Wells Fargo banks on Bangalore to derisk its India operations

BANGALORE: Wells Fargo, the fourth-largest bank in the US by assets, is banking on its recently opened Bangalore captive centre to de-risk its India operations. The company, at present, is heavily dependent on its Hyderabad centre.
Speaking to TOI on the sidelines of the Globalization Summit 2011 organized by Zinnov Management Consulting, Aveek Kumar Mukherjee - MD of Wells Fargo India , said that the company has 200 people in its Bangalore office. Business continuity planning is a major reason for this move. It is meant to deal with unforeseen circumstances like the possible worsening of the Telengana crisis.
"Some back office functions for Wells Fargo are now solely being done in India. Thus we have to keep ourselves equipped to meet contingencies that might arise on account of say the Telengana issue," he said. Mukherjee, however, added at this point of time they are facing no problems in Hyderabad and work is continuing normally.
Wells Fargo India currently has around 1,700 people in both centres that are involved in back office operations. This involves information technology outsourcing (ITO) and analytics functions for banking operations .
According to an industry source it is normal for corporations involved in banking operations to look at multiple geographies as the risk factors associated with data is higher in the banking sector. "Even the likes of Bank of America have used this strategy in India as part of their business continuity plan," the source added. Mukherjee said that apart from spreading risks, Bangalore offers Wells Fargo a good skill base that in certain areas are superior to that available in Hyderabad. "There is a case of balancing the work in both centres with some employees moving from Hyderabad into Bangalore. Also depending on how things pan out we might hire more people in Bangalore going ahead," he said.
Wells Fargo is a relatively late entrant in using the offshore business model, starting off its Hyderabad operations only in 2006. Mukherjee said that while other US banks like J P Morgan and Bank of America today offshore about 10-15 % of their work, the comparative numbers for Wells Fargo stands at just 2-3 %.
Mukherjee added that the captive business model is, however, no more related to just cost arbitrage as they are adding business value to the parent company.
According to a recent report by Everest Research there was speculation during the recession that the captive model will fail in India. However, between 2008-2010 around 37 new captives were added in India and 21 announced significant expansions. Also captives are now skewing their work mix towards more complex work and building hybrid partnerships with third party service providers. The Wells Fargo India expansion comes at a time when it has been downsizing staff in the US. On April 7, the bank announced that it was shedding 1,900 mortgage related jobs in the US.
Analysts, however, state thatthe prudent lending practices of Wells Fargo has limited its liability towards huge settlements and legal fees arising out of the 2007-2009 financial crisis, compared to some of its rivals.