Five Reasons Financial Services Companies are Keeping Their Captives

Financial services companies were among the early adopters of low-cost, offshore captives – a trend that started in the early 1990s and peaked between 2002 and 2004. Most large financial services companies, including American Express, Barclays, Wells Fargo, Bank of America, and Citigroup, quickly built captives in India. Processes located there ran the gamut, from basic transactional work to F&A and fulfillment. As these captives matured, they performed higher-end analytics, risk processes, and capital markets–related processes.

Yet even as captives became more established, many financial institutions found it difficult to realize benefits beyond salary arbitrage. By 2007, financial services companies began to question why they were in the offshore operations business when third-party providers could perform the same work, many times more effectively. This realization then raised the following question: Why do so many financial services companies remain in the captive operations business at all? In this RapidInsight™, HfS Research looks at the trends in this area, specifically the top five reasons many financial companies have chosen to retain their captives and the five ways financial companies can improve the value of their captives.