The new frontier for information technology outsourcing: International banking

Two international banking challenges will provide the future growth and rationale for information technology (IT) outsourcing in the financial sector. The first challenge is the multi-faceted risk associated with cross-border financial flows. Institutions are attempting to manage long-term risk through the use of financial derivative products. However, most short-term risk relates to structural (i.e. time zone or regulatory constraints) or settlement system shortcomings and individual institutions have few risk management tools. The second challenge involves the difficulty of developing truly global full-service financial firms. National regulations remain the major obstacle to foreign direct investment. However, de-regulation, particularly within Europe and North America has highlighted the difficulty of developing critical mass within fragmented national financial sectors. IT outsourcing could be a powerful tool in addressing these challenges, however, it is not currently structured, promoted or perceived as such.