The drive by business process outsourcing firms to capture clients in the financial sector could get a boost from a policy change expected to come into force soon. Lack of a data protection law to assure players in the financial sector of the safety of their corporate information is one of the major factors that have made banks to prefer handling their customer services internally.

"A law on data protection has been held back because it was tied to the Freedom of Information Act. We expect both laws to be approved by the Cabinet in their next few meetings," Bitange Ndemo, permanent secretary in the Ministry of Information, said. Analysts say that banks, for instance, fear litigation that is likely to come with disclosure of customer information. They argue that even with the passage of the data protection law, banks may only outsource less sensitive processes like loan applications.

"There is a bit of concern with regard to quality of services offered by local BPO firms," said Eric Musau, an analyst at Renaissance Capital. Mr Zain Khan, an international ICT consultant, said that banks in other parts of the world like the US are also preferring to maintain their hold on customer-related processes out of fear of data leakage. "Banks fear leaks of information to their competitors and would therefore rather do the job themselves," he said.

Musau added that another factor hindering the BPO companies from netting large clients is the costs involved. "Outsourcing depends on scale. Organisations with small volumes of processes are in a better position to outsource compared to those with large volumes that may find outsourcing more expensive," Mr Musau said, citing the example of Safaricom that has chosen to invest in its own customer contact centres.

Eric Nesbitt, the operations director at KenCall, a call centre, confirmed that outsourcing may sometimes be more expensive compared to internal operations. He said that in such cases, other value added benefits of outsourcing are what would woo clients. "Companies that outsource cut on staff numbers while remaining with their areas of core competencies which helps boost their productivity and profitability," he said.

Mr Nesbitt observed that the whole issue of major companies choosing not to outsource is probably because of the new outsourcing experience in the country. With time, he said the sector's credibility will rise and this will enable it to tap more business from companies in the financial sector. Analysts say that players in the BPO sector should identify special areas in which they want to play and improve their knowledge of the sectors for which they are targeting their products.