HCL: Managing U.K. Bank Accounts for A European Bank

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1 BPO CASE STUDY: HCL: Managing U.K. Bank Accounts for A European Bank NelsonHall 2014 January 2014

2 Summary This BPO case study illustrates a number of key aspects. It shows that: It is possible to work on a transactional basis, removing limits for spikes and troughs A move to transaction-based pricing, combined with process improvement, can yield a considerable cost saving (in this case 40%) without a material change in the level of offshoring It is important to manage and review processes holistically on an end-to-end basis and a single workflow can be a significant enabler of this It is possible to get FSA (now FCA) approval for material process change in a matter of months, if the necessary documentation and supporting evidence can be professionally assembled. Background & Business Challenge HCL s client is a European bank that manages its U.K. operations separately from its domestic banking business. Its U.K. business volume comes primarily from a joint venture which manages in excess of 1 million deposits and cards customers. Most of the operations for fulfilling the U.K. deposits and cards business were already outsourced with multiple vendors; multiple vendors being used for onshore mailroom services, another vendor being used for onshore contact center services, and multiple vendors being used for back-office processing services. These contracts were coming to an end and the European bank was seeking a supplier that could: Reduce costs further and move to transaction-based pricing from year one Make the overall service sing and dance on a more holistic and end-to-end basis Bring in technology to fine tune the process over time Have the ability to service new products as they are introduced in the U.K. market. Supplier Selection The selection process took approximately 6 months, with contracting taking a further 3-4 months. NelsonHall January 2014

3 Transition It was necessary to adopt a big-bang approach to transition, with the previous service being switched off on a Friday and the new service coming fully available on the following Monday. The services provided to the European bank by third-parties prior to transition were supplied by multiple providers: Multiple U.K. mailrooms Multiple contact centers Multiple processing centers After agreement of contracts, HCL received a letter of intent to go-live in 120 days (go-live date November 2010). Key tasks included: Setting up datacenters in the U.K. Connectivity between these datacenters and those of the European bank, building in redundancy in connectivity between sites Setting up a Citrix farm to enable customer data held in the U.K. to be viewed throughout HCL operations Implementing workflow Establishing access to prior customer records by transferring 15m records from incumbent vendors into the HCL workflow The European bank obtaining regulatory approval from both the FSA and the domestic regulator, since the transfer of the service to HCL represented a material change in the process. This represented a major task for the European bank COO. These latter two tasks represented the major threats to the go-live date. Some of the key changes in the service transfer included handling the separate activities more holistically and replacing the existing workflow solution across the various processes. In order to do this, HCL used ~15-20 personnel in the U.K. to map the existing processes, design the to-be processes and agree these with the European bank; these agreed to-be processes were then implemented within HCL s proprietary TOSCANA workflow, which was customized according to the process. HCL was not aiming to replicate the existing processes, but it was very important for HCL to understand the required inputs and outputs, and the regulatory conditions relating to the inputs and outputs for each process. Beyond this, there was flexibility to run the processes in the most effective and efficient manner possible. Training manuals based on these processes and workflows were then developed, and personnel were recruited and trained for the new U.K. mailroom, U.K. contact centers, and the Indian processing center over a 4-6 week period. NelsonHall January 2014

4 The processes outsourced by the European bank to HCL include managing both deposits and credit cards for a U.K. high street retailer. The management of deposits by HCL involves handling all customer touch-points across origination and servicing, including: Origination: Scanning and indexing deposit forms in the U.K. mailroom Form exception and identification verification handling via U.K. contact center Data entry via Indian processing center. Servicing: Handling change of address, renewals and withdrawals via contact center Handling check signing for deposit withdrawals. The credit card-related activities handled by HCL similarly cover origination and servicing activities, including: Scanning and indexing applications Data entry and credit-checking in Chennai Customer service. All original documentation such as images of application forms, proof-of-identity documents, check images and KYC documentation is held in HCL datacenters, and is subject to FSA and European regulations. The general ledger record-keeping including customer account balances is held by the European bank. The current HCL delivery centers used in support of the European bank s U.K. operations are located in: Welwyn Garden City: mailroom operations Belfast and Kilkenny: contact center operations Chennai and Noida: data entry and processing. Governance model The basic pricing structure of the contract is transaction-based for both customer origination and customer servicing; it is based on an annual volume commitment, which is reviewed annually. In addition, transaction volumes are forecast on a 30-day basis. Within this structure, HCL is committed to servicing all spikes in activity that may happen, regardless of their size, for example as a result of changes in product interest rate. However, beyond a certain level of spike, there is agreement between the European bank and HCL that SLAs will be relaxed. NelsonHall January 2014

5 The operational governance team meets on a weekly and monthly basis. In addition, the European bank and HCL meet every 6 months for a brainstorming session to identify potential process improvements across the end-to-end process, and to discuss other key developments, such as launching new products to achieve enhanced revenues at reduced cost. These new initiatives are subject to a gainshare model, with HCL receiving payments, for example, for significantly reducing product origination or servicing costs, where HCL has itself invested in process improvement. One example is that check printing has been moved to a single hub managed by the European bank in the U.K., rather than involving separate centers managed by the European bank and HCL. This change resulted in a gainshare payment to HCL in return for the loss of its check printing revenue. Results Since the start of the contract in Nov 2010, the business has grown by 60%, while customer numbers have grown by 40%. The new service achieved a cost reduction of 40%, while levels of service delivery from offshore have remained largely constant, with much of the improvement coming from the more efficient management of processes and the move to a transactional pricing model. In terms of reporting, the HCL TOSCANA workflow facilitates provision of daily statistics such as the amount of money received, together with a single view of the customer, for banking products serviced by HCL. The service also facilitates the introduction of new products; changes to the workflow to introduce a new banking product can be carried out within a 2 week timescale. The European bank has so far introduced four new banking products in this way. Once these operations had been put in place covering support for the U.K., the European bank asked HCL to evaluate re-engineering similar operations in its domestic market, with an HCL workflow being used to digitize the branch back-office operations of the European bank, so that certain documents could be managed not in the branches but in a central processing center. NelsonHall January 2014