Global reliance on managed services has steadily increased over the past decade, a trend that is forecast to continue as the service model reaches more than 200% of today's market capital by 2028. For the financial services industry, the impact of this surge in adoption rates could be transformative.

While global banks have relied on managed services for decades, smaller financial institutions on the buy side and sell side have been more hesitant to adopt, seeing managed services as a solution that is too costly and too governance-intensive to fit their needs. 

However, a perfect storm of market pressures is changing the mindset and creating new urgency in the search for viable solutions. In just a few years, the service landscape has changed dramatically, leaving financial service organizations scrambling to adapt. And there is more change on the horizon. As these factors continue to impact financial operations, many will find themselves stretched beyond their current capacities and capabilities.

Remote work

The shift to remote work highlighted how fragile business continuity can be. This has spurred the industry to find creative ways to build more resilience, flexibility, and capacity into the system.

Labor shortages

The Great Resignation and a wave of early retirements have exacerbated existing talent challenges worldwide, motivating more organizations to turn to a contingent workforce to address shortages and access business-critical skills.

Digital transformation

Digital transformation has enabled new levels of responsiveness, transparency, and efficiency. However, many organizations remain challenged by a fragmented technology landscape comprised of start-ups and niche providers.

Customer expectations

Innovations in retail banking have reset expectations for financial services as a whole, with investors and other financial stakeholders demanding greater visibility into workflows and data, while expecting the movement of (and access to) assets to be near instant.

Regulatory pressure

Average settlement dates are shrinking faster than ever as a result of global initiatives such as the European Market Infrastructure Regulation (EMIR) Regulatory Fitness and Performance program (Refit), the Commodity Futures Trading Commission (CFTC) re-write, and Australian Securities and Investments Commission (ASIC). While technology can help buy sides meet aggressive timelines, many are struggling to select and implement the technology required.

Workload variability

Requirements such as the Know Your Customer (KYC) periodic review or standing up new processes to support a regulatory change involve bursts of resource-intensive activity that are difficult, if not impossible, for a fixed workforce to accommodate.

Market volatility

Organizational priorities are shifting from cost-cutting and austerity to growth mandates and revenue optimization as market volatility creates more opportunities for sell-side institutions and higher returns for the buy side. This, in turn, is driving a need for onboarding and time-to-market speeds that can't be achieved without optimized, technology-enabled processes.

Rethinking managed services

At a time when the need for operational speed and flexibility has never been more urgent, financial service organizations are taking a new look at managed services. And they are doing so at an opportune time, as advances in workflow technology and service models have brought managed services within reach for a broader range of the buy-side, sell-side, and even corporates. However, many organizations need guidance to understand and navigate their options.

To this end, S&P Global Intelligence has published "Demystifying Managed Services for Financial Institutions." This white paper examines the state of managed services for the financial industry and defines the service models and evaluation points business leaders need to understand.

Download your copy here

S&P Global provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.