Belgium's KBC Bank is moving its domestic payments processing to Fin-Force, its 90 per cent-owned back office outsourcing subsidiary that it jointly founded with Electronic Data Systems (EDS).
Fin-Force already handles KBC's international payments, processing around 7.5 million transactions annually. With the new deal, Fin-Force says its processing volume will increase by some 130 million transactions a year.
As part of the agreement, 116 KBC Bank employees will be transferred to Brussels-based Fin-Force.
Launched in January 2001, the subsidiary's only current client is KBC Group. In a statement, KBC Bank claims this is because "the international banking market is not quite ready yet to outsource payments processing to a specialised firm."
KBC says Fin-Force is willing to consider working with other financial institutions and is even prepared to adjust its shareholder structure to accommodate new partners if necessary.
Other banks have also struggled to make this model work. Deutsche Bank pulled out of its back office outsourcing joint venture with Wall Street Systems, called SOCX (Settlement & Operations Clearing eXchange), in February this year. Established in 2001, SOCX provided processing, settlement and clearing services across a range of financial products, but its sole client was Deutsche Bank. The bank ended up selling its 50 per cent stake in the company to founding partner Wall Street Systems.
KBC Bank also claims the introduction of the euro and recent European regulations on cross-border payments pricing have altered competition in the marketplace but insists there is a market for Fin-Force: "KBC is convinced that Fin-Force has a solid business model and will continue to demonstrate its efficiency in future."