The purchase of Citigroup Global Services by TCS, the captive BPO delivery arm of the Citigroup bank, is likely to be the first of many, according to Tony Rawlinson, MD of Financial Services at EquaTerra. In a statement Rawlinson hailed the acquisition as a ‘fantastic move’ and predicted that the purchase will be replicated by other banks and service providers.

“In one fell stroke, this makes TCS a strong player in the banking BPO market with an acquisition on attractive commercial terms”, he said.

“Even before the credit crunch and then the global market meltdown, there was a definite trend developing in this area” he explained “Banks were asking themselves ‘are we in banking or running back office captives?’. They weren’t helped by the fact that they were looking to cut their costs due to losses sustained through investment in the sub-prime market. At the same time, service providers have matured enough to be able to take on the types of services which the financial services sector were looking to offload quickly. Although there will be a limited window of opportunity for offloading captives, I suspect we will see a few more sizeable deals like the Citigroup / TCS one done”, he explained.

In the same statement Rawlinson highlighted other likely trends for the industry, such as the shift in power from banks to service providers in terms of what services are actually outsourced. He also expects service providers to develop “utility” services across multiple banks using their scale to develop common platforms that can be leveraged by numerous banks.

While Rawlinson highlights the trend towards banks selling their captive operations, he adds “others will elect to keep certain process sets depending on their view of competitive advantage”.