February 14, 2003

Last summer, Accenture, a management consulting and technology service company based in New York, surveyed senior executives at a random sample of $3 billion-plus banks operating in the U.S.

The results indicate that bankers who outsource are generally satisfied with their current arrangements. Of the 30 bankers surveyed, 19 indicated that they participate in outsourcing deals. Of those, 16 were "satisfied" or "very satisfied" with their outsourcing partners and 12 planned to keep outsourcing at current levels. Four bankers planned to increase outsourcing efforts, two indicated they would cut back, and one was uncertain.

The most widely outsourced functions were credit card processing, human resources, IT operations, application development and maintenance, mortgage processing and online banking. Only credit card processing, mortgage processing, and online banking had been completely outsourced by more than one bank.

Based on the survey results, Accenture believes that retail banks have an additional outsourcing opportunity in the operations of their own finance and accounting departments. In other words, just because a bank excels at deposit-taking and lending doesn't mean that it's the best organization to handle the ever-shifting vagaries of financial accounting, the painstaking labors of cost accounting, or the drudgery of paying the bills.

The surveyors found that few banks track key indicators in their own financial operations, including turnaround time, cost per check and error rate. Furthermore, most banks surveyed have yet to adopt ERP systems, electronic billing and presentment, or online invoice management tools.

However, most bankers will require some convincing before they cede control of the books to an outside party, no matter how far from best practices their respective organizations may reside. Indeed, a majority of those surveyed indicated that they do not outsource their own finance and accounting functions. While one-third of the respondents outsource various aspects of tax accounting, only two bankers said that they currently outsource items such as financial reconciliation, fixed-asset accounting, accounts payable or accounts receivable.

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