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News - 30 March 2004
Not as cheap as it might seem?

The offshoring of call centre jobs to India is 'an accident waiting to happen'.

The trend will “inevitably” spark a regulatory crisis at one of the banks or financial services firms that is offshoring call centre or business processing work, said Eamonn Rice, head of financial services at Ernst & Young.

Rice said: “Given the volume of offshoring that is going on and the risks attached, there will have been a major regulatory failing within five years. “The FSA will be keen to respond appropriately, coming down pretty hard on any organisation that allows the carrot of reduced costs to outweigh the regulatory and risk management stick. “Financial services companies can never be entirely sure that offshore workers are up to speed on UK regulatory requirements. It will be a disaster for the financial services brand involved.” Rice suggests the scandal is likely to involve a failure to handle complaints properly, a breach of confidentiality or mis-selling. There have been reports that criminal gangs have been attempting to bribe lower-paid employees in Indian call centres to help them commit fraud against customers. An additional problem is that more than half the UK firms that are exporting call centre work to India are understood to be flouting the Data Protection Act, meaning they are at risk of unlimited fines, being sued by customers and of course further reputational harm. Information commissioner Richard Thomas has this year warned that firms would be unable to escape the law by blaming failures on the act’s complexity. Simon Davies, director of human rights group Privacy International, said: “The movement of call centres to India illustrates the failings of the Act with vicious clarity. The further away from the source of the data it is moved, the more likely it is that corruption will creep in.” Yet the trend of transferring financial services jobs to low-cost markets is still gathering pace – with major financial institutions such as Aviva, Lloyds TSB, Abbey National and HSBC jumping on the bandwagon in recent times. Rice said: “This is cyclical. We’re in a part of the cycle right now when the attractions seem huge. But two things will convince people that actually some of this stuff is better done in the UK. “Those will be pressure from customers to bring jobs back onshore as they recognise that service levels are lower, and the potential for regulatory failure. That will create doubt in the minds of UK executives which can only be eradicated by bringing stuff back onshore into a UK regulated environment. ” An early casualty is credit card firm Capital One which last week cancelled a deal with India’s largest call centre after Indian workers misled the US card company’s customers with unauthorised offers of credit. Lehman Brothers and Dell have both repatriated services to the US following customer dismay at poor service. Also HSBC’s UK reputation took a knock last October when it announced it would axe 4000 UK jobs by 2005 and transfer the work to India. The move is said to have sparked an exodus of customers to rival banks. Rice added: “ While there are meant to be cost savings, actually achieving those is a bigger challenge than most people imagine. There is a potential cost that people often don’t factor into their plans – lost revenue.” A spokesman for HBOS – which together with Royal Bank of Scotland, Alliance & Leicester and Legal & General – has come out against offshoring – said: “The real challenge is to get call centre services right. Nobody can claim they are even doing this right in the UK yet. It becomes even more difficult if you put your call centre more than 3000 miles away.”

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