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According to the new research report published by The Insight Partners, titled “Middle Office Outsourcing Market - Global Analysis and Forecast to 2027”, the global middle office outsourcing market is expected to reach US$ 9.8 Bn in 2027, registering a CAGR of 7.8% during the forecast period 2019-2027.
Over the past decade, large players such as State Street, Citigroup, JPMC, and BNYM made significant investments in the outsourcing field of middle office and strengthened their service offerings. The lessons learned in the past have been leveraged, and the outcome is more stable models that give asset managers the confidence to implement the outsourcing of middle offices. Companies outsourcing middle office activities face several challenges mainly due to decisions such as staff reduction, business requirements, closing offices, and consolidating programs. This resulted in significant delays in the completion of outsourcing activities. Moreover, the capital and time investment by both service providers and asset managers would result in larger asset managers scaling back their goals for outsourcing middle office. Vendors operating in middle office outsourcing collect data from a variety of sources, such as stock exchange feeds, broker-dealers, and regulatory filings as a single provider cannot have information on multiple securities.
Various analytics services are being adopted by the firms for transforming the unstructured data gathered from various online channels to structured data in order to gain meaningful insights. “Predictive analytics” is one of the major advanced analytics tools used to understand and code the behavior pattern of business and consumers. For increasing revenue at various organizational levels, such as stock exchange, private equity management, investment baking, clearing house companies, and hedge funding companies, analytical tools help numerous end users. This has encouraged most of the companies to adopt strategy of outsourcing middle office operations, which significantly reduces operational costs of the vendors and contribute towards the growth of middle office outsourcing market.
The optimization of middle office operations, such as reconciliation reporting and billing, portfolio accounting, staff augmentation, plays a crucial role in financial institutions as outsourcing helps in overcoming issues related to workflow disruption and also safeguards from wrong reporting. Thus, the emergence of automation is among the key trends in the global middle office outsourcing market. It eliminates unnecessary processes, reduces operational risks, provides valuable insights, and cuts down cost. Furthermore, cloud-based solutions, such as the “SaaS middle office model,” are being increasingly adopted for decreasing operational costs. The emergence of cloud solutions and increasing automation are likely to drive the middle office outsourcing market in the coming future. Cloud-based middle office solutions help in enhancing operational flexibility by providing frequent upgrades and enhancements, on-demand scalability, and extensibility as firms launch new and innovative products.
The Asia Pacific countries including India, China, Japan, South Korea, Australia, and Rest of Asia Pacific. In 2018, the Chinese government enabled foreign companies to establish wholly owned entities or else take majority stakes in joint ventures, thus allowing international companies to compete on an equal competing field with domestic incumbents. In an attempt to further accelerate the investment management industry, Chinese regulators have released a range of rules enabling securities firms as well as insurers to unveil mutual funds. Aggressive competition amongst asset managers as well as other institutions including banks, trust companies, and securities firms are expected to create further challenges for asset managers for maintaining high standards of governance and transparency in their chase of market share. The increasing complexities are expected to propel the middle office outsourcing market in China.
Key findings of the study:
The middle office outsourcing market is segmented into offering and end-use; the middle office outsourcing market is also analyzed across five major geographic regions-North America, Europe, APAC, MEA, and SAM. Based on offering, the middle office outsourcing market is further segmented into portfolio management, trade management, and others. Currently, the portfolio management segment dominates the market and is expected to be the fastest-growing segment during the forecast period.
Based on end-use, the middle office outsourcing market is segmented into investment banking and management, broker-dealers, stock exchange, and others. In 2018, the investment banking segment dominated the middle office outsourcing market.
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