Cultivating Business Outcomes In BFSI: The EXL Evolution

In late October, HfS Research attended a duo of Analyst Days hosted by EXL in their relatively new Digital Experience Center (DEC) in Jersey City, NJ. The stated mission of the Digital Experience Center is to serve as a collaborative space to design and architect digital solutions that transform clients’ businesses. EXL attempted to bring this mission to light by focusing the event on business outcomes achieved through digital transformation with banking, financial services, and insurance (BFSI) clients.

The briefings dovetailed with EXL’s announcement of its Q3 results, which showed double-digit year-over-year revenue growth of 12.4%. Analytics continued its strong growth trajectory (29.1%) and its operations management business chalked up modestly respectable 7.0% growth. Its financial performance served as a timely backdrop to the discussion of the firm’s movement away from labor-arbitrage-based operations management services to one offering digital transformation led by analytics and industry-specific solutions.

Growing Focus on BFS, Largely Led by Analytics

EXL is well known for its industry expertise in the insurance sector and increasingly in healthcare. It is somewhat less well known for its developing focus within banking and financial services. Part of the haziness around the company’s depth of BFS expertise is tied to choices the company had made around SEC reporting, whereby BFS is reported as part of a segment called “Other”. Another factor is its analytics business, which is often reported and discussed as a horizontal set of capabilities. However, BFS is one of the biggest growth engines within EXL’s analytics business, supporting various risk and compliance needs with deep industry-specific process knowledge.

At the event, EXL showcased various client examples to illustrate the link between digital transformation and tangible business outcomes. While the BFS examples were generally analytics-led, the examples also showed good continued growth in use of enabling technologies such as intelligent automation and data management, which have been focused growth areas for EXL. The depth of BFS-related risk and compliance expertise was also on display, as follows:

• Risk monitoring Center of Excellence: For one BFS client, EXL mentioned that it has been able to leverage its core work around risk model development, validation, and monitoring to create a Center of Excellence that integrates seven previously disparate risk monitoring sites. The solution combines elements of its analytics arsenal with intelligent automation components such as machine learning and natural language processing to automate and improve monitoring processes. The result for the customer is a streamlined approach to risk monitoring, lower cost, and a more predictable cost basis with pricing moving from FTEs to a fixed cost per model monitored.
• Automation of KYC onboarding: The firm developed a solution for a global banking client that compiles KYC inputs from myriad sources and answers the region-specific 300 to 400 questions required as part of the onboarding process for individuals. The solution simulates what human analysts do but substantially faster and with no errors. While this solution was analytics-led, it was coupled with intelligent automation components to yield an automated process. EXL worked with the client to assess their end-to-end onboarding process and developed a new process to enable the automated KYC processes to be effective. The client benefits include substantial cost savings from headcount reduction, faster time to solution with less errors, and higher regulatory efficacy.

In both examples, while the supporting technology may be applicable across industries and even across permutations of risk monitoring and regulatory compliance, it’s the process knowledge that helps EXL deliver an effective solution and begins to bridge the gap between analytics and enhanced operations management. As EXL continues to cultivate its BFS segment, HfS expects to see them leverage analytics to pull through operations management opportunities especially around process reinvention. EXL needs to ensure that its strength in risk and compliance process knowledge specific to BFS is not lost in the broader analytics message.

Setting Up to Become an Industry Participant in Insurance

EXL’s focus on business outcomes for insurance clients was apparent at the event, with a more cohesive than ever before message about the firm’s range of industry-specific capabilities. Part of this comes from the strategy work done by Nagaraja Srivatsan over the last year in his role as Chief Growth Officer for EXL in collaboration with the provider’s insurance practice leaders, including those at the event – Keith Johnson, Sr. Vice President and Head of Life & Annuities; Arnab Dey, Sr. Vice President, Head of Property & Casualty, and Chief Strategy Officer; and Brad Burdick, Sr. Vice President, Insurance Tech and Products. In its journey from being a niche operations player to a broad-based solution provider, we saw a few examples where EXL is consolidating capabilities to become an industry participant for insurance:

• Creating a library of digital interventions for insurance: While EXL was initially late to the market with robotic process automation tools, it has been reorganizing its approach to technology-enablement by providing access to them under the label of “digital palette”. The service provider has created domain-specific bots and automation tools, analytics and reporting, and other technology intervention suggestions for 700 insurance processes. Similar to the banking examples, process knowledge and knowing what to recommend are the biggest value-adds for working with EXL in this way. Its clients are brought into the same DEC space where the event was held and taking their process as an example, clients are led through a collaborative workshop using the digital palette ideation tool to redesign and digitize their footprint.
• Contributing to top-line growth with data-driven platform: EXL’s acquisitions over the last few years are now coming together with its new standalone offering, the Digital Customer Acquisition Platform. Built on the 2016 LISS acquisition’s new business engine, this capability allows EXL to further address topline growth for carriers in North America. EXL is using rich customer data from its RPM acquisition to supplement customer information, reporting match rates of 85%-90% of prepopulated customer data for new business activities. EXL already has two clients signed up; commercial structures will be based on transaction-based pricing.
• Evaluating opportunities for industry utilities: While market-facing utilities have been cropping up in banking and financial services, this is still an emerging area in insurance. EXL is investigating discrete processes where it can step up to create standards and offer market utility services. One likely candidate is subrogation. Using the service provider’s existing Subrosource platform as a base, carriers would entrust digital data flow to EXL, which could in turn auto-resolve payments on behalf of clients.

Progress Toward the Triple A Trifecta

HfS developed the “Triple A Trifecta” of robotic process automation (RPA), smart analytics, and artificial intelligence (AI) to provide a clear and crisp articulation of the emerging change agents for clients to optimize, renovate, or transform their business operations. While each element of the trifecta has a distinct value proposition (RPA drives efficiency, smart analytics improves decision making, and AI can solve business problems), the increasing convergence between the three elements is the Holy Grail of service delivery transformation.

EXL doubled down on analytics long ago with its Inductis acquisition (2006) and has continued to invest and build its expertise. Lately this has included a focus on data management with its acquisition of Datasource. As we evaluated EXL’s updated BFSI strategy, we noted new use cases involving RPA and AI, areas in which EXL was somewhat late to market. The firm needs to continue to embrace and increasingly combine these change agents to help its clients and itself achieve digital transformation.

Exhibit 1: The HfS “Triple A Trifecta”: Automation, Analytics, and AI

Source: HfS Research 2017

Bottom Line: EXL’s BFSI offerings are evolving with the increased use of intelligent automation; however, BFSI reinvention is only possible if EXL embraces the Triple A Trifecta.

HfS sees a thoughtful front presented by EXL on its BFSI practices: rooted in its analytics strength and industry process expertise, but increasingly stretching to develop more technology enablement and deliver on business outcomes for clients in these markets. As we noted in our recent HfS Chicago Service Buyers’ Summit, clients aren’t looking for RPA, AI, or blockchain products off the shelf; they are trying to buy an outcome. EXL is on the right path with rethinking its analytics and operations management business with these new expectations, taking its own advice to “look deeper” as it goes to market. It must now refine and ramp up its new intelligent automation capabilities as clients continue to challenge its risk appetite for change. There will be a notable self-cannibalization of its operations business as this unfolds.