F&A Outsourcing Offers Revenue Opportunity for Banks

by : Ann All

When we've mentioned banks here in the past, it’s been about their activities as consumers of outsourcing services, including their apparent reticence in working with offshore providers.

A recent article in Bank Systems & Technology offers an interesting twist, quoting a Celent analyst who believes banks could earn a little outsourcing revenue of their own by partnering with third-party firms that provide accounts payable and accounts receivable services and selling them to their commercial cash management customers.

That's exactly what Cincinnati's Fifth Third is doing, with a partnership with invoice solutions provider API Outsourcing. It didn't make sense to build internal capabilities, a Fifth Third SVP says, "For us to develop the technology and the subject matter expertise, we were losing vital time."

Emerging technologies such as Web-based portals make it far easier for banks to forge these types of partnerships,?the Celent analyst tells Bank Systems & Technology.

Through their strong brands and existing relationships with commercial customers, banks offer outsourcing providers a shot at business they might not otherwise have a chance of winning. Banks can enhance those customer relationships by offering a new service.

Banks will also make a little money?- though Celent points out it's a relatively modest revenue opportunity, currently a $300 million annual business that could grow to $1.6 billion. But unlike bigger money businesses like mortgages, it's nice and stable.

A few banks have even purchased invoice solutions providers, the article notesBusiness Management Articles, mentioning Mellon's acquisition of SourceNet Solutions.