ZEW Survey Among Financial Market Experts – Outsourcing in the German Banking Sector Will Increase Further

In the German banking sector, outsourcing of business processes will increase further within the next five years. Especially the outsourcing of payment transactions and research has the potential to produce efficiency gains. These are the findings of a recent survey by the Centre for European Economic Research (ZEW), Mannheim, among approximately 215 financial market experts.

Internal measures to save costs are frequently not sufficient to compete on an international level. Therefore more and more banks use outsourcing. They break down their value-added chain and transfer parts to external companies. “Outsourcing activities have increased markedly during the last years. With 60 to 80 per cent the share of products offered by the banks themselves is still considerably higher than the contribution of the industry, which is 20 to 30 per cent of production”, explains ZEW expert Gunnar Lang.

Nearly half of the experts surveyed by ZEW think that the importance of outsourcing in the banking sector will increase within the next five years and 14 per cent even expect a strong increase in importance. Around one third of the financial experts assume that the significance of outsourcing will remain unchanged, while only six per cent believe that the importance of outsourcing for banks will decrease.

Experts assess different potentials for increasing efficiency gains, depending on the area of banking. They believe that the highest potential for efficiency gains lies in payment transactions, an area that is characterised by a relatively high degree of standardisation and automation. Nearly 85 per cent of the experts surveyed expect a high to very high potential for future efficiency improvements produced by outsourcing activities in this area.

Half of the survey participants also believe that efficiency improvements can be obtained in the research fields of market observation and analyses by outsourcing certain activities. The expectations for the area of securities business are relatively balanced; approximately half of the experts surveyed predict efficiency gains through outsourcing. In the field of private and corporate customer advisory service only limited advantages are expected. However, outsourcing could play a role in the credit business. Especially at small and medium sized banking institutions the potential for cost cutting is limited. Therefore it could be attractive to outsource the complete credit sector to a “credit factory”.

Business processes can be transferred either to national or to foreign companies. According to the financial market experts nearly two thirds of the outsourced business processes are transferred to companies in Germany and only one third is covered by companies abroad.

Contact

Dr. Gunnar Lang, Phone: +49 (0) 621/1235-372, E-mail: lang@zew.de

Matthias Köhler, E-mail: koehler@zew.de