Given the challenges that CFOs face to grow revenues, increase profitability and manage compliance issues, the focus today is on getting relevant and timely financial information to make better decisions and take actions proactively to improve the company's performance.
Financial analytics is increasingly finding popularity among companies that are looking to better their financial value proposition and optimise business performance.
Leading financial services firms have been early users of financial analytics and have made investments in this area to address their business imperatives. These could be around building a credit line strategy for a consumer banking scenario; developing a robust equity research model by using various fundamental analyses and cash flow analyses; doing claims' severity and frequency analysis in the insurance sector; or building fraud detection models.
What financial analytics can do is integrate critical internal and external data from across the enterprise value chain and transform it into timely, actionable information, ultimately improving business performance.
The offshoring of financial analytics to India is emerging as one of the next big opportunities, after the Finance & Accounting (F&A) BPO industry. Consider these facts:
- India has one of the largest pools of qualified chartered accountants, other accounting graduates, finance professionals, statisticians and econometricians with salaries comparably lower than those of developed countries. HP estimates a Chartered Financial Analyst (CFA) or his equivalent (CA or an MBA in finance) with less than five years of experience is paid up to $20,000 per year in India whereas a CFA with similar experience is paid $80,000 in Singapore, $115,000 in Hong Kong, $131,000 in Australia, $170,000 in the US and $217,000 in the UK.
- The talent pool in India has a strong global outlook due to the in-depth understanding of US GAAP/UK IAS procedures, and also by working in leading MNC banks as a part of the F&A BPO shared operations functions.
- Software & BPO offshoring has also led to a strong understanding of financial/banking applications and the related requirements of companies.
The global financial data analytics market size has been potentially estimated at $5 billion and with the expansion of this market come the challenges of offshoring. Continuous innovation is the foremost thing that companies will need to focus on to differentiate themselves and retain their customers.
Another key challenge will be attracting and managing highly-educated and experienced professionals -- in addition to the present employee policies in place, companies will need to substantially invest in training and development and in creating an ecosystem for the incubation of mature knowledge management models.
As the market matures, customers will look to vendors for scalability, repeatability and measurement. Providing secure operating conditions in a multi-client environment, mechanisms to tackle issues related to IPRs, the right SLAs, flexible engagement models and an ability to create forward-looking solutions, would all be key factors in ensuring success in this market
We also expect the market to undergo consolidation -- there are smaller firms that have focused on innovation and that have the appetite to scale. India is uniquely poised with all the right elements -- people, process, innovation and security -- to become a sustainable global hub for financial analytics.
The author is Vice-President, Decision Support & Analytics Services, HP BPO.
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