Introduction
In recent years, the finance industry has undergone significant transformation. With rapid technological advancements, there is a growing trend towards outsourcing fintech software development as a strategic response to embrace digital innovation.
As of May 2023, approximately 11651 fintech startups were established in the US alone. And the global fintech market is predicted to be worth USD 644.6 billion by 2029, up from USD 209.7 billion in 2024, growing at a CAGR of 25.18%.
Additionally, global IT outsourcing services are expected to show a Compound Annual Growth Rate (CAGR) of 8.2% in the forecast period from 2023 to 2032.
And with such growing numbers, fintech companies often strive to be at the forefront of innovation. This guide explores the reasons and methods for outsourcing fintech development, providing insights into its benefits and addressing potential challenges, along with effective navigation strategies.
Why is Fintech turning to outsource?
The fintech industry has experienced a remarkable shift in recent years. This rapid progress has reshaped the entire industry in various ways, but it has also presented new challenges and requirements.
With such rapid advancements, fintech companies face intense competition and need to innovate consistently, which unfortunately strains their internally hired resources. Outsourcing fintech software development requirements allows companies to access specialized expertise and acquire a competitive edge without overburdening their existing core teams.
Research conducted by Avasant indicates that around 72% of financial services firms rely on IT outsourcing.
The three verticals of outsourcing Fintech product development
Fintech software outsourcing can benefit businesses in numerous ways. But do you know that this Fintech Outsourcing is also further categorized into different verticals? Well, yes! Below are the possible verticals of outsourcing Fintech development needs:
1. IT Outsourcing
IT outsourcing (ITO) services are used across a wide range of business domains and are majorly focused on accessing technical services for businesses to free up their internal resources, cut down expenses, and quicken their time to market. From MVP development to QA, software architecture solutions, cloud adoption, cloud migration, and more, ITO services cover all aspects of Fintech development.
2. Business Process Outsourcing
Business Process Outsourcing (BPO) is more about outsourcing business-associated responsibilities to third-party experts. These types of outsourcing may include operations like accounting, customer support, talent acquisition, human resources, and more.
Fintech projects often involve managing internal and external operations that are not connected to financial or technical processes. Outsourcing BPO can be an excellent solution for saving time, energy, and money.
3. Outsourced Product Development
In this dynamically changing world, to sustain themselves in the competitive fintech market, businesses need to retain a competitive edge, flexibly adjust to quickly changing market demands and customer behavior, and adopt tech advancements.
Therefore, having access to specific expertise is required.
The OPD is a third-party service provider that functions along with the mandatory compliance with the business requirements and goals and aims to satisfy the unique business demands. They are in charge of the project documentation, adherence to architecture and coding standards, appropriate configuration management, and compliance with industry-specific regulations.
Related Read: Why IT Outsourcing in India is the Best Decision
Who needs Fintech software outsourcing?
Practically every business in the finance industry needs to outsource FinTech software development. Whether it's a startup aiming to bring a groundbreaking idea to life or an enterprise looking to scale up, software development outsourcing has it covered. Therefore, every finance business needs to outsource some operations to reliable partners in order to streamline their business processes.
Challenges or risks associated with Fintech software outsourcing
Every process has its downsides, and outsourcing is no exception. However, when businesses are familiar with the risks associated, there are more chances of mitigating those risks. That is why, along with the benefits of outsourcing the FinTech process, below are some of the associated risks that need to be taken care of.
1. Transparency
When outsourcing services, maintaining smooth and clear communication is not just important; it's a necessity. This is the key to understanding project requirements and goals and ensuring that everyone is on the same page. However, it's also one of the most challenging aspects of outsourcing.
2. Quality
As soon as a company decides to outsource the FinTech software requirements, it certainly begins to worry about the project's outcome to ensure that it is aligned with the same values and points of view as set during the project initiation.
3. Security
Security is not just a crucial factor; it's the most critical one. It's the risk that poses the greatest threat to data protection. Therefore, it's imperative to have robust security measures in place to mitigate this risk factor.
Benefits of outsourcing IT services for Fintech
Outsourcing can help finance industries streamline their operations and gain access to a wide range of benefits that may be difficult to attain otherwise. When you outsource fintech software development, your business can enjoy the following benefits:
1. Access to domain-specific knowledge
It is sometimes challenging to acquire the necessary skills and expertise in-house. Outsourcing your project's requirements provides you with access to specific skills.
Did you know?
About 80% of companies in the US find recruiting and onboarding IT talent to be the most difficult business challenge. The graph below clearly indicates the increasing global talent shortage over time.
Fortunately, outsourcing helps fill the gaps in accessing global talent easily.
Recommended Read: Reasons Why Custom Software Is Best For FinTech Industry
2. Fast project delivery
Fintech firms choose to outsource some of the project operations to a third-party services provider as it is a reliable solution to kick off the project quickly. This saves them energy in recruiting the talent, onboarding them, and training them to get started with the project. Rather, outsourcing the services immediately initiates the project execution.
3. Better data handling
The finance industry, a master of data gathering and analysis, is one domain where outsourcing data handling shines. Startups or enterprises can trust reliable service providers to handle their data appropriately, providing accurate insights and thereby empowering them to make more informed decisions.
4. Flexibility and scalability
With outsourcing, businesses can have the flexibility to scale their teams up or down based on project needs.
5. Focus on core business
By outsourcing the tasks, you can free up your valuable resources, time, and energy to focus on other core business activities.
However, in order to reap the benefits of outsourcing, it is crucial to find a reliable fintech software development partner that can help you achieve your business goals.
The Future of Fintech Software Development Outsourcing
The field of fintech software development outsourcing is constantly evolving to meet changing market needs. In 2024, a shift towards digitization and automation is anticipated.
In addition to automating and digitizing processes to improve the customer experience and optimize operational processes, the fintech industry is gearing up to implement more advanced security measures to ensure data security. This may lead to increased use of cloud computing, providing access to various advantages such as cost savings, flexibility, and scalability.
However, the fintech industry will continue to evolve and be prepared to adopt new technologies to make further advancements.
Bottom Line
In today's fast-paced FinTech landscape, outsourcing software development has become a strategic imperative. It allows companies to leverage specialized expertise, optimize costs, and expedite time to market.
At YTII, we understand the unique challenges of the FinTech industry and provide tailored software development solutions that drive growth and innovation.
Frequently Asked Questions (FAQs)
What does BPO mean in finance?
BPO refers to business process outsourcing in which finance-related businesses collaborate with a third-party service provider to perform non-core financial operations.
How much does outsourcing Fintech software development cost?
The cost of developing FinTech software depends on various factors, including the requirement of the project, business objectives, complexity of the project, location and expertise of the developer, and more. Each factor plays a crucial role in determining the cost. However, to determine the price for your specific project, check out our outsourcing calculator and estimate the accurate costings for your project, or get in touch with our development experts.
What are the key benefits of outsourcing fintech software development?
Key benefits include:
- Cost savings.
- Access to skilled talent.
- Faster development cycles.
- Leveraging the latest technologies.
- Focusing on core business activities.
However, it's crucial to consider ensuring effective communication, managing cultural differences, and mitigating security risks.
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