R Everest Group PEAK Matrix for Mortgage BPO Service Providers Focus on Accenture December 2017 Copyright 2017 Everest Global, Inc. This document has been licensed for exclusive use and distribution by Accenture
Introduction and scope Everest Group recently released its report titled Mortgage BPO Service Provider Landscape with PEAK Matrix Assessment 2017. This report analyzes the changing dynamics of the mortgage BPO landscape and assesses service providers across several key dimensions. As a part of this report, Everest Group updated its classification of 16 service providers on the Everest Group PEAK Matrix for mortgage BPO into Leaders, Major Contenders, and Aspirants. The PEAK Matrix is a framework that provides an objective, data-driven, and comparative assessment of mortgage BPO service providers based on their absolute market success and delivery capability. Everest Group also identified three service providers as the 2017 mortgage BPO Star Performers based on the strongest forward movement demonstrated on the PEAK Matrix year-on-year. Based on the analysis, Accenture emerged as a Leader. This document focuses on Accenture s mortgage BPO experience and capabilities and includes: Accenture s position on the mortgage BPO PEAK Matrix Detailed mortgage BPO profile of Accenture Buyers can use the PEAK Matrix to identify and evaluate different service providers. It helps them understand the service providers relative strengths and gaps. However, it is also important to note that while the PEAK Matrix is a useful starting point, the results from the assessment may not be directly prescriptive for each buyer. Buyers will have to consider their unique situation and requirements, and match them against service provider capability for an ideal fit. 2
Everest Group s classification of the mortgage value chain Origination Securitization Servicing Sourcing Credit/collater al evaluation Underwriting Loan funding Presecuritization Core securitization Processing Account closure / foreclosure Lead generation Credit risk assessment Collateral risk underwriting Document draw Quality assurance Risk management Loan setup Default management Application management Fraud risk assessment Underwriting decision Condition clearing and validation Document support Regulatory compliance Payment processing Refinance / loan modification Loan pricing Document verification Underwriting audit Wire request and approval Collections Short sale / foreclosure Loan document indexing and verification Rate locking Risk management Securitization support Post closure document review Purchase review and approval Credit reviews Collateral review Compliance/post closure compliance 1 Post funding review Securitization support Analytics Regulatory compliance and reporting 1 The United States compliance follows the mortgage electronic registration system and the HUD1 settlement statement Note: This report covers vertical-specific BPO within the mortgage space. It does not include coverage of horizontal business processes such as F&A, HR, procurement, and contact centers 3
Everest Group PEAK Matrix Mortgage BPO Accenture positioned as Leader Everest Group Mortgage BPO Service Provider Landscape with Services PEAK Matrix * Market impact (Market adoption, portfolio mix, and value delivered) High Low EXL Capgemini Intelenet DXC Technology Aspirants Major Contenders Cognizant Firstsource Mphasis-Digital Risk IBM Infosys WNS Wipro Accenture Low High Mortgage BPO vision & capability (Vision & strategy, scope of services offered, innovation & investments, and delivery footprint) HCL Leaders TCS Genpact Sutherland Leaders Major Contenders Aspirants Star Performers * Service providers scored using Everest Group s proprietary scoring methodology given on page 12, 13 and 14 Note: Assessment for Capgemini, DXC Technology, EXL, and IBM excludes service provider inputs on this particular study, and is based on Everest Group s estimates which leverage Everest Group s proprietary Transaction Intelligence (TI) database, ongoing coverage, service provider public disclosures, and interaction with buyers Source: Everest Group (2017) 4
Accenture Mortgage BPO profile (page 1 of 6) Everest Group assessment 1 Leader Measure of capability: Best-in-class Very high High Medium high Medium Medium low Low Not mature Market impact Vision & capability Market adoption Portfolio mix Value delivered 1 Overall Scope of services offered Innovation and investments Delivery footprint Vision and strategy Overall Strengths Accenture has a robust strategy for developing digital and end-to-end offerings for clients in addition to traditional BPO services It has invested in advanced analytics solutions over the last few years, which has positioned it to offer an enhanced customer experience to clients It has also ramped up its technology capabilities inorganically with platform, augmentation, and tie-and-run solutions, which helps it to provide end-to-end solutions to clients looking for judgment-intensive mortgage service Areas of improvement Accenture can further develop its risk management and regulatory compliance capabilities, given the increasing complexity of regulations in the United States It needs to ramp up its servicing capabilities to provide end-to-end services in this space, especially since the market demand for servicing capability is on the rise There is scope to more effectively operationalize its vision in order to embed outcome-based pricing models such as gainsharing in its deals 1 Value delivered score and overall PEAK matrix positioning adversely impacted for those service providers who did not provide adequate information 5
Accenture Mortgage BPO profile (page 2 of 6) Overview Company overview Accenture is a leading global professional services company, providing a broad range of services & solutions in strategy, consulting, digital, technology, and operations. It combines experience & skills across more than 40 industries and all business functions with more than 411,000 FTEs serving clients in more than 120 countries. It works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. Key leaders Pierre Nanterme, Chairman & CEO Jo Deblaere, Chief Operating Officer David P. Rowland, Chief Financial Officer Headquarter: Dublin, Ireland Website: www.accenture.com; www.accenture.com/creditservices Suite of services Communications, media, and technology software & platforms and electronic & high tech Financial services banking and capital market insurance Health and public services Products consumer goods, retail, travel services, and industrial life sciences Resources chemical & natural resources, energy, and utilities Mortgage BPO 2015 1 2016 1 2017 1 Revenue (US$ million) Number of FTEs 3,250 3,500 3,350 Number of clients 90 90 90 Recent acquisitions and partnerships 2013: Developed following platforms with the acquisition of Mortgage Cadence: Planned to launch a new version of Enterprise Lending Center (ELC) platform to offer lenders enhanced service ordering and regulatory support Announced its agreement to license FirstClose an integration hub software platform that will enhance lenders capabilities within Mortgage Cadence s program 2013: Completed its acquisition of majority stake in Vivere Brasil, a mortgageprocessing technology company, to enhance mortgage service capabilities and help banks increase their efficiency and capacity for processing loans 2011: Completed its acquisition of Zenta, a provider of residential and commercial mortgage processing services in the United States, to expand credit industry capabilities Recent developments 2016: Developed Mortgage-and-Compliance-as-a-Service (MCaaS) to help mortgage and home equity lenders reduce overall cycle times, scale volume on demand, improve regulatory compliance, and reduce the potential for repurchase risk, at a predictable outcome-based cost 1 Twelve months ending June 30 of any particular year, i.e., from July 20XX to June 20XX+1 Source: Everest Group (2017) 6
Accenture Mortgage BPO profile (page 3 of 6) Key delivery locations Sacramento San Antonio New York Charlotte Mumbai Bangalore Chennai Manila Sao Paulo Source: Everest Group (2017) 7
Accenture Mortgage BPO profile (page 4 of 6) Capabilities and key clients Key mortgage BPO engagements Client name Category (origination, securitization, or servicing) Region Client since Top-10 U.S. mortgage banker Origination North America 2015 Top-five commercial bank Origination North America 2014 Top-30 U.S. financial institution Servicing North America 2013 Top-five U.S. financial institution Origination North America 2012 Top-five mortgage servicer Servicing North America 2009 Mortgage BPO FTE mix by segment FTEs in numbers Mortgage BPO revenue mix by geography Revenue in US$ million Mortgage BPO FTE split by delivery location FTEs in numbers Mortgage BPO client split by buyer size (buyer revenue) 1 Number of clients 100% = 3,350 100% = 100% = 3,350 100% = Originations Onshore Nearshore 7% 37% 23% 63% Servicing 70% Offshore 1 Buyer size is defined as large (>US$10 billion in revenue), medium (US$5-10 billion in revenue), and small (<US$5 billion in revenue) Note: Based on contractual and operational information as on June 2017 Source: Everest Group (2017) 8
Accenture Mortgage BPO profile (page 5 of 6) Technology solutions/tools Application Category Year launched Description No. of BPO clients Accenture operations navigator Origination A finance and accounting suite of tools, providing a central portal that gives joint visibility into the client organizations operational performance and critical business process data Insurance Tracking & Analysis (ITAC) Origination A comprehensive platform that manages insurance tracking and compliance iworks@ Origination A decision engine that dynamically selects Quality Assurance and Quality Control (QA/QC) reviews specific to the associate performing the review Mortgage cadence LOS Origination 1999 A credit services proprietary technology platform Mortgage cadence workflow Mortgage cadence document engine and document repository Prioritization, Allocation, Routing (PAR) Origination An algorithm that systematically routes and reassigns loans based on loan criteria, turn-time requirements, and licensing Vivere (Brazil) Origination An end-to-end consumer mortgage and construction-lending contract processing platform that helps to create workflows and business rules by product and origination channel Source: Everest Group (2017) 9
Accenture mortgage BPO profile (page 6 of 6) Risk management & regulatory reporting Risk management support Details No. of BPO clients Credit risk Operations risk Inspection and validation of adherence to Government-Sponsored Enterprise (GSE) credit requirements encompassing credit, income, asset, collateral, vesting, various insurance requirements, vesting, and lien position Inspection and validation of proper process adherence as it is executed to insure staff, operating systems, and controls to prevent repurchase or indemnification Market risk Not applicable Liquidity risk Regulatory risk Inspection and validation of adherence to GSE credit requirements for secondary market saleability encompassing credit, income, asset, collateral, vesting, various insurance requirements, vesting, and lien position Inspection and validation to adhere to regulatory policies governing lending practices such as TRID/ KYBO, ATR/QM, and appraisal independence Regulatory reporting support List of regulations Description No. of BPO clients United States regulations TRID, TILA, HOEPA, HPML, KBYO, Flood, Patriot Act, SAFE Act, GSE guides, and credit policy BPO services include an independent audit against Loan Origination System (LOS) data entry, physical documents, regulation requirement, and agent interpretation to report out results. Results can require creative payments and additional document requirements to meet acceptability and redisclosure United Kingdom regulations European Union regulations Not applicable Local regulations Source: Everest Group (2017) 10
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Everest Group PEAK Matrix is a proprietary framework for assessment of market impact and vision & capability Everest Group PEAK Matrix for mortgage BPO High Market impact (Market adoption, portfolio mix, and value delivered) Aspirants Major Contenders Leaders Low Low Vision & capability (Vision & strategy, scope of services offered, innovation & investments, and delivery footprint) High 12
Services PEAK Matrix evaluation dimensions Measures impact created in the market captured through three subdimensions Market adoption No. of clients, revenue base, and YOY growth, deal value/volume Leaders Portfolio mix Diversity of client/revenue base across industries, geos, enterprise size class Market Impact Aspirants Major Contenders Value delivered Value delivered to the client based on customer feedback and other measures Vision & capability Measures ability to deliver services successfully. This is captured through four subdimensions Vision and strategy Scope of services offered Innovation and investments Delivery footprint Vision for the client and itself; future roadmap and strategy Depth and breadth of services portfolio across service subsegments / processes Innovation and investment in the enabling areas, e.g., technology IP, industry/domain knowledge, innovative commercial constructs, alliances, M&A, etc. Delivery footprint and global sourcing mix 13
Everest Group confers the Star Performers title on providers that demonstrate the most improvement over time on the PEAK Matrix Methodology Everest Group selects Star Performers based on the relative YOY improvement on the PEAK Matrix ILLUSTRATIVE EXAMPLE FOR SERVICES PEAK MATRIX Market impact Year 0 Year 1 Vision & capability In order to assess advances on vision and capability, we evaluate each service provider s performance across a number of parameters including: Innovation Increase in scope of services offered Expansion of delivery footprint Technology/domain specific investments In order to assess advances on market impact, we evaluate each service provider s performance across a number of parameters including: Yearly ACV/YOY revenue growth # of new contract signings and extensions Value of new contract signings Improvement in portfolio mix Improvement in value delivered This slide to be used ONLY for Star Performers We identify the service providers whose improvement ranks in the top quartile and award the Star Performer rating to those service providers with: The maximum number of top-quartile performance improvements across all of the above parameters AND At least one area of top-quartile improvement performance in both market success and capability advancement Star Performers are identified by top quartile performance improvement on the X and Y axes for each segment The Star Performers title relates to YOY performance for a given service provider and does not reflect the overall market leadership position, which is identified as Leader, Major Contender, or Aspirant. 14
FAQs (page 1 of 2) Does the PEAK Matrix assessment incorporate any subjective criteria? Everest Group s PEAK Matrix assessment adopts an objective and fact-based approach (leveraging service provider RFIs and Everest Group s proprietary databases containing providers deals and operational capability information). In addition, these results are validated / fine-tuned based on our market experience, buyer interaction, and provider briefings Is being a Major Contender or Aspirant on the PEAK Matrix, an unfavorable outcome? No. PEAK Matrix highlights and positions only the best-in-class service providers in a particular functional/vertical services area. There are a number of providers from the broader universe that are assessed and do not make it to the PEAK Matrix at all. Therefore, being represented on the PEAK Matrix is itself a favorable recognition What other aspects of PEAK Matrix assessment are relevant to buyers and providers besides the PEAK Matrix position? PEAK Matrix position is only one aspect of Everest Group s overall assessment. In addition to assigning a Leader, Major Contender or Aspirant title, Everest Group highlights the distinctive capabilities and unique attributes of all the PEAK Matrix providers assessed in its report. The detailed metric level assessment and associated commentary is helpful for buyers in selecting particular providers for their specific requirements. It also helps providers showcase their strengths in specific areas Does PEAK Matrix assessment incorporate customer satisfaction as an evaluation criteria/metric? Everest Group does not have customer satisfaction as a separate metric in its PEAK evaluation framework. This is primarily because it is challenging to obtain interviews with a meaningful number of reference buyers for each service provider. Also, customer satisfaction is a highly subjective and opinion driven metric and there is no foolproof methodology to normalize this input. That said, we validate our PEAK results through buyer interaction and capture some consistent spikes or lags in performance through metrics such as renewal rate, etc. What are the incentives for buyers and providers to participate/provide input to PEAK Matrix research? Participation incentives for buyers include a summary of key findings from the PEAK Matrix assessment Participation incentives for providers include adequate representation and recognition of their capabilities/success in the market place, and a copy of their own profile that is published by Everest Group as part of the compendium of PEAK Matrix providers profiles 15
FAQs (page 2 of 2) What is the process for a service provider to leverage their PEAK Matrix positioning, or Star Performer status? Providers can use their PEAK positioning or star performer rating in multiple ways including: Issue a press release declaring their positioning/rating Customized PEAK profile for circulation (with clients, prospects, etc.) Quotes from Everest Group analysts could be disseminated to the media Leverage PEAK branding across communications (e-mail signatures, marketing brochures, credential packs, client presentations, etc.) The provider must obtain the requisite licensing and distribution rights for the above activities through an agreement with the designated POC at Everest Group Does the PEAK Matrix evaluation criteria change over a period of time? PEAK Matrix assessments are designed to serve present and future needs of the enterprises. Given the dynamic nature of the global services market and rampant disruption, the assessment criteria are realigned as and when needed to reflect the current market reality as well as serve the future expectations of enterprises 16
About Everest Group Everest Group is a consulting and research firm focused on strategic IT, business services, and sourcing. We are trusted advisors to senior executives of leading enterprises, providers, and investors. Our firm helps clients improve operational and financial performance through a hands-on process that supports them in making well-informed decisions that deliver high-impact results and achieve sustained value. Our insight and guidance empower clients to improve organizational efficiency, effectiveness, agility, and responsiveness. What sets Everest Group apart is the integration of deep sourcing knowledge, problemsolving skills and original research. Details and in-depth content are available at www.everestgrp.com. Dallas (Headquarters) info@everestgrp.com +1-214-451-3000 Bangalore india@everestgrp.com +91-804-276-4533 Delhi india@everestgrp.com +91-124-496-1000 London unitedkingdom@everestgrp.com +44-207-129-1318 Stay connected Website www.everestgrp.com Social Media @EverestGroup @Everest Group New York info@everestgrp.com +1-646-805-4000 Blog Sherpas In Blue Shirts Toronto canada@everestgrp.com +1-416-388-6765 www.sherpasinblueshirts.com