Unlocking the potential of “Operating Services” in Financial Services

Operating services are rapidly becoming a cornerstone in reshaping the financial services industry’s operating models. These entities offer powerful solutions for institutions aiming to streamline processes, reduce costs, and focus on their core business. They’are also an opportunity for growth for players offer bespoke operating services for third parties.

By integrating specialized expertise and advanced technology, operating services unlock efficiencies and create scalable solutions for growth.

The global market for outsourcing and IT services underscores this trend, projected to reach a combined $1.6 trillion by 2029, driven by a CAGR of 5.5% for outsourcing and 8.2% for IT services.

This growth reflects a transformative shift in the way financial institutions—spanning banking, asset management, and wealth management—approach operational resilience and innovation.

Operating services provide a new way to conceive outsourcing by packaging HR, processes, and IT systems into a cohesive end-to-end service. These entities are well-suited for organizations seeking to modernize and optimize their operating models.

The archetypes of Operating Services 

The Operating Services market comprises a diverse range of business models, each tailored to meet specific operational and strategic needs. These archetypes include:

• IT Vendors: Providers like Clearwater and FNZ offer end-to-end solutions, evolving from traditional software licensing models to integrated services. They leverage SaaS models to provide scalable, technology-driven solutions.
• Internal capacity carve-outs: Institutions such as Amundi and Crédit Agricole have carved out dedicated entities to consolidate internal expertise and develop solutions either for internal use or as white-label services for external clients.
• Subsidiarization: Creating a standalone subsidiary focused on group-wide operational excellence.
• Third-party outsourcing: Transforming internal operations into marketable services for external stakeholders.
• Industry utilities: Collaborative platforms like S2E and Copartis enable cost-sharing and mutualized operational functions across multiple stakeholders, reducing redundancy and driving efficiency.
• Consulting firms with Operational Services : Organizations like Big four blend strategic advisory capabilities with operational outsourcing, offering a comprehensive appraoch to transformation and execution

Core Benefits of Operating Services 

Operating Services offer numerous advantages to financial institutions, but success hinges on meeting core client expectations. The seven key benefits include:

1. Cost efficiency: Significant reduction in operational expenses through outsourcing.
2. Scalability: The ability to adapt services to client growth.
3. Access to expertise: Leveraging specialized providers with cutting-edge technology.
4. Focus on core business: Freeing internal resources to concentrate on strategic priorities.
5. Regulatory compliance: Simplifying adherence to complex regulatory frameworks.
6. Improved operational efficiency: Streamlined processes that enhance service delivery.
7. Enhanced client experience: Delivering more seamless and reliable solutions.

There are 10 key success factors that players in the industry can address to overcome the current challenges

The complexity of the operating services market requires a strategic approach to not only address challenges but also create sustainable value for clients. To address these challenges, players in the operating services market must focus on 10 critical success factors that create a roadmap for success:

1. Building comprehensive service catalogues: Clients increasingly expect modular and tailored service options. Developing an adaptable service catalogue enables providers to align their offerings with diverse client requirements across industries like banking, capital markets, and insurance.
2. Developing flexible pricing models: Offering tiered pricing allows clients to select services that best meet their operational and budgetary needs. This flexibility is key to accommodating varying client sizes and maturity levels.
3. Ensuring effective client governance: A well-defined governance framework ensures alignment between service providers and clients. Player in the industry have integrated client feedback into long-term service development, fostering collaboration and trust.
4. Driving continuous process improvement: Investing in process innovation helps maintain a competitive edge and cost efficiency. Industry leaders emphasize the importance of operational excellence through continuous refinement of workflows and technology integration.
5. Mutualizing investment costs: Sharing resources and investment costs across multiple clients reduces barriers to entry and ensures sustainability. Co-partnership models demonstrate the value of a collaborative approach to mutualizing expenses
6. Balancing standardization and customization: Standardized services offer scalability and efficiency, but providers must also accommodate critical client-specific needs
7. Focusing on client satisfaction: A client-centric approach, with proactive support and regular interaction, enhances satisfaction and loyalty.
8. Streamlining onboarding and migration: Simplifying transitions for new clients minimizes disruptions and builds confidence. Providers must offer clear processes and robust support to facilitate seamless integration of services.
9. Harnessing technology and innovation: Emerging technologies, including AI and blockchain, play a crucial role in enhancing efficiency and reducing costs.
10. Mitigating risk with robust frameworks: Regulatory and operational risks can hinder adoption and scalability.

The future of Operating Services 

Operating services have proven to be game-changers for Tier‑2 and Tier‑3 wealth and asset managers, who often lack the resources to manage large-scale transformations independently. By providing cost-efficient, scalable solutions tailored to their needs, this market segment presents significant growth opportunities. Providers must focus on delivering competitive, off-the-shelf offerings that lower entry barriers while emphasizing continuous innovation. As the market matures, operating services entities will continue to serve as powerful options for reshaping operating models. Their ability to package HR, processes, and IT systems into end-to-end services will be critical in helping institutions meet evolving client demands and navigate complex regulatory landscapes.

Operating services represent a paradigm shift in the financial services industry. By leveraging external expertise and innovative delivery models, institutions can unlock efficiencies, enhance client satisfaction, and focus on strategic growth. The next decade will see the expansion of this market, driven by technology, collaboration, and the need for operational resilience. Financial services leaders must embrace these trends and adapt their models to capitalize on the immense potential of operating services.