By Dan Berthiaume
As public sector entities seek to reduce costs and fraud associated with delivering transactional services, they are increasingly turning to BPO and shared services to help them minimize transactional risks while maximizing returns. A recent white paper from Capgemini, “Rising to the New Challenges of Transactional Services in the Public Sector,” examines how the public sector can follow the private sector’s lead in outsourcing financial transactions to deliver transactional processes that are “twice as good, in half the time, for half as much.”
Outsourcing Repetitive Transactions
The paper defines public sector transactions as primarily consisting of a citizen fulfilling financial obligations to the state (such as tax payments), the state fulfilling financial obligations to a citizen (such as unemployment benefits), and the state acting as a service provider (such as offering student loans).
Public sector entities, particularly in Europe, are beginning to pool and blend similar transactional services. For example, the UK is combining around 50 separate social benefits into one Universal Credit system, while also merging the operation of income tax and National Insurance Contributions. This results in greater standardization, automation and control of transactional functions.
Capgemini advises that any process which can be documented to an 80/20 level or higher, is repetitive, and can be learned in no more than six weeks with a certain skill level can be outsourced. In terms of transactional services, this includes all AP processes (such as invoicing), as well as many processes in AR, cash and banking, fixed assets, financial accounting, and management reporting.
However, as in private industry, certain core processes are best left in-house. Capgemini recommends that public sector entities make core policy, regulation, assessment and fraud management functions the core responsibility of government agencies that provide transactional services. Meanwhile, citizen-based functions, such as registry, transaction and all accompanying citizen contacts and interactions, can be commissioned “as-a-service.” This could mean sharing services with other parts of the government (registry services) and/or joining forces with the third-party providers to handle (bulk) transactions. This provides the added benefit of freeing up civil servants to focus and specialize on core functions where they can add the highest value.
ITO For Fraud Detection
Capgemini also advises public sector entities to follow the example of private sector industries such as banking and insurance and using ITO (information technology outsourcing) to move fraud detection from more costly and time-consuming “downstream” efforts focused on detecting and investigating fraud after the fact, to more effective and timely “upstream” efforts focused on identifying high risk activities and by refusing the provision of a service or product, or by flagging high risk cases for investigation before a transaction is completed.
Most public sector entities do not have in-house access to the type of enterprise data warehousing, inbound communication monitoring and advanced predictive analysis solutions needed for effective upstream fraud prevention. However, ITO providers and security specialists can deliver these solutions, often on a hosted “as a service” basis facilitated by cloud technology. In addition, employees with extra time provided by the outsourcing and/or sharing of routine transactional processes can dedicate it toward upstream fraud prevention and detection efforts.