Mills, Abbey

Ms Mills claims that customer service standards can be maintained in India, depending on how the offshoring strategy is handled. Abbey’s approach has been to work with an experienced local partner, Msource.

“We haven’t actually got the Indian call centre up and running yet, but the key thing is to set up a standard with your provider and ensure that standard is met,” says Ms Mills. “You must also ensure that proper staff training takes place.”

She is unconcerned by the language issue: “Lots of people in the UK don’t have English as a first language.”

Yet Ms Mills adds that Abbey “will keep its business primarily in the UK”.

Core operations

Similarly, Fidelity has some operations in India, including call centres, processing and systems development. But Thomas Balk, president of European mutual funds emphasises that “substantial operations remain here in Europe.”

Investec Private Bank recently moved a chunk of its back office to South Africa. But head of marketing Antonia Chambers explains the bank felt that in order to maintain a personalised service it was necessary to retain a core of customer service staff in London.

Steve Morrell, call centre analyst at ContactBabel, says that wealth managers need to look at all aspects of offshoring, not just salary savings.

“There are numerous estimates saying that businesses can expect to achieve a 30–40 per cent cost saving by offshoring, which is significant, but much smaller than the dramatic salary reductions experienced – there’s more to running a contact centre than just agent salary costs,” he says.

“Also, have these businesses fully considered whether they will lose existing or new business from the segment of the UK customer base to whom offshoring is a highly-politicised issue?”

Mr Morrell suggests a “halfway-house between UK and Indian call centres”. “An ‘elective offshoring’ option could be given to customers at the beginning of a call – pressing ‘one’ transfers them to an agent in India on a freephone number, whereas pressing ‘two’ transfers them to a UK agent, but at a national or even premium rate. Alternatively, by updating the relative queuing times, customers can be offered contact with an Indian agent immediately, or wait three minutes for a UK agent. Such a system is not particularly complex to implement, and is self-managing and could take some of the steam out of the offshoring argument.”

More than savings

Outsourcing to India is about more than simply saving costs, according to the high commissioner of India, Ronen Sen. “Depending on the particular operation sought to be outsourced, and the scale of the project, cost savings range from 30 per cent to as much as 70 per cent.

‘Countries that offshore themselves capture sizeable economic value’

Ronen Sen, Indian high commissioner

“However, it is not just labour cost arbitrage that makes outsourcing to India so attractive, but the combination of low cost and high expertise,” he says. “Equally important, but less well-known, is the fact that countries that offshore themselves capture sizeable economic value through multiple channels – reduced costs, higher exports, new revenues, repatriated earnings, and redeployed labour.”

Mr Sen points to a recent McKinsey Global Institute study, which estimates that $1.45 (E1.20) of value is created globally from every dollar that a US company chooses to divert abroad. Of this value, the US captures back $1.12, while the receiving country captures 33 cents.

“In other words,” he says, “the US captures 78 per cent of the total value, and more than its original investment overseas. We see no reason why the same logic should not apply to the UK and the rest of Europe as well.”

The Indian solution examined

Independent research firm ContactBabel’s survey of call centres based in India suggests that outsourcing to cheaper jurisdictions may not be the panacea it was hitherto thought to be.

The 44 survey respondents answered questionnaires on their performance metrics, operational and human resources practices and use of technology. The resulting findings were a mixture of positive and negative:

• Inbound call lengths are very much higher in India than in the UK – over 70 per cent onger compared to the UK outsourcing industry.
• Call abandonment rates are similar to UK operations. There is room for improvement, but generally things were found to be “under control”.
• Indian respondents’ call centres are almost three times as quick to answer the phone than are UK respondents’ operations.
• More than a third of callers to Indian centres have to ring back another time. This is far worse than UK operations, according to the survey, which says “UK outsourcers achieve a first time resolution rate of over 90 per cent”.
• Almost a third of the Indian respondents do not measure customer satisfaction.
• The cost structure of an Indian operation is very different to a UK contact centre, where two-thirds of costs tend to be agent salaries. In India, less than 40 per cent of costs are agent salaries.
• New agents in India earn around E2000 per year, less than one-eighth of a new UK agent.
• Generally, staff facilities in India are superior to UK operations, as a result of being purpose built recently. The amount of training also tends to be higher in India.