Outsourcing is a business arrangement involving one company handing over the management of some of its operations to an outside service provider. Such an arrangement is nothing new to the banking industry considering that banks have been outsourcing functions since the 1960s. In the 1990s, however, banks are looking at outsourcing more as a means for increasing profits rather than for cutting costs. Additionally, unlike in the past, more banks are acting as service providers to other banks. Outsourcing has both its advantages and in disadvantages. On the plus side, this practice provides costs savings, faster access to new technology, lesser capital investment risks and new revenue sources. On the downside, banks that outsource are putting their reputation in the hands of a third-party and they also run the risk of incurring more problems from the new arrangement. Bank managers should carefully consider these issues before deciding to outsource.