Global banking profitability hit an all-time high in 2015, recovering from the lows of 2009 in the aftermath of the financial crisis. The recovery was led by North America and China; however, the effects of the financial crisis can still be seen in Western Europe. Macro-economic uncertainty continues to plague the banks. Some of the events this year include the United States signaling a reversal in the monetary policy and raising the interest rates for the first time since the 2008 financial crisis and Japan adopting negative interest rates. Banks are still trying to determine the long-term impact of these events on their profits. Amid tightening regulations, macro-economic uncertainty, and technological disruption leading to increased competition from non-traditional sources, banks are looking at new technology investments that yield cost savings and free up budgets to spend on change initiatives. Consequently, IT budgets in 2016 are expected to remain flat or witness a modest increase from the levels in 2015.

As banks struggle to balance the three priorities of run, manage, and change the bank, there is an increased need for simplification. Led by consumer demand for simplicity in financial interactions, easy-to-understand products, and the demand for speed, banks are now faced with the challenge of dealing with the new age consumer who is willing to switch his banking relationship more quickly than ever. Banks have started to recognize the threat of digital technologies and the rise of non-traditional competitors. In order to compete in a market that is becoming more crowded, banks need to simplify business operations, regulatory compliance, and user experience to reduce costs and remain competitive.

In this report, we look at the global trends in the banking industry and their implication for application services outsourcing. We focus on:

• State of the banking industry
• Business priorities of banks
• Market trends and activity for large AO relationships in banking

SCOPE OF THE ANALYSIS

• Industry: Banking (retail banking, commercial banking, credit cards, loans, and mortgages); excludes capital markets and insurance
• Services: : Large (TCV > US$25 million), multi-year (>three years), and annuity-based application outsourcing
• Geography: Global
• Sourcing model: Third-party AO transactions; excludes shared services or Global In-house Centers (GICs)

CONTENT

This report is structured across three key sections, each containing insights into application outsourcing in the global banking sector, with a specific focus on large-sized contracts:

• State of the global banking industry: Region-wise trends in the banking sector and their impact on IT outsourcing
• Future of banking: The changing face of IT services requirements across change-the-bank, run-the-bank, and manage-the-bank priorities of banking enterprises and implications for IT service providers
• Banking AO market overview: Analysis specific to the banking AO market with a focus on large transactions:
• Market size of global banking AO
• Trends and characteristics for large-sized transactions in banking AO
• Demand characteristics for banking AO services by lines of business, AO subfunctions, geography, and buyer size
• Offshore leverage
• Renewal activity