Technology has become an absolute necessity in the financial services industry in the 21st century. Integrating enterprising tech with crucial and sensitive financial processes and operations leads to better overall efficiency, convenience, reliability, and scalability. With technology and finance overlapping for several years, we later got a new industry poised to be one of the next big things – fintech.
Projected to grow to almost $700 billion globally by 2030, the fintech industry is scaling exponentially. As the industry continues to grow, there’s an increasing need for talent to develop the software, applications, and platforms that enable fintech services. However, global talent shortage and high full-time/on-site recruitment costs make it difficult for financial firms to fully adopt the fintech model. As a result, partnering with a fintech software development company has become an attractive option.
The blog explores the factors driving the growth of outsourcing in fintech and the best practices financial institutions can follow to ensure profitable fintech development partnerships:
The Pivotal Role of Outsourcing in Fintech
Here are some reasons why financial firms prefer outsourcing to fintech software development companies:
1. Fintech covers a wide range of technologies
Now, fintech is quite a broad term that covers various technologies that’ll potentially shape the future. Here are some of technologies that are or will be a part of the fintech ecosystem:
Artificial Intelligence (AI)
Fintech is one of the countless fields where AI can play a pivotal role in the coming years. It can drive unmatched innovation in this sector thanks to its intelligent decision making, data analysis, pattern identification, prediction, and generative capabilities.
The gargantuan amounts of data financial services generate supports everything from credit risk modeling to personalized recommendations. Leveraging big data can help financial services providers leverage fintech effectively and revamp UX according to the preferences and behavior of your target users.
Fintech innovation can further revamp the digital banking infrastructure where consumers will have more features and functionalities at their disposal that’ll ultimately drive better convenience and financial management.
Voice assistants like Siri, Alexa, and Google Assistant have enabled users to perform various tasks with simple voice prompts. This technology can be integrated with financial services to make it even more convenient for users to make transactions, purchases, and payments.
Financial services can’t function without stringent and robust security protocols. Protecting sensitive consumer and transaction data requires more than just password protection these days. Fingerprint, face, and voice recognition can be integrated in Fintech apps to increase security for financial transactions and reduce fraud.
While its popularity has halted recently, blockchain’s potential is undeniably promising. This tamper-proof distributed ledger technology brings security and transparency to payments, contracts, and other financial transactions. It can possibly shape the future of financial services and partnering with a fintech software development company that offers blockchain development services can future-proof your business.
The credit scoring system can be further improved to help expand access to credit for the unbanked and underbanked.
The shortage of technical skills needed to build and implement these innovations is one of the key reasons why financial services providers prefer partnering with a Fintech software development company
2. Outsourcing to a fintech software development company is more feasible
With the demand for fintech solutions growing rapidly, financial institutions and fintech providers struggle to find the right fintech software development company to developing and deploying fintech tools. Reasons why companies prefer partnering with a fintech software development company include:
- Access to specialized skills – Outsourcing partners maintain large pools of highly trained fintech experts across emerging technologies like blockchain, AI, and biometrics.
- Accelerated development – Augmenting in-house teams with offshore talent speeds up delivery of fintech solutions.
- Scalability – Outsourcing provides flexibility to easily scale developer capacity up or down.
- Cost savings – Lower labor costs and overhead with outsourced teams reduces spending on fintech initiatives.
- Reduced hiring – Outsourcing minimizes time-consuming and expensive tech recruiting and hiring processes.
- Focus on core competencies – Offloading development to outsourcing providers allows companies to focus internal resources on competitive differentiators.
Companies can outsource different services
Financial institutions and fintech companies prefer reaching out to a fintech software development company for a wide range of services:
- Fintech applications – Apps for mobile banking, investing, lending, insurance, blockchain wallets, and more
- Payment systems – Payment gateways, card processing, cross-border remittances
- Banking platforms – Core banking, trading platforms, risk management systems
- Security – Fraud detection, identity verification, regulatory compliance
Business Process Outsourcing
- Customer service – Call centers, chat support for customer inquiries and tech support
- Transaction processing – Payment processing, trade settlement, account openings
- Data management – Data entry, mining, analytics, reporting
- Content development – Web content, training materials, marketing assets
Customer Care Services
- Onboarding – New account opening, KYC verification, documentation
- Ongoing support – Addressing transaction issues, account maintenance
- Fraud prevention – Identity verification, suspicious activity monitoring
- Collections – Delinquent account outreach, payment plan negotiation
3. Fintech software development companies provide different benefits
Partnering with a reliable fintech software development company provides financial institutions with many advantages:
Outsourcing to a forward-thinking fintech software development company can help reduce the costs associated with recruiting, hiring, training and retaining specialized technical talent. Offshore outsourcing to regions with lower labor costs maximizes savings.
Scaling up development capacity quickly by adding offshore team members accelerates delivery of fintech solutions.
A fintech software development company can provide access to fintech experts across the latest technologies like blockchain and AI that may be scarce domestically.
Fintech companies can easily scale outsourced development teams up or down to match needs.
Focus on Core Business
Outsourcing software development and BPO enables companies to focus on value-adding business initiatives.
Distributing work across time zones can enable 24/7 development, reducing time-to-market.
Despite the risks, fintech software development companies drive growth
While outsourcing offers significant upside, there are also potential risks fintech companies should carefully evaluate:
- Security risks – Sensitive customer data must be properly secured when outsourcing.
- Quality issues – Vetting the capabilities of offshore partners is crucial to ensure high-quality delivery.
- Communication challenges – Cultural gaps and language barriers can impede collaboration.
- Loss of control – Outsourced partners must align processes with the hiring company.
- Hidden costs – Travel, management oversight, and knowledge transfer add expenses.
Best Practices for Successful Fintech Outsourcing
Follow these best practices when choosing the right fintech software development company:
- Clearly define project scope, requirements, milestones, and acceptance criteria
- Select mature outsourcing partners with extensive fintech experience
- Build relationships at multiple levels of each company for smooth collaboration
- Institute rigorous security protocols and controls for data protection
- Establish detailed processes for communication, transparency, and issue escalation
- Actively manage outsourced teams and frequently review progress and quality
- Invest in knowledge transfer to build internal capabilities over the long-term
The Future of Outsourcing in Fintech
As demand for fintech-driven financial services continues to surge, outsourcing will play an increasingly vital role in scaling innovation by supplementing internal teams with specialized offshore talent. Companies that leverage outsourcing strategically will gain a competitive advantage in bringing compelling fintech solutions to market faster. Careful partner selection and active management of offshore teams will be critical for fintech players to harness the benefits of outsourcing while minimizing risks.