Mortgage and Loan BPO

Transcription

1 NEAT EVALUATION FOR WNS GLOBAL SERVICES: Mrtgage and Lan BPO Market Segment: Overall This dcument presents WNS with the NelsnHall NEAT vendr evaluatin fr Mrtgage and Lan BPO (Overall market segment). It cntains the NEAT graph f vendr perfrmance, a summary vendr analysis f WNS in Mrtgage and Lan BPO, and the latest market analysis summary fr Mrtgage and Lan BPO. An explanatin f the NEAT methdlgy is included at the end f the dcument. The vendrs researched are: Accenture, Cgnizant, EXL, Genpact, HCL Technlgies, igate, Infsys, Tata Cnsultancy Services, Wipr, WNS Glbal Services, and Xerx. NEAT Evaluatin: Mrtgage and Lan BPO (Overall) Buy side rganizatins can access the Mrtgage and Lan BPO NEAT tl here. NelsnHall April 2015

2 Vendr Analysis Summary fr WNS Overview Mrtgage and Lan (M&L) BPO is part f WNS' financial industry line f business, under business prcess management (BPM). WNS started its M&L BPO business in 2006 when it acquired Trinity Partners, a mrtgage prcessing BPO vendr, t pursue the mrtgage services business. WNS' retail banking BPO business grew, primarily frm mrtgage servicing cntracts, until the ecnmic dwnturn. As the financial crisis accelerated, the mrtgage BPO business shrank in terms f revenues (~50%) and clients, cnsistent with industry experience. Since 2011, the mrtgage BPO business has been grwing; since the beginning f 2013, M&L BPO has been grwing very fast (>100% revenues and new lgs ver the tw year perid). WNS BPM has 600 FTEs wrking in M&L BPO and delivers service frm six delivery centers: Gurgan: 205 FTEs, all M&L prcesses Mumbai: 60 FTEs, riginatin and supprt services Nasik: 40 FTEs, data entry services Clmb (Sri Lanka): 50 FTEs Suth Africa: 215 FTEs Clumbia: 30 FTEs, supprts U.S. WNS' M&L BPM supprts client peratins in fur markets: U.S., U.K., Middle East, and Suth Asia. WNS' emplyees supprt the fllwing gegraphies: U.S.: 32% APAC: 31% Africa: 37%. WNS' primary targets fr M&L BPO are: Glbal banks headquartered in the U.S. Mrtgage servicers in the U.S. Reginal Middle Eastern and Suth African banks Tier 1 Indian and ther Asian banks Investrs in mrtgage backed securities. In future, WNS will cntinue t target glbal institutins based in the U.S. and reginal banks based in Asia, Africa, and the Middle East. The fcus in M&L is n lan administratin, but mrtgage prtfli acquisitin services and lan riginatin are rapidly grwing. NelsnHall April 2015

3 WNS has seven M&L BPO clients, with the fllwing gegraphical breakdwn: Americas: 40% Asia: 20% Middle East: 10% Africa: 10%. M&L BPO clients include: Leading universal bank (U.S.) Leading retail bank (U.S.) Tp 10 U.S. mrtgage servicer Leading universal bank (India) Middle Eastern bank Leading lan prvider (Suth Africa) Leading bank (Suth Asia). Financials WNS' M&L BPO revenues are generated frm: Originatin: 30% Lan servicing: 20% Default management: 30% Secndary market services: 20%. WNS' M&L BPO generated an estimated $15.0m in 2014; a grwth f 114.0% ver the prir year. Strengths Lng-term experience with large cmplex clients acrss all mrtgage prcesses Significant M&L BPO engagements in emerging markets Prprietary strength in lan dcument indexing Willingness t deply hybrid BPO mdels including BOT, virtual captive, etc. Willingness t c-invest with clients in deals t "put skin in the game" Willingness t use variable pricing mdels tied t peratinal cnditins. NelsnHall April 2015

4 Challenges Expanding its presence in several key emerging markets (specifically the Middle East and Suth Asia) Need t expand client base (in Nrth America) t firms lking t buy lan prtflis Fcusing n BPM, rather than IT services, may limit its scpe f engagements where clients are replacing M&L platfrms. Strategic Directin WNS' M&L BPO strategy is t: Build an nshre delivery capability within mrtgage servicing fferings (cntact center, due diligence and cmpliance KPO) by leveraging WNS' Nrth America delivery center and by pursuing clientele acquiring lan prtflis Develp its custmer supprt fferings fr M&L and g t market utilizing emplyee dmain based expertise t prvide value t clients Build ut its M&L BPO capabilities in cmpliance (during the next year), increase the number f mrtgage prcesses, and enhance reprting and analytics Develp lng-term partnerships based n peratinal excellence and prviding "skin in the game" (WNS investments in peratins fr clients, such as captive acquisitin) Prvide clients wh d nt have relevant ffshre peratinal experience with cnsulting and transitin management services, t facilitate the creatin f ffshre peratins and emerging markets entry (e.g. BOT) Prvide cntinuing peratinal savings frm prcess management skills (i.e. Six Sigma management techniques) and scale peratins. WNS has als shwn resilience and adaptability by managing a shrinking business in mrtgage prcessing, as that market shut dwn in 2009/2010. WNS was then able t rebuild and grw the business as markets recvered and clients sught t utsurce mrtgage prcessing. In respnse t changing industry cnditins it has cntinuusly changed its fcus n prcesses delivered frm riginatin t servicing, t default management, and nw back t riginatins. It will cntinue t prvide its clients with peratinal flexibility t help them mitigate the challenges f industry cycles. NelsnHall April 2015

5 Mrtgage and Lan BPO: Market Summary Buy-Side Dynamics The mrtgage and lan BPO market is well established in mature markets, especially the U.S., and U.K. Drivers include: Cmpliance and peratinal flexibility: BPO vendrs bring in prject labr as needed, nging best practices and standardizatin Cst cutting: reduced TAT fr riginatins, default reslutin, and prtfli acquisitin (~30% t 70%), delivering labr arbitrage (~20% t 40% savings), and imprved accuracy (~10%). The primary client prfile is: Tier 1 banks and M&L service vendrs selling t residential mrtgagees remain the primary adpters (~90%+) Single-cuntry supprt fr riginatin, servicing, and elemental services remains the primary service bundle (~85%+ f revenues). Clients are buying service bundles including: Primarily manual paper prcessing and acquisitin and review f third party supplied dcumentatin Prcess ptimizatin t imprve efficiency, accuracy, flexibility, and reduce TAT. Pricing remains verwhelmingly n a per FTE basis (70%). Cst take-ut thrugh labr arbitrage remains a key driver behind the decisin t utsurce, and service prviders nw supprt clients frm a wide variety f lw-cst near and ffshre delivery centers in rder t achieve this. Offshre delivery remains the prime driver f cst. There are ther significant drivers fr utsurcing buying decisins. The tp drivers f mrtgage and lan BPO are: Imprved cmpliance t adapt t changing regulatins Data remediatin requirements (prject wrk) Lw prcess standardizatin and high errr rates Reduced turnarund time (TAT) t meet shrter industry prcessing deadlines Lack f prcess autmatin r systems t adequately supprt prcesses. Fr rganizatins preparing t renew mrtgage and lan BPO cntracts (secnd generatin), the key challenges fcus n hw t drive further peratins cnslidatin and standardizatin/minimize lcalizatin f prcesses thrugh CEs. NelsnHall April 2015

6 Market Size & Grwth NelsnHall estimates the size f the mrtgage and lan BPO market t be ~$9,150m in 2014, with prjected grwth f 3.6% in the perid 2014 t The mrtgage and lan BPO market remains dminated by Nrth America, which accunts fr ~66% ($6,000m) f client spend and is grwing at 2.6% ver the frecast perid. EMEA and ROW are mving rapidly frm an emerging t established market status in mrtgage and lan BPO; EMEA is expected t grw at 4.0% ver the frecast perid, APAC at 7.6%, and LATAM at 2.7% ver the same perid. Success Factrs The critical success factrs fr mrtgage and lan BPO vendrs are: Dmain knwledge: Ability t prvide cnsulting supprt helps develp an M&L radmap, especially fr regulatins Key multi-client challenges (e.g. cmpliance) are best addressed by third party vendrs with access t best practices and early adpters. Prcessing skill: Ability t balance wrklads acrss varius cmpnents f the M&L envirnment t maintain lng run peratinal effectiveness Cst reductins: Initially >20%; cntinuing cst reductins f ~20%-~50% ver five years Standardizing and cnslidating prcess delivery acrss multiple markets and entities/instruments Ability t cnvert CAPEX t OPEX by making upfrnt investment in peratins and by taking sme vlume risk Ability t cnvert FTE-based pricing (currently industry standard) t transactin based, as utilities are adpted Understanding interactin between IT and prcess dmains t supprt change management. Prprietary IT services: Building autmatin int manual prcessing services (e.g. cnsulting t autmate prcesses, r paperless lan dcs) Ability t wrk with key technlgy vendrs t create useful BPO ecsystems. NelsnHall April 2015

7 Key success factrs fr clients include: Strategy develpment: Establish a radmap t increase revenues (new lan types, new markets, and/r greater wallet share f existing custmers), while minimizing capital allcatin t lending peratins. Flexibility fr grwth and shrink must be built int BPO cntracts frm the start t anticipate business changes Identify relevant vendrs fr each majr lan prcess (riginatin, servicing, default management, and secndary market services). Originatin fulfillment and secndary market services require vendrs wh can cnsume very large amunts f data quickly and then remediate and analyze the data. Default management and servicing require vendrs which can execute transactins quickly, cmpliantly, and accurately. Executin: Operatinal flexibility and declining cst f delivery are the tw tp pririties in selecting a M&L BPO vendr Glbal peratinal standardizatin and cnslidatin are required as regulatins synchrnize. Vendr selectin: Key vendr attributes: ITS, ability t cmmit capital, cmpliance expertise and custmer experience fr riginatin, servicing, default management, and/r secndary market services Reduced internal client staffing requires vendrs t be able t suggest peratinal change and imprvement t clients. Lk fr centers f excellence, cnsulting and shared service envirnments. The key challenges faced in M&L BPO include: External challenges: Regulatins: this is the primary challenge tday. Banks need t increase regulatry reprting and standardizatin f prcessing, under cnditins f unclear regulatry implementatin. At the same time, regulatins are synchrnizing acrss brders, which in the shrt run requires mre adaptatin by vendrs, but in the lng run may allw the reuse f IP acrss brders, unlike tday New clients: traditinal clients have been tier 1 lenders. The new clients are much smaller, requiring greater investment frm the vendrs in an engagement and a brader set f peratins services New markets: lending is grwing in emerging markets, and is stagnant t falling in mature markets. Hwever, in additin t different lcal regulatins, each market has differing cst structures, cmpetitrs, and prduct features New lan prducts: delivery f fluctuating vlumes fr lan types (e.g. aut, student) with fundamentally different custmers, characteristics, and regulatins, requires cntinuus emplyee training and platfrm enhancement Changes t business mdels: banks generally understand that they must reduce r exit businesses with subpar perfrmance. Hwever, the shift t custmer lifecycle management is driving banks t find ways t cntinue t satisfy lending requests, despite nt wanting t be in the lending business. Vendrs need t be able t NelsnHall April 2015

8 manage delivery f a service which is undesirable (fr universal banks), but necessary. Vendrs need t be able t deliver a cst effective service, where the bank is unwilling t pay fr increased value. Internal challenges: Operatinal: Flexibility: vlume swings, bth cyclical and secular, acrss prducts and prcesses (e.g. default, riginatin) make scaling, planning and managing a challenge fr vendrs Accuracy: multiple credit/cllateral data feeds are ntriusly divergent in valuatins. Wrking with vendrs, identifying and scrubbing best feeds while handling higher vlumes (especially in secndary market services) is required Nearshre/nshre: M&L BPO clients want t mve t nshre peratins. In mature markets regulatrs are increasing the pressure fr nshre, and lenders in emerging markets usually demand nshre presence. Finally, up-selling additinal prcess utsurcing requires greater nshre delivery in mature markets; vendrs need t supprt this mve t remain relevant Flexibility: vlume swings, bth cyclical and secular, make scaling, planning and managing a challenge fr vendrs. Standardizatin f prcesses: Hsting/systems integratin/cnslidatin: lenders are reducing internal staff, requiring mre supprt fr cmbined IT/BPO fferings. Vendrs are challenged t take ver client envirnments t reduce csts and standardize prcesses Custmer treatment: regulatrs and managements are requiring cnsistent treatment fr fairness and reduced cst f management. Standardizing acrss multiple markets and prducts remains a challenge in addressing lcal regulatins. Key initiatives in new fferings cver five areas, including: Expanded cverage f specialty lans: t cver nn-residential lan types (cmmercial, aut, student lans). The key is databases and analytics, t make specialty lans easier t understand and manage Secndary market services: facilitating prtfli acquisitin with better prtfli evaluatin tls and services. Ability t cnduct lan evaluatin faster n a massive scale Supprt fr new market entry: facilitating new market entry (primarily emerging markets). Offerings are fcused n riginatin services, using autmatin t deliver lw cst and peratinal flexibility Prcess imprvement fr riginatin: increase autmatin and standardizatin f prcesses. Increase flexibility t add new lan prducts t peratins Prcess imprvement fr lan administratin: use f prtals and analytics t allw greater insight int prcessing f individual lans. NelsnHall tracked new fferings (fr the last 24 mnths) shw: 100% f new fferings have embedded cmpliance capabilities, fferings have embedded IT 95%, and embedded analytics 90%. NelsnHall April 2015

9 NEAT Evaluatins fr Mrtgage and Lan BPO NelsnHall s (vendr) Evaluatin & Assessment Tl (NEAT) is a methd by which strategic surcing managers can evaluate utsurcing vendrs and is part f NelsnHall's Speed-t-Surce initiative. The NEAT tl sits at the frnt-end f the vendr screening prcess and cnsists f a tw-axis mdel: assessing vendrs against their ability t deliver immediate benefit t buy-side rganizatins and their ability t meet client future requirements. The latter axis is a pragmatic assessment f the vendr's ability t take clients n an innvatin jurney ver the lifetime f their next cntract. The ability t deliver immediate benefit assessment is based n the criteria shwn in Exhibit 1, typically reflecting the current maturity f the vendr s fferings, delivery capability, benefits achievement n behalf f clients, and custmer presence. The ability t meet client future requirements assessment is based n the criteria shwn in Exhibit 2, and prvides a measure f the extent t which the supplier is well-psitined t supprt the custmer jurney ver the life f a cntract. This includes criteria such as the level f partnership established with clients, the mechanisms in place t drive innvatin, the level f investment in the service, and the financial stability f the vendr. The vendrs cvered in NelsnHall NEAT prjects are typically the leaders in their fields. Hwever, within this cntext, the categrizatin f vendrs within NelsnHall NEAT prjects is as fllws: Leaders: vendrs that exhibit bth a high ability relative t their peers t deliver immediate benefit and a high capability relative t their peers t meet client future requirements High Achievers: vendrs that exhibit a high ability relative t their peers t deliver immediate benefit but have scpe t enhance their ability t meet client future requirements Innvatrs: vendrs that exhibit a high capability relative t their peers t meet client future requirements but have scpe t enhance their ability t deliver immediate benefit Majr Players: ther significant vendrs fr this service type. The scring f the vendrs is based n a cmbinatin f analyst assessment, principally arund measurements f the ability t deliver immediate benefit; and feedback frm interviewing f vendr clients, principally in supprt f measurements f levels f partnership and ability t meet future client requirements. NelsnHall April 2015

10 Exhibit 1: Ability t deliver immediate benefit : Assessment criteria Assessment Categry M&L BPO fferings M&L BPO delivery M&L BPO presence M&L BPO benefits achieved Assessment Criteria Range f M&L BPO: riginatin related Range f M&L BPO: servicing services Range f M&L BPO: default management Range f M&L BPO: secndary services Range f riginatin services Range f servicing prcesses Range f default management prcesses Range f secndary prcesses Perceptin f value: riginatin Perceptin f value: servicing Perceptin f value: default management Perceptin f value: secndary services Analytics Cmpliance supprt Risk management Benchmarking and radmap supprt Delivery capability in supprt f U.S. Delivery capability in supprt f Eurpe Delivery capability in supprt f Rest f Wrld Re-engineering f manual prcesses Applicatin f M&L platfrm technlgy: riginatin Applicatin f M&L platfrm technlgy: servicing Applicatin f M&L platfrm technlgy: default management Applicatin f M&L platfrm technlgy: secndary services Scale f M&L peratins: verall presence Scale f M&L peratins: U.S. presence Scale f M&L peratins: Eurpe presence Scale f M&L peratins: Rest f Wrld presence Cst savings TAT reductin Operatinal flexibility Pricing flexibility NelsnHall April 2015

11 Exhibit 2: Ability t meet client future requirements : Assessment criteria Risk factrs Assessment Categry Suitability t deliver future benefits Assessment Criteria Perceptin f T&Cs and value fr mney Financial rating Cmmitment t riginatin BPO Cmmitment t servicing BPO Cmmitment t default management BPO Cmmitment t secndary services BPO Delivery f service innvatin Perceived impact as a prcess change agent Perceived ability t supprt gegraphic expansin Mechanisms in place t deliver innvatin Perceived ability t meet future client needs: riginatin Perceived ability t meet future client needs: servicing Perceived ability t meet future client needs: default management Perceived ability t meet future client needs: secndary services Perceived impact f benchmarking and radmap supprt This dcument prvides ne f five separate NEAT market segment evaluatins fr Mrtgage and Lan BPO. They are: Overall Default management BPO Originatin BPO Secndary market services BPO Servicing BPO. Fr mre infrmatin n these and ther NEAT evaluatins, please cntact the NelsnHall relatinship manager listed belw. research.nelsn-hall.cm Sales Enquiries NelsnHall will be pleased t discuss hw we can bring benefit t yur rganizatin. Yu can cntact us via the fllwing relatinship manager: Steven Taelman at steven.taelman@nelsn-hall.cm Imprtant Ntice Cpyright 2015 by NelsnHall. All rights reserved. Printed in the United Kingdm. N part f the publicatin may be reprduced r distributed in any frm, r by any means, r stred in a database r retrieval system, withut the prir written permissin f the publisher. The infrmatin prvided in this reprt shall be used nly by the emplyees f and within the current crprate structure f NelsnHall s clients, and will nt be disclsed t any ther rganizatin r persn including parent, subsidiary, r affiliated rganizatin withut prir written cnsent f NelsnHall. NelsnHall exercises its best effrts in preparatin f the infrmatin prvided in this reprt and believes the infrmatin cntained herein t be accurate. Hwever, NelsnHall shall have n liability fr any lss r expense that may result frm incmpleteness r inaccuracy f the infrmatin prvided. NelsnHall April 2015