First, US textile jobs were shipped to the Orient, then customer service call centers for American companies cropped up in Manila. Now the back office of the corner bank is being hauled to Bombay and Bangladore, India.
From SunTrust in Atlanta to Bank of America in Charlotte, N.C., banks are hiring overseas shops to stay competitive, be more efficient, and have access to cheap labor.
But as more accounting and investment banking is being sent overseas, the result is that Americans' personal bank accounts are increasingly susceptible to theft and fraud, some experts say.
"If you think about the scenario, you have the lowest-paid contractors furthest away from the main office all with access to sensitive data," says Paul Bilden, vice president at Covelight, an Internet security company in Cary, N.C. "It's an incredibly risky proposition."
Outside of a Bank of America branch in Atlanta, customer Pete Johnson says he's surprised to learn that his bank is offshoring some of its processing work. He's concerned about an increased risk of fraud, and that workers a half a world away may eye his personal information. "It's an invasion of my privacy," he says. Still, for now he's not moving his accounts elsewhere, he says.
Other top banks such as JPMorgan Chase and Wachovia are also at the forefront of offshoring. Last month, JPMorgan Chase announced it expects to double the number of Indian employees to 9,000 people by next year. Currently, about 10 percent of employees of US banks work outside the country. This number is expected to rise to 20 percent - or 2 million people - by 2010, according to a recent Deloitte & Touche study.
"The new frontier is back-office processing done offshore," says Bob Olson, CEO of Dallas-based Carretek, a contractor that runs back-office shops for banks in India.
Banks also now have the technological means and regulatory go-ahead from the federal government to do offshoring, says Mr. Olson, because of the Banking Modernization Act in 1999.
But some say shipping back-office bank jobs, such as data processors and investment analysts, to India also means that banks are risking their reputations to compete for business.
US banks attributed $19 billion in losses from fraud in 2004, according to TowerGroup, a financial services research firm in Needham, Mass. Some expect more red ink with offshoring.
"Security can of course be an issue even in the US, but it is potentially an even bigger concern for offshored work," says Norm Matloff, a computer-science professor at the University of California at Davis, in an e-mail. "Typically, developing countries do not have the sophisticated security protections which we have here."
In April, three former employees of Mphasis, an outsourcing company, were arrested in India for allegedly stealing $350,000 from several of CitiBank's US customers. They had allegedly tricked the customers into giving their PIN numbers over the phone, and then transferred the money into their own accounts.
To be sure, Wachovia and Bank of America say foreign workers will get only partial access to accounts - never the whole file.
Banking experts also say that risk management is what banks do better than any other industry, and there's been little consumer backlash to offshoring. By hiring firms that monitor workers' activity, bankers say their overseas operations can withstand audits from the Federal Reserve. And if there are problems, banks can cover the losses, says Paul Stock of the North Carolina Bankers Association in Raleigh.