Co-operative Bank extends mortgage service deal with Capita

The Co-operative Bank has taken up the option to extend its contract with Capita to run its UK mortgage servicing operation for another five years.

In 2015, when the contract was originally signed, it was a 10-year contract, worth £325m if Co-operative Bank decided to extend.

At the time, Capita acquired the bank’s existing mortgage processing operations, including Western Mortgage Services Limited – previously a subsidiary of Britannia, which merged with the Co-op in 2009. A total of 660 workers transferred from the finance firm to Capita.

The renewed contract, which sees Capita continue to run mortgage services lifecycles from initial mortgage enquiry to managing mortgages, is worth up to £141m over six years.

Capita is also supporting the digital transformation of Co-operative’s customer services. This will include redesigning and simplifying processes and systems to improve customer experience, increase productivity and reduce costs. 

Due to increased competition from challenger banks, organisations in the financial services sector such as Co-operative Bank can’t afford to put off investments in IT services. These investments could help them to transform customer experiences through digital or reduce costs and improve efficiency in the operations. Challenger banks, such as Tandem, are entering the market with flexible and customised mortgages that they can deliver at a fraction of the cost.

The contract is a ray of light in the UK private sector outsourcing market, which is in the doldrums as businesses are cautious about signing outsourcing deals in the currently uncertain economic environment.

According to research by NelsonHall for Arvato, the UK private sector agreed outsourcing deals worth £307m in the three months ending September 30. This was down from £449m in the previous three months.

Debra Maxwell, CEO of Arvato, said: “We expect to see companies shake off this approach as political pressures begin to lift and they can plan ahead with more certainty.”

The research showed that the overall value of UK outsourcing contracts in the financial quarter, including public and private sector deals, was up 72% compared to the previous quarter. A total of £1.61bn was spent on IT outsourcing and business process outsourcing, with some £1.26bn spent by public sector organisations.

“The public sector has long been the flagship market for UK outsourcing and it’s encouraging to see it continue to rebound after a slow start to the year,” said Maxwell. “Procurement teams across central departments are taking off the shackles and partnering with specialist providers to deliver a growing range of services.”

The lull in private sector spending is across Europe, according to the recent ISG outsourcing index, which monitors deals worth ₤3.9m or more. It found that the combined managed and cloud services spending in Europe was down 7% to ₤3.2bn in the third quarter of this year, compared with the same period last year.

Steve Hall, partner and president of EMEA at ISG, said: “Political and trade issues are contributing to a mixed stance on technology spending, with enterprises largely split on investing for growth or leveraging technology for cost reduction through 2020.”