Offshoring Financial Jobs

Sending Financial Jobs to Cheaper Locales

Offshoring is affecting financial jobs.
Yuji Sakai/Digital Vision/Getty Images

Offshoring Financial Jobs: offshoring is no longer an issue just for workers in manufacturing industries. This trend is also affecting the financial services industry and the financial function within other industries.

Call Centers and Other Examples: For a number of years financial services providers based in the United States, such as credit card companies and the credit card divisions of major banks, have sought to reduce operating expenses by placing customer service call centers in lower-cost countries with large English-speaking populations, such as India and the Philippines.

Ireland has also been a popular destination for such offshoring, but this trend has lessened as its economy boomed and labor costs rose there. In addition to call centers, the back office operations of financial services firms in high-cost countries such as the United States and various western European countries also have seen attempts at offshoring.

Accounting and Audit Offshoring: More recently, a variety of functions within the broad category of accounting services, including auditing, have joined the job types subject to offshoring. This trend among auditors is causing a growing amount of comment and concern since the job traditionally requires spending a significant amount of time on the premises of the company being audited, allowing for direct observation of its operations and documents.

Leading public accounting firms, including some members of the industry leading Big Four, have set up facilities in low-cost venues (most notably India, but also Poland and elsewhere) where an increasing amount of audit related number checking and tabulation is being performed remotely.

Improved technology for scanning and transmitting documents to far off locations is facilitating this development. Although only a small fraction of the audit work related to companies based in the United Kingdom currently is being performed remotely in this fashion, the trend is worrisome to a key accounting regulator in that country.

He is deeply concerned that the quality, accuracy, and reliability of audits will decline as they are being conducted with less direct client contact. See "Watchdog fears less rigorous vetting as audit work is sent offshore," Financial Times, 7/26/2011.

Impact on Low-Cost Countries: The implications of the offshoring trend in the financial services industry and in financial functions depend on your location and credentials. For many financial professionals in low-cost countries that are attracting these sorts of jobs, this globalization initiative is opening up new employment opportunities close to home. This is especially true for practitioners with excellent English language facility, given the dominance of English as the primary global language for business, especially in the financial services industry and the financial field, more broadly defined.

Impact on Developed Countries: On the other hand, for financial services and financial management staff within higher cost countries such as the United States, Canada, western Europe, Australia and New Zealand, increasing offshoring to lower-cost venues around the globe presents new challenges. To a large extent, these growing trends are more recent extensions of earlier labor-saving initiatives that focused on the development and implementation of information technology to reduce staffing levels, or to restrain the growth of employee headcount as volumes of business increased.

In even broader terms, the offshoring of low value added financial job functions in countries with high labor costs is evidence that the financial workforces there are likely to be concentrated in the higher value-added activities.

Relation to Back Office Automation: As recently as 1990, Wall Street firms employed large numbers of people in various back office functions for which a high school diploma was more than adequate preparation and credentials. With the loss of many, if not most, of these positions to automation in the succeeding years, the average minimum required educational attainment has risen significantly within the financial services industry. Accordingly, the opportunity to make a good living is becoming associated with a narrower spectrum of positions, for which more extensive and expensive education is being cited as a prerequisite.