By Sreeram Iyer, Chief Operating Officer, Institutional and (Acting) Head of the Group Capabilities Centre (GCC), ANZ Banking Group
These days, the most frequently discussed topics focus on examples of how successful digital transformations can lead to better business outcomes, including higher margins, new revenue streams and better valuations. While this is true in many instances, firms such as large banks typically lag behind their competitors in innovation, speed and productivity. A reliance on traditional operating models, coupled with the limited adoption of swift ways of working, has hindered the success of their digital transformations.
Despite some wins, the sector is at a turning point at which banks face a future marked by fundamental restructuring to enable them to compete in new arenas organised around customer needs. I point out two such drivers below—the second of which is not often discussed, hence, is the central theme of this article.
- The “known” force of new-age technologies1, such as generative AI (artificial intelligence), will significantly impact the banking industry. One estimate suggests this force will generate value from the increased productivity of 2.8 to 4.7 percent of the industry’s annual revenues, or an additional $200 billion to $340 billion. Undoubtedly, generative AI (GenAI) tools will enhance customer satisfaction, improve decision-making and employee experiences and decrease risks through better fraud monitoring, for example. Of course, none of this is easy.
- The other “unknown” force is a reimagined formula of Global Capability Centres (GCCs). What are GCCs? In the case of global banking, GCCs are typically sizable centres in less-expensive locations run by large teams operating 24/7 and offering different capabilities, services and technologies to the rest of the institution. Lately, GCCs have also delivered product-based innovation, using modern tools such as AI and analytics to support revenue growth, better manage risks and drive efficiencies. This operating model, while not new, is fast evolving and maturing—thanks to technology. Almost 25 percent of global firms2 now have a presence in the form of a GCC. That is significant.
This article will paint the picture of the GCCs’ evolution and why we should care about their roles in banking—today and tomorrow.
What has changed? The rise of GCCs from modest service centres
As the world faced pandemic lockdowns, businesses everywhere entered a race against time to digitise. Work went virtual, and companies struggled to set up systems to streamline processes and workflows within the span of a few weeks. GCCs continued to add value at each stage of this process, rendering the location-based model obsolete. The transformation was rapid and remarkable.
GCCs were at the forefront and contributed to the resilience agendas of every part of their parent organisations—regardless of business units or geographic presence. It was about how they had maintained service levels—no matter how volatile the market was. Hence, the growth of and reliance on the GCCs has been on a steep incline.
Over the past few years, encouraged by government incentives and policy impetuses, countries such as India, the Philippines, South America, parts of Europe and others have witnessed a proliferation of GCCs across banking, financial services and insurance (BFSI), fast-moving consumer goods (FMCG), retail and engineering services—with India being home to more than 55 percent of the GCCs established globally.
GCCs are now centres of excellence (CoEs) and have progressed from being former cost-arbitrage centres overseeing support functions to becoming automation and innovation hubs. Moving beyond excellence to experimentation, these centres are starting to become impactful components of success for their head offices—expanding their services with a focus on leadership, innovation and knowledge-based capabilities.
I have observed a few common themes over the years and deliberated on what needs to change and why—both from a head-office and GCC perspective.
- Head-office sponsorship of the GCC. It is imperative to have solid head-office visibility and an even stronger anchor sponsor, combined with a belief in the GCC and a strategic business outlook. This will help the GCC push its boundaries and gain positive positions to co-create the future of the enterprise.
- Genuine decision-making rights for the GCC. The question “What should the GCC be allowed to do?” usually precedes the decision to design the GCC model. Should it respond to instructions and fulfill tasks, or can it aspire to enhance value by driving the organisation’s transformation agenda? Should the answer be the ambitious latter objective, it is important to document these rights, which equally come with accountability for the GCC leadership. In the truest case of empowerment, the GCC leadership team should understand the business and its products, have a mercantile mindset, appreciate the business unit’s challenges and construct an agenda for the GCC that contributes to overall business performance. Working with headquarters, this must involve proper resource allocations and an enabling, uncluttered organisational design.
- A collaborative path with the combined impact of technology and operations. To achieve executive sponsorship and enable GCCs to contribute to enterprise priorities, leaders must challenge themselves and take a broader approach across the business, its technology and its operating model. Being at the forefront of this shift means maturing from the traditional scope to establishing new capabilities, using artificial intelligence and machine learning, and introducing meaningful business initiatives.
What more can be done to reposition GCCs?
Organisations—especially financial institutions—have entered the golden age of borderless global teams. As the lines are rapidly blurring between GCCs and their headquarters (HQs), GCCs can help HQs discover new opportunities, form strategic plans to adapt to new business trends and build new capabilities. In India, 70 percent of GCCs are headquartered in the United States. Additionally, the latest remote-work trends have added to the art of the possible.
Think enterprise first, GCC second
This is perhaps a cultural shift for some, but it ought to be clear to the GCC leadership that there is no independent business agenda to be pursued other than what business units expect and demand. There must be a balance between flexibility for the GCC on the one hand and rigidity of the business agenda on the other when determining the GCC’s priorities.
Mind the gaps
- Capability gap. As the banking industry continues to evolve amidst volatility and risk, GCCs must, in response, keep pace by developing the capabilities needed. Often these include accepting “full ownership and accountability” to build end-to-end digital platforms and implement multiple transformation initiatives, such as migrating from monolithic to microservices architecture, embracing cloud-native platforms, pursuing greenfield developments, such as GenAI, digital assets and more.
- Credibility gap. After many years and the different experiences of banks around the world, it is best to acknowledge that there is room for improvement in how value can be added and capabilities built. Credibility may have been hit hard by poor risk-management outcomes, reactive people-management policies or the lack of strategic direction.
- Consistency gap: GCC teams must recognise the need to earn the right to be noted based on a quality of performance that is predictable and consistent. Too often in the past, we have seen volatility in service standards, which, in many cases, results from inconsistent practices and fragmented processes. Also, automation and innovation have often been tactical, sporadic and not industrial-strength.
The future: GCCs helping to drive digital evolution
Today, the transparency and opportunities offered by GCCs make them the change agents of choice. A report by Nasscom India3 stated that the market size of GCCs is expected to grow from $46 billion in 2023 to $60 billion by 2025. The number of GCCs in India is forecast to increase to 1,900 by 2025, with financial services accounting for 35 percent of GCCs. Currently, GCCs employ about 1.66 million people, while the size of the total IT (information technology) workforce in India is about 5.4 million. GCCs are expected to hire around 2.6 million people in India by the end of 2030, taking the total number of people employed in GCCs to more than 4.5 million by 2030, according to a report by EY (Ernst & Young Global Limited).
In conclusion: The opportunities for GCCs are exciting
Considering the cycles of ups and downs with GCCs in the past two decades, it is logical to ask if the latest positive trend of relying on GCCs in response to macroeconomic challenges will continue. In light of the past decade’s developments, there is no doubt that GCCs have gone mainstream and are here to stay, rapidly adding more value.
Three priorities may help:
- Scale up with more of the same. Extend scale across transactional services on the back of current service delivery with a strong plan to deliver capabilities across digital, analytics and broader business operations.
- Mature up with new capabilities. This is about raising the overall level of talent and the culture of ownership and building new skills. The ask here is to build leaders who are themselves magnets of talent, not repellents.
- Efficiency up via automation. Challenge all human-based decision points in the flow of work. Not only do technologies—such as complex reporting, modelling, digital-product development, customised applications, fraud detection and business workflows—reduce error margins, but they also help streamline business processes and obtain actionable insights.
The single largest caveat to the success of GCCs is their value alignment with their head offices. Successful GCCs are extensions of their parent organisations and remain guided by the same values and objectives as their HQ counterparts. They have the same business goals and organisational cultures. GCCs are best poised to influence such a combination.
I look forward to the next frontier. How can the collective expertise of GCCs the world over be scaled? What if GCCs could collaborate in creating and delivering similar business value for their head offices and further elevate the maturity of the banking sector as a whole? Physical distance is nearly absent, proximity is overrated, and work habits are changing irrevocably. That in itself is very exciting because reinvention occurs every day.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of ANZ Banking Group
1 McKinsey & Company: “The economic potential of generative AI: The next productivity frontier,” Michael Chui, Eric Hazan, Roger Roberts, Alex Singla, Kate Smaje, Alex Sukharevsky, Lareina Yee and Rodney Zemmel, June 2023.
2 PwC: “Global Capacity Centre.”
3 Nasscom Community: “GCC4.0: India Redefining the Globalization Blueprint,” June 1, 2023.