The global banking, financial services and insurance (BFSI) outsourcing market is expected to be worth more than $277 billion by 2020, according to a recent report released by Technavio. Analysts predict an increase in the volume of outsourcing contracts in the financial services segment as more companies turn to IT outsourcing to streamline operations and drive competitiveness.
The general insurance segment of the global BFSI market captured most of outsourcing deals in terms of volume, with 55 to 60 percent market share in 2015, while the health and life insurance segment captured 35 to 40 percent. The “others” segment accounted for 5 to 10 percent of the market.
North America, led by the United States, was one of the biggest consumers of outsourced services in 2015. Demand was driven by economic uncertainty and regulatory pressures faced by banks and financial institutions. New regulations like the HIPAA, Consumer Protection Reform, Credit Rating Agency Reform, the Dodd-Frank Act and the Volcker Rule are forcing many companies to outsource services to improve compliance while reducing costs.
The second largest market for outsourced BFSI services in 2015 was the EMEA (Europe, Middle East and Africa) region, with the United Kingdom leading the group. EMEA is also an important capital market and insurance business process outsourcing (BPO) location. The Technavio report revealed that buyers who outsourced insurance and capital market services to this region reduced turnaround times and improved service quality. Companies in EMEA are outsourcing BFSI services due to regulatory uncertainties and increased pressure to improve operational efficiency.
Meanwhile, the Asia Pacific (APAC) region remained the most cost-effective application outsourcing service delivery destination. Clients mostly outsource call center, credit card processing, data processing and disaster recovery services to this region. Mature BPO markets like India, China and the Philippines continue to be attractive locations for buyers.