The global recovery among financial institutions around the world has brought about a significant rise in the outsourcing of financial services such as accounting, bookkeeping, tax preparation etc. As predicted in the Everest Research Report which came out last February, the Finance and Accounting Outsourcing (FAO) market has now reverted to its pre-recession levels.
Successful growth in the FAO sector has witnessed massive deals among large players such as Genpact, Accenture and IBM and a steady growth among new players who are taking advantage of expected growth in the global financial services sector. Speaking about this trend, Saurabh Gupta, Research Director of Everest, says, “The mature FAO market is getting increasingly competitive with players vying to carve out unique value propositions to differentiate themselves.”
This unprecedented growth in the FAO market has also been capitalized by a number of countries including, Sri Lanka, China, Philippines, Rwanda and other Latin American countries like Colombia, Brazil and Guatemala which were previously unknown in the FAO market.
India’s Role in the Global Financial Services Sector
India at present is still maintaining its lead in the Finance and Accounting Outsourcing market with many Fortune 500 companies such as GE, Bank of America and American Express having formed partnerships with Indian firms. Other banking institutions such as the National Australia Bank (NAB) and Deutsche Bank have also turned to outsourcing their non-core financial activities, to companies such as IBM and TCS respectively. A recent survey stated that two out of five Fortune 500 companies currently outsource some of their back office requirements to India.
Benefits of Outsourcing Financial Services in India
There are numerous reasons for India getting the major share of the FAO market. While cost-competitive prices are stated as the chief reason, other reasons including India’s abundant manpower, the 12- hour time difference allowing a quick turn over rate and the availability of qualified accounting professionals has made India a target destination for Financial and Accounting services. India also has state-of-the-art infrastructure, friendly government policies and a labor pool of about 75,000 graduating English speaking accounting professionals annually.
The Future of FAO
As predicted by the research firm Everest, finance and accounting outsourcing, which includes processing of accounts receivable services, accounts receivable follow-up, as well as general accounting and back-up, will witness a steady growth in the coming years. Furthermore, NASSCOM (National Association of Software & Services Companies) in a recent report has stated that banking, financial services and insurance (BFSI) verticals have accounted for the largest revenue growth with an expected increase at 1.3 to 1.5 times of core segments.
The main reason behind FAO is that more and more businesses are seeking to shift their focus on core processes in order to improve their overall performance and outsourcing of financial services is generally considered as a very powerful tool to cut costs and improve overall performance.
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