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Financial services firm must reduce operational costs to stay competitive

RFP
Sector: Money transfer
Client challenge: Outdated pricing structure
Services provided: Performance improvement, financial modeling
THE SITUATION
Margin pressure

A publicly traded financial services company that operates in more than 200 countries and sovereign territories found its traditional pricing structure under severe margin pressure due to an onslaught of competition from new, lower-cost online service providers, which were charging more than 30% less for the same services.

THE CHALLENGES
Struggle to remain competitive

With cheaper options for essentially the same services, customers had little incentive to pay a premium. The company recognized that it needed to lower prices to remain competitive, but realized that simply reducing transaction pricing without drastically lowering operational costs would bankrupt the business. They needed a new operations support model that could drive margin improvement.

WHAT THE TEAM DID
Reduce costs, maintain service

Grant Thornton LLP’s team began with a thorough assessment of the existing operating model from several standpoints — people, processes and technology — and monetized the cost of operations across each component and service element. Next, the team completed a capabilities assessment based on how the company needed to perform in order to be competitive and identified the gaps from its current performance. The team looked at various operating models, considering everything from outsourcing and co-sourcing, to offshore processing and relocating resources inside the U.S. The team was aware that any new technology platform was off the table due to the capital-constrained environment, so they had to reduce costs without major technology investments. It also knew it needed to maintain the same level of customer service — no better but no worse.

The next step was to build a robust financial model to create a series of what-if scenarios and evaluate the cost-benefit of implementing the changes, which enabled the team to assess the operating and financial costs of the scenarios under consideration. The model was used to answer questions such as: Which country would be the most economical for operations, given labor, operational and compliance risks? Through the use of analytic modeling, the Grant Thornton team came up with a plan that included a hybrid of outsourcing, co-sourcing, off-shoring and relocating certain functions to the U.S. company headquarters.

Based on the recommendations, the client consolidated its financial organization into its headquarters in the U.S.; transitioned a majority of customer service and transaction processing to an offshore facility in Eastern Europe, as well as to outsourcers based outside the U.S.; and reduced headcount by more than 200 full-time equivalents.

OUTCOMES
Cut costs, remain competitive

The client was able to cut costs per transaction by more than 35%, enabling it to keep its transactions competitively priced. It reduced its overall operating costs by 20%. The company eliminated redundancy and streamlined its organization. Going forward, the company is on track to save more than $30 million a year in annual operating costs. They also achieved new capabilities — in particular, enhanced fraud monitoring and detection within its transaction processing function, which helps with anti-money laundering compliance. As a result of the changes, the company was able to reposition itself competitively in the marketplace against both traditional competitors and new upstarts.