The Indian backoffice operations of ABN Amro have become an insourcing hub for global banks such as Barclays, Allied Irish Bank, Key Bank, among a host of others.
US and European banks are looking at means of cutting costs and mitigating risks in cash management services, and top global banks such as ABN Amro Bank are actively bidding for these accounts.
Reportedly a $2-trillion space, insourcing cash management services of banks and corporates is also attracting other global players such as HSBC, which has yet to tie up with any bank.
Cash management enables corporates and institutional clients to efficiently manage their payable process, speed up their collections and enhance liquidity.
ABN Amro is working with banks, offering them a global trade technology platform wherein the entire process is undertaken by us for other banks without their customers being any wiser, said Abraham Chacko, executive director, regional manager Asia, Middle East & Africa, global trade advisory, ABN Amro Asia Pacific Pte.
"Banks agree to give us their total trade accounts as it helps bring down high technology costs and mitigate the risk of not having the right skill sets in place," added Chacko. ABN Amro has insourced Barclays Bank's entire UK trade operations at its outfit in Chennai, India.
"This is the largest one we have in the world, and about 20 per cent of the workforce undertakes insourcing of other banks' cash management operations, and the balance 80 per cent services the global need of our bank," said Chacko.
The Netherlands headquartered bank has made a bid for more similar bank accounts in Australia and Asia.
HSBC is not in that market today, but adds Marilyn H Spearing, head of global payments and cash management, HSBC Bank Plc, "If we feel it is a big enough trend, then we will pursue it more aggressively."
She added that implementation of Basel II could be a key driver in domestic banks looking at outsourcing their cash payment services.
There is huge savings for overseas banks outsourcing the process since it lowers cost and controls transactional risks.
The degree of cost savings depends on location of the bank. Chacko admitted that today Indian banks are unlikely to outsource their portfolio since the cost factor is not a serious advantage for them.
HSBC is considering to insource cash management services for a few banks and process all their payment under its name, said Spearing.
"There are some elements of outsourcing today even with corporate entities but we handle only some parts of their cash management services," she said.