Outsourcing Excellence Award – Most Transformational – KeyBank and ABN AMRO
Although trade was not a high-growth business for KeyBank, it was an important part of its overall offering. Projected growth rates did not, however, justify the cost of upgrading – its multi-site back office operation. Moreover, as the market for global trade services evolved and the industry consolidated in the late 1990’s, financial institutions like Key faced the challenge of spending huge sums of money on new services and IT platforms to remain competitive. The bank faced a strategic decision:
- continue on the current course with intense cost pressures and finite capabilities
- exit the business; or
In order to improve the level of service to KeyBank clients continuously, in 2001 Key chose to outsource full service global trade documentary processing with private-labeled front-end Web-based platform, client servicing, IT services, plus IT platform hosting for related services that have not been outsourced.
Partnering to Overcome the Trials of Transition
Key originally viewed outsourcing with skepticism. ABN AMRO, which had been doing processing for multiple legal subsidiary entities, had discussions with Key’s senior management to outline the outsourcing value proposition and rationale, as well as the scope of services, economies and benefits it could realize. ABN AMRO helped Key assess its current situation, develop a business case, define long-term goals, study alternatives to reach its goals and finally, decide on a strategy. Ultimately, ABN AMRO persuaded Key to outsource on the strengths of its global network, world-class capabilities, product innovation, and commitment to customer service.
During the initial three months following the transition, there were several client servicing and processing issues that had to be resolved, which is fairly typical of an implementation with this level of complexity. These issues resulted largely from insufficient training during the implementation due to time constraints.
To work through these issues, Key and ABN AMRO conducted daily conference calls , and in the beginning these calls included senior management from both sides who set the tone of cooperation and mutual respect for the entire team. Additionally, Key prepared a comprehensive and detailed issues log and updated it daily following these calls. These issues took less than three months to bring to a close.
Outstanding Client Service Is The Shared Expectation
Outstanding client service is the baseline expectation for both parties. Neither organization allows problems or interruptions to just slip by. In fact, these high expectations have created something of a competition to see which party can provide better service and support for the clients.
Second, frequent communications at all levels ensure that there are no surprises or misunderstandings. Frequent informal communications are augmented with periodic formal meetings that ensure all parties publicly commit to their respective responsibilities. This simple act dramatically improves everyone’s accountability. Said Martens, “We’re so tightly partnered that we go over this together. ABN AMRO’s revenue is tied to client satisfaction, in that if our clients are happy and we’re able to sell more, then they get all the fees for all the services.”
Over time a great deal of mutual trust and respect has grown between KeyBank and ABN AMRO. The more experiences and challenges that they share, the more time that passes as they work toward a common goal, the greater the trust grows in this relationship. Trust, respect, communication, and client focus create new rules and procedures when they are required, allowing for the growth of the flexible, creative solutions required to evolve and stay ahead in a fast moving industry.
“Ticket for the Future”
KeyBank and ABN AMRO are the first financial institutions to enter into a full service outsourcing agreement on such a scale for the servicing of global trade transactions. A few other banks in the United States had tried something similar, on a smaller scale, without success. KeyBank is now able to offer a much more robust and state-of-the-art product offering that greatly benefits its customers by improving the transparency and integration of their global supply chains, automating and streamlining work flows, and reducing costs. “I want to say we can sort of pick and choose the products we want based on what our client needs are. There are plenty of products and services that ABN AMRO provides that we do not choose to offer to our clients because they are either not appropriate or they may just be too expensive for us to be able to deliver profitably. That gives us a choice to pick and choose what we want. We’re not forced to offer anything we don’t want to offer.”
KeyBank’s servicing is very competitive with its industry peers. It has been able to penetrate new and more profitable market segments, winning deals that it could never have won in the past due to its inefficient and outdated technology and product deficiencies. Clients have now been persuaded to concentrate their business with Key. Staffs at KeyBank have been redeployed to focus on certain aspects of the business, which has enhanced the bank’s ability to generate revenue and reduce expense.
KeyBank and ABN AMRO have pioneered a new business model for the industry. While KeyBank conducted due diligence on ABN AMRO’s operations and processes before the outsourcing, there were no industry benchmarks or references that Key could research during the implementation, as an outsourcing arrangement of this scale and complexity for trade processing had never been done before. Both parties forged a precedent-setting partnership that ensured the long-term viability of KeyBank’s trade business by strengthening its competitive position. In crafting this business model, they carefully examined a host of issues — operations, implementation, IT, human resources, sales and marketing, legal and compliance, etc. — to deliver an optimal structure. No investment is required for product development or improvements to Key’s infrastructure. Key’s sole expense is processing, which it can now quantify exactly. “The burden of new product development is left to somebody else, so we are no longer responsible for the ongoing care and feeding of the IT system.” Finally, ABN AMRO’s product offering, which spans traditional documentary credits to end-to-end supply chain solutions, has raised customer satisfaction.
Benchmark for the Industry
This partnership established an industry benchmark by which the success of other outsourcing partnerships is measured. This relationship also set a precedent in the way banks are responding to intense cost pressures and changes in market demand. Commoditized solutions and industry stagnation, which has resulted largely from declining use of traditional trade credit instruments, are driving banks to partner for growth. By gaining access to innovative end-to-end supply chain solutions, such as accounts receivable financing, vendor finance, and open account, without incurring huge development costs, Key is able to invigorate their trade businesses. For the first time, KeyBank uses trade services as a lead to grow its overall business.