How to leverage scale using shared services

The trend of specialization of activities validates the increasing demand for utilization of shared services to achieve excellence and cost effectiveness. Banks, too, can consider development of units of shared services at two levels - intra-bank and inter-bank.

Centralization of processes

Typically, several activities are undertaken by business managers of different departments in isolation, leading to duplication and redundancy within the bank. The Artha Shastra approach recommends that during the initial assessment, processes be sequenced and centralized at a bank level to leverage the synergies of combining processes performed by different departments. For example, while developing a shared services unit for recoveries, the processes used by the loans, the credit cards, as well as the mortgages departments can be consolidated into one centralized activity to generate maximum leverage at the bank level.

Inter-bank shared services

The analogy of centralized processing of activities within the bank can be extended to processing activities performed by each bank in isolation. For example, every bank maintains a department for credit verification and authorization for issue of credit cards, each following the same processes with minor variations. The productivity of the banking segment as a whole can be significantly improved by outsourcing the credit verification activities of all the banks to one single shared service unit that specializes in that field.