The Rise of Managed Services: Adoption Accelerating Among Financial Institutions

Global reliance on managed services has steadily increased over the past decade, a trend that is expected to continue as the service model reaches over 200% of current market capital by 2028 For the financial services industry, the impact of this increase in adoption rates could be transformative.

The use of third parties is increasing

A LinkedIn survey of 299 finance professionals found that almost a third (32%) already use third-party support for 25-50% of their operational workflow processes. 16% used a third party for 50-75% of these processes, and 10% said they used third parties for more than 75% of their operational workflow.

While global banks have relied on managed services for decades, smaller buy-side and sell-side financial institutions have been more hesitant to adopt, seeing managed services as too expensive and governance-intensive a solution to meet. to their needs.

However, a perfect storm of market pressures is changing mindsets and creating new urgency in finding workable solutions. In just a few years, the services landscape has changed dramatically, leaving financial services organizations scrambling to adapt. And there is more change on the horizon. As these factors continue to impact financial operations, many will find themselves pushed beyond their current abilities and capacities.

Remote work

The shift to remote working has highlighted just how fragile business continuity can be. This prompted the industry to find creative ways to build system resilience, flexibility and capacity.

Labor shortages

The big quit and a wave of early retirements have exacerbated existing talent challenges around the world, motivating more organizations to turn to casual labor to address shortages and access talent. business-critical skills.

Digital transformation

Digital transformation has enabled new levels of responsiveness, transparency and efficiency. However, many organizations still struggle with a fragmented technology landscape made up of start-ups and niche vendors.

Customer expectations

Innovations in retail banking have redefined expectations for financial services as a whole, with investors and other financial players demanding greater visibility into workflows and data, while expecting the movement ( and access) of assets is almost instantaneous.

Regulatory pressure

Average settlement dates are shrinking faster than ever due to global initiatives such as the European Market Infrastructure Regulation (EMIR) Regulatory Fitness and Performance Program (Refit), the Commodity Futures Trading Commission (CFTC) rewrite and the Australian Securities and Investments. Commission (ASIC). While technology can help buyers meet tight deadlines, many struggle to select and implement the required technology.

Workload variability

Requirements such as periodic Know Your Customer (KYC) review or the establishment of new processes to support a regulatory change involve flurries of resource-intensive activities that are difficult, if not impossible, for a workforce to manage. fixed work.

Market volatility

Organizational priorities shift from cost-cutting and austerity to growth mandates and revenue optimization as market volatility creates more opportunities for sell-side institutions and higher returns for the sell-side Buyer. This, in turn, drives a need for integration and time-to-market speeds that cannot be achieved without optimized, technology-driven processes.

Areas with high potential for optimization

A LinkedIn poll of 260 finance professionals found that 44% identified KYC, onboarding and awareness as the top optimization opportunity.

Nearly a quarter (23%) chose third-party risk management as the best opportunity, while regulatory reporting and tax operations were selected by 19% and 14% of respondents, respectively.

Rethink managed services

At a time when the need for operational speed and flexibility has never been more urgent, financial services organizations are taking a fresh look at managed services. And they’re doing it at an opportune time, as advances in workflow technology and service models have brought managed services within reach of a wider range of buyers, sellers, and even businesses. However, many organizations need guidance to understand and navigate their options.

To this end, S&P Global Intelligence has published “Demystifying Managed Services for Financial Institutions”. This white paper examines the state of managed services for the financial industry and defines the service models and assessment points that business leaders need to understand.

Download your copy here

IHS Markit provides industry-leading data, software and technology platforms and managed services to meet some of the toughest challenges in financial markets. We help our clients better understand complex markets, reduce risk, operate more efficiently and comply with financial regulations.

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.

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