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Questions and Answers
What was the estimated value of the global market for back-office operations, finance, and accounting in 2000?
What was the estimated value of the global market for back-office operations, finance, and accounting in 2000?
- $4 billion
- $3 billion
- $1 billion
- $2 billion (correct)
Which of the following banks did not have a global processing center in India?
Which of the following banks did not have a global processing center in India?
- Citibank (correct)
- American Express
- GE Capital
- Standard Chartered
What was the name of the third-party provider that was previously known as Citicorp Securities?
What was the name of the third-party provider that was previously known as Citicorp Securities?
- ICICI
- Sprectramind
- Gupte
- E-Serve (correct)
When did Dasgupta start looking at the business process outsourcing space?
When did Dasgupta start looking at the business process outsourcing space?
What was the benefit of ICICI's heavy investments in technology in its back-office processing business?
What was the benefit of ICICI's heavy investments in technology in its back-office processing business?
What inspired ICICI to create a third-party platform for outsourced services?
What inspired ICICI to create a third-party platform for outsourced services?
What was the primary area of focus for Dasgupta in the banking industry?
What was the primary area of focus for Dasgupta in the banking industry?
What was the primary advantage of business process outsourcing for banks?
What was the primary advantage of business process outsourcing for banks?
Which of the following foreign banks had a long history of providing NRI services?
Which of the following foreign banks had a long history of providing NRI services?
What was the target of Citibank's strategy by 2010?
What was the target of Citibank's strategy by 2010?
What was the estimated market share of remittances for the State Bank of India?
What was the estimated market share of remittances for the State Bank of India?
What was the primary advantage of the public-sector banks in the deposits and remittance businesses?
What was the primary advantage of the public-sector banks in the deposits and remittance businesses?
Which of the following foreign banks focused more on high-net-worth clients?
Which of the following foreign banks focused more on high-net-worth clients?
How many countries did the State Bank of India have branches in outside India?
How many countries did the State Bank of India have branches in outside India?
What type of services did correspondent banks provide?
What type of services did correspondent banks provide?
What was the estimated market share of remittances for the public-sector banks?
What was the estimated market share of remittances for the public-sector banks?
What was the primary reason for the low branch profitability of public-sector banks in the Gulf countries?
What was the primary reason for the low branch profitability of public-sector banks in the Gulf countries?
What was the consequence of bad credit decisions made by public-sector banks in the Gulf countries?
What was the consequence of bad credit decisions made by public-sector banks in the Gulf countries?
What was the primary benefit of Western Union's agreement with India's Department of Posts in 2000?
What was the primary benefit of Western Union's agreement with India's Department of Posts in 2000?
What was the estimated annual value of remittances to India in 2001?
What was the estimated annual value of remittances to India in 2001?
What was the primary challenge faced by public-sector banks in the Gulf countries?
What was the primary challenge faced by public-sector banks in the Gulf countries?
What was the number of agent locations for Western Union in 2001?
What was the number of agent locations for Western Union in 2001?
What was the average size of Western Union's money transfer transactions in 2000?
What was the average size of Western Union's money transfer transactions in 2000?
What was the primary reason for the shutdown of public-sector banks' branches in the Gulf countries?
What was the primary reason for the shutdown of public-sector banks' branches in the Gulf countries?
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Study Notes
Business Process Outsourcing
- The global market for back-office operations, finance, and accounting was estimated at $2 billion in 2000.
- The banking industry benefited from business process outsourcing, which involved sending raw data and paper documents to a remote location for data entry and reconciliation.
Outsourcing in India
- Large financial services institutions, such as American Express, GE Capital, HSBC, and Standard Chartered, set up global processing centers in India.
- Some third-party providers, including E-Serve and Sprectramind, also emerged to cater to the outsourcing needs of other banking clients.
Players in the BPO Space
- Dasgupta noted that in August 2001, nearly all players in this space were call centers with few domain experts.
- ICICI had a subsidiary and in-house operations that specialized in back-office processing of domestic retail and corporate banking business.
ICICI's BPO Experience
- ICICI invested heavily in technology, which led to reduced costs and superior customer service to clients.
- ICICI's BPO project taught the importance of centralized operations, zero error, and customer focus, which led to the idea of creating a third-party platform for outsourced services.
Foreign Banks
- Citibank and HSBC are the main foreign bank competitors for ICICI in international banking
- Both banks have a substantial presence in India, North America, Europe, and the Middle East, catering to cross-border retail and commercial banking
- Citibank has shifted towards a more mass-market approach, aiming to capture 1 billion customers globally by 2010, up from 60 million in 1998
- Citibank has a long history of providing NRI services, offering personalized services to NRIs worldwide
Public-Sector Banks
- State Bank of India and Bank of Baroda have the largest presence outside India among public-sector banks
- State Bank of India has 50 branches in 34 countries, while Bank of Baroda has 22 branches in 16 countries
- Public-sector banks have an extensive branch network in India and established relationships with the Indian community abroad, giving them a strong competitive advantage in deposits and remittance businesses
- They have a market share of around 70% in remittances, with State Bank of India holding 40%
Public-Sector Banks' Challenges
- Credit decisions are slow due to technology limitations and referral to Indian offices for approval
- Bad credit decisions have led to high NPAs
- There is a lack of aggressive marketing to new customers and little product innovation
- Branches are staffed with Indians who have little knowledge of the local environment and customers, leading to low branch profitability and branch closures
Money Transfer Companies
- Remittances to India are estimated at $15 billion annually (2001)
- Western Union is one of the largest players in the world, specializing in money transfer
- Western Union has 101,000 agent locations in 186 countries, with 89 million transactions in 2000, generating revenues of approximately $2 billion
- The average transaction size is around $250
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