At a time when North American banking sector is in doldrums, top Indian IT services companies like TCS and Infosys are securing large BFSI deals from other geographies, as seen in the last six-seven months.
Just a few days ago, TCS announced announced a 10-year partnership with AIB Life, the joint venture of Allied Irish Banks plc and Great-West Lifeco, to support the launch of its operations in Ireland.
This quarter, Infosys bagged a $454-million deal to accelerate the digital transformation of Denmark-based Danske Bank. In June this year, TCS and Nest, UK’s largest workplace pension scheme, expanded their partnership to focus on digitally transforming the latter’s scheme administration services. The contract value of the deal is £840 million with an initial tenure of 10 years.
Another blockbuster deal for TCS was also in the UK. In February this year, the IT bellwether won a contract of over £600-million (about $723-million) with Phoenix Group, the UK’s largest long-term savings and retirements provider, to digitally transform the latter’s ReAssure business using the TCS BaNCS-based platform.
In 2023 so far, TCS has secured or expanded partnerships with BFSI clients based in Saudi Arabia, Sweden, South Africa, Dubai, the UK, Taiwan and Switzerland. Infosys on the other hand secured or expanded partnerships with banks in Australia, Nordics, Mongolia and Belgium.
Elena Christopher, chief research officer at HFS, said, US lenders are reeling under problems like rising cost of acquiring deposits, lower demand for lending and continued off-balance-sheet loss potential due to continued inflation impacting fixed assets.
“After the bank failures in Q1 this year, the US banking market remains hesitant at best to do much more than keep in-play initiatives going. There is a massive focus on cost savings — which is always there — but it’s everyone’s number one objective at the moment,” Christopher said.
She added that the US climate of banking uncertainty equates to limited new investment. “For service providers, they are finding other geographies to be more lucrative in terms of banking opportunities for the time being. Like the recent Danske Bank deal for Infosys as well as some life and pensions deals for TCS in the UK.”
Pareekh Jain, founder of Pareekh Consulting, explained that while US banks have strong and scaled global capabilities centres (GCCs) in India, lenders from European, Australian and other geographies have relatively less scaled presence in India through their GCCs.
“This is one of the factors for the Indian IT services firms getting transformational and cost take out deals from BFSI clients in non-American regions,” Jain said.
Peter Bendor-Samuel, CEO, Everest group, said, “This is less a strategic move and more a reflection of market conditions around the globe. The US continues to be the most important market but Europe and Australia are on a different macro cycle.”
He added: “Europe bottomed out last year and is now in recovery at least from the tech services perspective. Australia never went into the tech services decline and the West Asia and especially Saudi are on fire driven by the high oil prices and their governments’ significant investments in transformation.”