According to research from the Economist Intelligence Unit (EIU), sponsored by Booz Allen Hamilton, an increasing number of companies are turning to this next generation of shared services which is focused on customer-facing activities such as opening accounts and billing statements.

Unlike efforts that have delivered savings by scaling internal services - such as finance, accounting, human resources - 'process utilities' pull together core activities for the delivery of products and services like opening accounts and billing statements, says EIU.

The survey of 499 banks found that 35% failed to reach their goals of achieving savings of five per cent or more over the past three years.

The average shortfall in savings was approximately nine per cent. A "failure to align objectives to broader business goals" was cited by 36% of respondents as a reason for coming up short, while 32% attributed it to a "failure to provide incentives."

This high rate of failure has led to more firms switching to 'process utilities', says EIU. To implement the new service models, bank executives are required to identity functional silos and geographic divides to identify the processes that can be shared across corporate boundaries.

'Account opening', which was cited by 47% of respondents that have adopted process utilities, is the most popular business process that has been structured as process utility. 'Billing/statements' and 'clearing' are also common choices, selected by 37% and 35% of respondents respectively.

Of processes yet to be converted, one third of those surveyed say that turning "IT infrastructure" and "IT application development" into process utilities is at the top of their planning lists, says the EIU.

Commenting on the research findings, J Scott Cade, principal at Booz Allen, says: "Process utilities are a proven path to boost efficiencies, cut costs and even deliver better customer service. This next generation of shared services is slated to become a key way for financial institutions to achieve their business goals."

EIU says more than half of the financial institutions that have implemented process utilities reported "improved economies of scale", and nearly four in 10 said "increased customer satisfaction" followed deployment.

But despite reports of higher efficiencies and reduced costs, the survey found that banks seeking to use the new operating model face a range of cultural, technological and organisational challenges. More than 38% of respondents cited "variation in customer needs" as a significant hurdle, while around one third cited "complex product offerings" as a barrier. Over a quarter stated that "multichannel management" was an obstacle to success.

Read the study here: