Making the Case for Insourcing in Financial Services



Is your credit union looking to reduce costs and increase productivity? Then insourcing as an alternative to outsourcing might be something to take a closer look at. See why now is the perfect time to insource the processing of commercial deposits and ATMs and what benefits your CU can reap.

Many industries, most notably IT and manufacturing, have begun re-examining the need for outsourcing and are shifting to an insourced approach.1 The benefits of insourcing include improved customer service, greater control over business processes and actual reductions in operating costs. As part of their branch transformation strategy to reduce costs and increase productivity, many financial institutions (FIs) are following suit and examining current outsourcing strategies. One such area that is ripe for insourcing is the processing of commercial deposits and ATMs.

The Downside of Outsourcing

In the late 1990s and early 2000s, financial services was one of many industries to adopt outsourcing as a way of standardizing business processes, thereby leveraging outside expertise and achieving cost savings of as much as 40 percent.2 Processing deposits from ATMs and commercial accounts was one of the core functions outsourced by the financial services industry over the past two decades. To ease real estate costs and counteract employee inaccuracies, companies began to rely on armored carriers to pick up and take money away to process it offsite.

While an effective solution, several disadvantages quickly emerged with this outsourced approach, and the expected cost reductions sometimes never quite materialized. With the armored transport market dominated by a few key companies and with demand increasing, prices are projected to increase even more over the next several years.3 Sending cash offsite to be processed also creates an inventory need at the branch and makes it necessary to order more cash to utilize in ATMs and for transactions. In addition, when funds are tied up in cash in transport, they’re unavailable, so financial institutions need to borrow money from other banks to continue with other operations, including loans. With interest rates on the rise and high cash-order and transportation fees imposed, the substantial cost of this service has led some banks and credit unions to begin exploring more cost-effective and efficient options.

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