Fintech is no longer just a buzzword and a short-term trend. It has become one of the most promising and ambitious markets, as the numbers speak for themselves.
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According to Statista, as of February 2020, there are almost 20,925 Fintech startups worldwide. Meanwhile, the global market value of FINTECH is expected to reach $ 305 billion by 2025.
More and more people, from individuals to communities and organizations, are using Fintech apps and discovering all the benefits they can offer. Even traditional financial institutions that previously saw these apps as competitors have begun to collaborate and incorporate these solutions into their portfolio.
However, in order to meet high demand, increase efficiency, and quickly adapt to new technologies such as artificial intelligence, blockchain, Internet of things (IoT), and data science, these Fintech startups are readily turning to outsourcing companies to hire specialized technical experts to create their software.
Despite the fact that outsourcing in the financial sector is regulated by many laws, and most financial companies prefer internal development, with the development of technology, this type of cooperation is becoming more common.
In today’s world of technological innovation, it simply no longer makes economic sense to create most of the financial technologies in-house from scratch. Outsourcing technology needs is cheaper, faster, and more reliable for Fintech startups.
Why Fintech firms choose technology outsourcing
There is hardly one universal reason for outsourcing the development part of the business, since each company has its own needs and reasons. However, in most cases, decision makers decide to hire a Fintech-outsourcing company to innovate, reduce the talent shortage, reduce costs, increase speed, or focus on the core business.
Outsourcing can be used in all aspects of the business process, as it provides technology to its partners. Depending on the business requirements, there are two possible models of Fintech outsourcing with their pros and cons:
Outsourcing of product development
In a rapidly developing economy, firms must maintain their competitive advantages and adapt to rapidly changing customer behavior and technology development. So it is vital to launch the product quickly and efficiently.
Product development outsourcing is a business practice in which all processes related to the creation and maintenance of software are entrusted to third-party vendors. The product development outsourcing provider is responsible for working on the product as a whole and ensuring that it meets user needs and business goals. Here are some pros and cons of outsourcing product development (PDO).
This makes it possible to use real experience in creating products and a qualified talent pool, especially for companies that are not sure how to develop a Fintech application.
PDO also reduces development costs, accelerates time-to-market, and provides the necessary expertise for rapid and smooth implementation of new technologies.
High dependence on the contractor, because in Fintech, small mistakes can lead to business delays, so it is very important to choose a supplier wisely.
IT outsourcing is not something special for financial technologies. it is well-known and used in many industries to reduce costs, accelerate market entry, and free up internal resources for other important business tasks.
IT outsourcing services range from a complete technological infrastructure to the development of a specific part of applications. Outsourcing of FINTECH development is becoming a common factor in the introduction of cloud technologies.
Financial firms can save on costs and use third-party expertise and assets to adapt to technological advances.
Newly established Fintech startups can easily organize their business development needs, while a third-party firm handles the technology aspects.
Unclear requirements can result in delay of the project.
Lack of communication and collaboration can interrupt the development process.
Whether you decide to outsource full product development or just part of your business, outsourcing is becoming the commonplace allowing you to quickly adapt to technological trends and gain a competitive advantage in a fast-growing market.