Finsec’s General Secretary, Andrew Casidy, and UNI Finance, the international body representing all finance unions, have both warned New Zealand’s banking regulator, the Reserve Bank, of the dangers of banks becoming dependent on the IT platforms held offshore, outsourced processing companies or of handing over the operation of bank call centres to a temp agency.

The unions were responding to a consultation paper on a policy to deal with outsourcing at major, “systemically important” banks (that is, crucial to the smooth operation of the whole banking system).

Outsourcing is well advanced in New Zealand banks and now covers “critical areas of banking operations” says Casidy. “We have various examples of processing, information and technology and call centre functions that have been outsourced or offshored to independent third party suppliers or parent companies.”

Banks around the world are continuing to outsource thousands of jobs offshore as they search for cheaper and less protected labour. American investment bank Goldman Sachs is spending US$30 million outsourcing up to 1500 front and middle office jobs to Bangalore, in India. Bank of America is setting up its second office in Mumbai this summer. HSBC intends to double the number of outsourced workers it has in Asia to 25,000 over the next three years. Although the offshore expansion will cost HSBC US$1 billion initially, it saves the bank about US$20,000 for every job it moves offshore.

National Bank Australia (NAB), which owns BNZ, is outsourcing 20 IT jobs at present, but is also laying off up to 3000 staff, sparking a fear among Australian bank workers and their union of a more systematic outsourcing of jobs.

In India the Times has recently reported on plans by American entrepreneurs to buy a US$10 million ship called the Carousel, sail if off the coast of California, and keep an international crew of 600 software developers on it. The Carousel will then be able to sail outside the jurisdiction of US labour and immigration laws, and so provide US firms with cheap, nearby labour. One of the entrepreneurs, David Cook, says of the plan, “We’re not a slave ship.”

However the picture is not all rosy for offshore providers. In Britain some industry commentators are now suggesting that outsourcing and offshoring may not be the profitable solution that it promises to be.
Britain’s Financial Services Authority (FSA) has warned that offshore call centres and back office operations pose a serious risk its ability to guard against crime, maintain consumer protection and protect market confidence.

Many companies are finding that cost-savings from out sourcing labour are actually very difficult to achieve because of the loss of institutional knowledge and skilled people that goes with it. These concerns are coupled for many companies with problems from customers, employees and the general public strongly opposing outsourcing.

In Australia the Finance Sector Union (FSU) is raising concerns about the effect that sending large numbers of jobs offshore may have on the Australian economy. FSU communications manager, Rod Masson, argues that; “Companies that derive the bulk of their profits from one country should not be exploiting another community with few safeguards.”

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