For most financial service companies, SMBs and large organizations alike, going digital is a matter of survival. With this respect, IT outsourcing is an actionable means of helping them gain a competitive edge and stay in business. While outsourcing is surely a tried and true method of reducing development costs, reasons to leverage fintech development outsourcing extend far beyond financial. It takes a lot of effort and commitment to ensure effective software development. Understandably, it’s a steep path many companies chose not to tread. Instead, they decide to forge partnerships with outsourcing companies to ensure successful fintech app development.
Outsourcing has already helped a lot of fintech solutions to be brought to life, so let’s explore some of the best practices and lessons learned. But firstly, let’s look at the reasons many fintech companies choose to hire dedicated fintech developers instead of building fintech solutions in-house.
Reasons For Fintech Companies To Outsource
1. Cost reduction
In-house fintech development is, essentially, a costly endeavor. Apart from developer salaries, fintech companies have to provision and maintain an infrastructure with all the IT capacities needed for fintech software development, testing, and deployment. Ensuring your in-house development team has all the tools and frameworks for building fintech software also involves continuous expenses. Even if companies use cloud solutions that scale on-demand, monthly cloud fees are still quite substantial, and dealing with complex billing is daunting.
Fintech outsourcing companies, on the other hand, have all it takes to provision for successful fintech software development, so many financial organizations choose to work with dedicated fintech teams instead of developing fintech solutions on-premises.
2. Keeping the focus on core products and services
Admittedly, in-house IT function is very demanding not only in terms of provisioning but also when it comes to management, human resources, and strategic planning. Maintaining a full-fledged development team may divert the company’s attention from its core function and interfere with most of the already established processes within the organization. Changes require a lot of efforts that businesses would rather apply to develop and refine their core functions and strategies. Outsourced fintech app development helps organizations retain focus on their products and services without disrupting their company ecosystem.
3. Solving capability issues
Hiring dedicated fintech software developers often solves capability and delivery issues within the company and results in significant enhancement of customer services. Outsourcing an IT function helps streamline backend processes, eliminate human error, and bring faster time-to-value. Customers are usually the first to notice that and are highly appreciative of the quality of services.
4. Adding intellectual capital
The new perspective a fintech development outsourcing company can bring to a financial business may even feel overwhelming. Having worked with several companies across various industries and gained expertise in developing versatile solutions, they usually have a broader outlook and may help to discover business opportunities unseen before. There may be nothing wrong with the vision of in-house specialists, except for the fact that their focus on their company may prevent them from thinking out-of-the-box.
5. Keeping abreast of the current technology trends
The trends within the fintech industry tend to fluctuate and require companies to be highly flexible and adaptive. Fintech outsourcing providers with their versatile experience help companies keep abreast of these trends and ensure business agility needed to survive in the digital age. Dedicated fintech software teams are often highly responsive to the ever-changing industry needs and will provide the necessary level of adaptability without interfering with the client’s workflow.
Admittedly, using fintech development outsourcing to add business value requires a thoughtful approach and careful consideration. Financial software development is inherently tied to working with the clients’ sensitive data, so keeping a keen focus on security is imperative. However, apart from security issues, other matters related to fintech outsourcing have recently become subject of regulatory concerns.
Regulatory Concerns Over FinTech Outsourcing and How Vendors Should Comply
Non-disruptive client service
According to recent PRA and FCA enforcement actions, financial firms outsourcing fintech software development should understand all of the possible shortcomings and work on ensuring operational resilience.
“Nearly 17% of all outages and disruptions reported by financial service organizations in 2017- 2018 have resulted from a third-party IT failure” Computer Weekly
An online banking service being down for minutes or even hours due to a cloud server failure is a vivid example of such a shortcoming. According to recent regulations, financial firms are now directly responsible for ensuring the non-disruptive performance of their outsourced fintech solutions.
Overall operational resilience
When it comes to operational resilience, regulatory concerns extend beyond merely client service. As of today, regulatory commissions strongly recommend that companies focus on overall operational resilience of their organization and ensure they can safely incorporate fintech solutions into their company ecosystem.
Vendors should comply with these demands by:
– Ensuring the supervision of fintech solutions support and development;
– Carrying out outsourcing risk assessments;
– Dedication to customer success and commitment to quality;
– Personal accountability of senior management;
– Imposing policies and procedures focused on enhancing operational resilience throughout the organization.
Thus, fintech companies are now obliged to carefully assess the risks and overall impact of fintech solutions outsourcing on their end clients as well as on organizational ecosystems.
Keys To Successful Fintech Outsourcing: Best Practices
Fintech is a relatively new industry with its best practices being still in the stage of development. Yet, financial companies who have successfully leveraged fintech solutions outsourcing can already share some important insights. In terms of effectively approaching fintech development outsourcing, here’s what Ludge Olivier, CEO of The Cornerstone Professional Group, has to say:
At the initial stages of communicating with your fintech outsourcing partner, make sure they are listening to you, and have your best interests at heart. Do they understand your business needs? Are they willing to work on custom solutions that add value?
Start small and scale
Being cautious is the key to success. Start with a small project and see how your dedicated development team handles it. If all works well, move on to a larger project. You don’t have to rush and entrust a third-party with all your data and assets. Make sure you can rely on them first.
Broaden the scope of expertise
While it’s generally believed that niche companies will be experts in a specific field, chances are, a company with a broader scope of expertise could offer you something truly groundbreaking. When it comes to outsourced fintech app development, new knowledge, and a different perspective could make a difference.
Adopt an agile mindset and focus on an end customer. Collect feedback and modify your product to cater best to the end-user needs. What many established financial companies overlook is the need to adapt to customer demands, rather than force them to accept existing solutions.
Successful partnership with an outsourcing company requires a cultural shift within the entire organization. Apart from being resistant to changes, insiders may often feel threatened by a third-party company and be reluctant to cooperate. Most of the time, change management and an additional incentive is required for an outsourcing partnership to work.
FinTech Outsourcing Success Story
Skycoin is a blockchain platform aiming to build a global, decentralized and independent “new internet”. The company had 2-3 urgent software development tasks to complete, which required advanced programming and project management skills. Specifically, the project required excellent knowledge of Golang and a few frameworks that weren’t very common at that time.
After giving up on hiring good developers, team leads, and system architects locally, the company approached 8allocate with a request to set up a dedicated fintech development team in our Ukraine-based R&D Center. Within an established timeframe, we’d assembled the client-tailored Golang developer team and brought it up to speed in less than 4 weeks. The interview/hire ratio was amazing, with team hiring success rate exceeding 80%.
“I got to work with a professional team for every aspect of the project, starting from identifying the client’s needs, through to the hiring process and the people we brought in”, – said Tal D., Skycoin external consultant, – “They prepared the right financial offers for the resources, hired, and on-boarded them. Everything was professional, focused, and very efficient”.
As a Skycoin story proves, fintech software team outsourcing can be mutually satisfying and successful. Most importantly, it can help fintech companies reach their objectives and bring excellent products and services to end customers. While choosing a reliable fintech development outsourcing firm accounts for 80% of the project’s viability, ensuring sufficient supervision and risk assessment, dedication to customer satisfaction and personal accountability of key management personas will surely contribute to the successful outcome of your outsourcing partnership.