The Ultimate Guide To Fintech Development Outsourcing: How To Make It Work

Fintech is one of the most promising and ambitious branches nowadays, so it shifts from being a short-term trend to a prominent market segment. Back in 2022, the number of active fintech unicorns reached 312, showing a dramatic increase. At the same time, as of May 2023, there were 11,651 fintech startups in the US only. 

The global IT services outsourcing market was estimated at about $525 billion as of 2022 and is expected to show a CAGR of 8.2% during the forecast period 2023 to 2032. With the growth comes the increased competition since more and more people tap into fintech development. Even the traditional banks and financial institutions now see how incumbent is to collaborate with fintech software.

To meet the high demand, increase efficiency, and quickly adopt emerging technologies like the Internet of Things, Artificial Intelligence, and Data Science, business owners are more often approaching development outsourcing.

In this post, you’ll discover what’s understood under fintech software outsourcing, the vertical of outsourcing, as well as pros and cons of this approach.

Let’s Get IT Straight: What Does Outsourcing Mean?

Outsourcing is the practice of hiring external providers to perform services or create products that are typically handled by a company’s internal employees. 

This approach is often used to tap into external talent and resources, allowing a company to concentrate more effectively on its core business functions.

In the tech sector, outsourcing takes on various forms, including:

• IT outsourcing
• Software development outsourcing
• Outsourced consulting

Each type has its own scope of applications and usefulness to business. For example, outsourcing IT services can provide access to top-tier tech talent globally. At the same time, outsourcing software development can expedite product development timelines, while outsourced consulting can help make use of external expertise.

For a deeper insight into outsourcing, consider exploring these articles:

• A comprehensive overview of the outsourcing process with practical advice on beginning your outsourcing journey
• A piece detailing the differences between various types of outsourcing and helping to determine which is most suitable for your needs
• A client’s guide on how to communicate with your outsourcing partner in the most effective way

When looking for a provider of outsourcing services, pay attention to these key factors:

1. Cultural and communication alignment. Ensure that the outsourcing partner is in sync with your company’s culture, values, work ethics, and attitudes. Effective communication is essential to avoid misunderstandings and maintain project progress.
2. Technical expertise and track record assessment. Evaluate the technical skills and experience of the potential partner. Have they successfully handled similar projects before?
3. Flexibility and scalability. Look for a partner who can adapt and scale their services according to your project’s evolving needs.
4. Strategic insight value. The ideal outsourcing partner should offer more than just technical skills. They should bring industry knowledge, innovative ideas, and problem-solving capabilities.

It’s important to understand that the aim of outsourcing is to add value to your business, not just to delegate tasks that are troublesome to handle in-house. Choosing the right partner is key to the success of your outsourcing initiatives.

The Current Software Development Outsourcing Trends and the Market’s State

It is a common misconception that only big companies can afford to outsource when the reality is fundamentally different. Over the years outsourcing not only changed how businesses pursue achieving their goals, but also spread across the market flowing into every niche. More than a third of small businesses outsourced a business process in 2019, while in 2022, 24% of small businesses see outsourcing as the way to increase efficiency.

IT outsourcing price lists vary from county to county, but the main reason for cooperation under this model is unchanged; 59% of companies cite cost reduction as what drove them to outsource. Among other reasons also are the following:

1. 57% of companies use outsourcing to drive the main focus of the in-house team to the core processes.
2. 47% of businesses seek to solve capacity problems through outsourcing.
3. 31% believe that outsourcing can help them improve their services in quality.
4. 28% outsource to meet their business needs.

According to Zippia, around 37% of IT tasks are outsourced.

The IT outsourcing market is expected to spend around $1.3 trillion by the end of 2023. At the same time, the US is predicted to contribute $167 billion of the total revenue in 2023. 

But when it comes to the actual ordering of these services, there are three verticals you can get. Let’s break them down to help determine what works best for your business.

Three Possible Verticals Of Outsourcing Fintech Product Development: Their Pros And Cons

IT outsourcing can benefit numerous processes in your organization, and they can all be applicable to fintech businesses. Since DashDevs provides all types of outsourcing cooperation, including fintech developments, we’ve consulted with our experts, analyzed our experiences, and distinguished three actionable variants of sourcing.

#1 IT outsourcing (ITO)

ITO services are used across all business domains for a number of reasons we’ve stated above. Mostly it is focused on providing exclusively technical services for companies to quicken time-to-market, free up internal resources, and cut down expenses.

ITO can be provided by small IT outsourcing fintech developers and large corporations like IBM, Accenture, Cognizant, Capgemini, and others. The services they take care of can include app development, QA, MVP development, UI/UX, software architecture solutions, and other tech-focused services.

In more modern terms, ITO can be carried out for cloud adoption and other innovative technologies implementation. Companies might hire cloud, blockchain, AI, or ML experts to help them smooth out business processes with an innovative competitive advantage.

IT outsourcing pros and cons:

The major benefits here include:

• Allows companies to hire financial software developers to cut costs and capitalize on outside expertise and assets
• Is an efficient solution to implement cutting-edge technology for a fintech project

The limitations, respectively, are:

• There is a need for several small outsourcing companies since one small firm might provide expertise only in one segment of IT.

#2 Business Process Outsourcing (BPO)

Business process outsourcing is focused on handling business-related duties to third-party experts. The operations might include human resources and talent acquisition, customer support, accounting, marketing, etc.

Fintech project founders often need to manage a lot of internal and external operations unconnected to technical or financial processes. For this, BPO would be a perfect solution to free up the team and focus on more prioritized tasks.

To leverage all the benefits of outsourcing, stakeholders should be open to establishing relations with an outsourcing team and align them with the internal corporate culture. Defining tangible goals and objectives, you hope to achieve during the cooperation is crucial. For example, you might set an aim to lower expenses or enhance productivity, engage more customers, or attract new employees.

The pros of business process outsourcing services include:

• Accelerated market entry. Outsourcing business processes can significantly speed up the time-to-market for new projects, allowing businesses to launch products or services more quickly and efficiently.
• Resource optimization. By outsourcing, companies can free up their in-house resources, enabling them to concentrate more effectively on the core, critical aspects of their business operations.
• Global talent access. Outsourcing offers the opportunity to engage a multilingual team, thereby enhancing the capability to scale the business on a global level and effectively handle diverse market needs.

The limitations, respectively, are:

• Security risks due to complex communication between in-house and outsourced team;
• The control over the processes can be overbearing since the outsourced team might not share your vision.

#3 Outsourced Product Development (OPD)

In the conditions of high competition, such as in the fintech market, companies need to retain a competitive advantage, adopt technological advances, and flexibly adjust to fast-changing customer behavior and market demand.

So, outsourced product development stands for a cooperation model where all the processes are delegated to a third-party provider. Even though it seems similar a lot to IT outsourcing, this team is much broader and includes more than tech services alone.

Among other significant differences that set OPD apart from other verticals of outsourcing are the mandatory compliance with business goals, needs, and requirements. The OPD takes aim to satisfy your unique business objectives from a business perspective rather than just a technical one.

Based on our experience, the OPD provider takes responsibility for the whole product and its compliance with the business objectives and user needs. It’s not enough to solely meet functional requirements, because it should also be scalable, easily maintainable, reliable, customizable, well architectured, robust, attractive, intuitive, and bug-free. Additionally, outsourced product development companies are in charge of project documentation, appropriate configuration management, adherence to coding and architecture standards, and compliance with industry-specific regulations.

So, as the outcome of the process, you can get scalable, maintainable, customizable, robust, and well-architectured software. Aside from this, you’d also get QA and design services or an MVP development if needed.

Apart from the most important differences, OPD also offers market and competitive research along with technical consultation as a separate service. They provide you with all the project documentation, which they maintain singlehanded, appropriate configuration management, adherence to coding and architecture standards, and compliance with industry-specific regulations.

The pros of fintech outsourced product development services: include:

• Business focus. Product development primarily concentrates on achieving the set business goals. It aligns development with company objectives, emphasizing financial viability and strategic planning.
• Responsibility for results. This aspect involves owning the process and ensuring the desired outcome is achieved. The product manager bears full responsibility for meeting all business requirements.
• Experience and expertise. Experienced contractors prevent companies from making common mistakes which saves time and money. They assist in creating a roadmap and strategy formulation. They also offer continuous product growth oversight.
• Flexible approach. Product development contractors provide tailored solutions, adaptable as goals change. This includes diverse skills and methodologies suited to evolving objectives.
• Adaptability to change. These companies are adept at adjusting to changes, and employing cost-effective methods for idea validation. They can offer MVPs for customer insights, reducing market failure risk, and ensuring products meet customer needs.

The limitations, respectively, are:

• Dependence on outsourced development teams an lead to a lack of control over the project.
• Outsourcing can sometimes lead to miscommunication and a mismatch in goal

The Benefits and Risks of Outsourcing IT Services for the Fintech Product Development

Outsourcing can help and ruin your company just as much as freelance or in-house fintech developers can. The outcome of your cooperation highly depends on your technical partner, willingness to build a cooperative relationship, and engagement model. However, if your outsourced software development fintech project goes as planned, you’ll achieve benefits that will immensely benefit your business.

• Access to domain-specific knowledge and skills. Outsourcing software development companies can help you find and work with the best talents in the industry. Lately, this problem feels especially sharp due to the lack of professionals specifically in the fintech field. The global shortage of IT workers is shocking, about 80% of companies in the US state recruiting as their hardest business challenge.

Such a candidate-driven employment market means that most businesses are contesting to hire skilled software developers in fintech. Whereas, staffing teams for fintech projects comes with even more rigorous requirements. This makes in-house teams even more const-inefficient, hence creating the need to outsource for long-term projects. Best fintech companies for software engineers promise experts that they’ll get involved in interesting and non-trivial fintech products development, and their talents and expertise will help your business grow if you choose to outsource.

• Fast project delivery. Many banks and fintech firms opt for outsourcing services to ensure smooth and fast project kick-offю Outsourcing allows them to save energy on recruiting, onboarding, training, and other time-consuming activities. Moreover, reliable engineering and consulting outsourcing companies can utilize their proficient technical experience to shorten the implementation process and launch products much more quicker.

For instance, the DashDevs team has extensive experience in custom software development, and we use our knowledge to help clients avoid common mistakes, and our dedicated teams help companies across the world mitigate risks and streamline processes. We can also pump your team up with the staff augmentation service.

• Better data handling. The fintech domain is one of the leaders in data collection and analysis. Large enterprises and startups utilize data to mitigate risks in security systems, underwriting loans, or trading. You can start outsourcing fintech software development to use big data in your project or implement other solutions like the cloud to improve the workflow.

The niche specialists can help you achieve better results in the selected field. For example, if you have an in-house outsource business development team working on a complex multilevel project, you can additionally hire developers to handle data analysis operations and thus maintain a clear focus on both processes.

Risks of outsourcing and how to outsource development right

There is a downside to each process, and outsourcing is no exception. However, when you know the risks, you can learn to mitigate them. Mostly, the cons of this process are associated with faulted communication and unreliable technical provider. However, other issues can occur as well. So, let’s break down the possible risks you can encounter and how to solve them.

• Transparency: outsourcing can’t go smoothly without clear communication and understanding between all parties involved. Ensure that the stakeholders position their vision clearly and that the technical team shares it. Discuss every step if you need to make corrections to avoid overdoing the same task. And, of course, ask for a service level agreement (SLA). This document must include all aspects of the development process concerning quality and responsibilities and define the standards of services performed by a team.
• Security: it’s important to protect your sensitive information, so the first step you must take in preparations to work with an outsourcing provider is to sign a Non-Disclosure Agreement (NDA). It must provide the team with information about what they can and cannot disclose about your project and implement a penalty for breaking the contract. Aside from this, you have to make sure that you own the product they create, so it must be your intellectual property. You have to make sure that no one aside from you and authorized parties can see the documentation on the project, and the team must do the same thing from their side as well.
• Quality: as soon as you decide to outsource to a fintech software development company, you have to make sure that your values align and you have the same view of the finished product. While this might seem like no big deal, in reality it is directly linked to the quality of the software you get. Cooperation with a B2B company that strives towards the same goal and takes their reputation seriously can save your business. When hiring an outsourced team, imagine as if you were hiring in-house employees; pay attention to their mindset, ask to see their portfolio, assess their relevant experience, and contact their previous/current customers if possible.
• R&R or roles and responsibilities: loss of control is one of the most frequently mentioned concerns business owners have. The issue is connected to poor project management, unclear roles, and lack of communication strategy. Before delegating control to an outsourcing development company, draw up a management plan describing how you distribute management duties between you and the provider. Also, make sure that there is a clear and comfortable way that you can reach them, and they can reach you. Create a plan for work evaluation, and include meeting timelines, report templates, change requests policies, and key personnel on both parts.

This is how DashDevs team learned to mitigate the risks, and our methods have never failed us. However, this does not imply that every outsourcing team will be using the same tips. Therefore, we aspire you to thoughtfully choose a service provider for your IT project.

Tips and Tricks on How to Choose the Right Software Outsourcing Company

Pressure falls onto financial technology companies. They have to find a way to maintain a competitive edge, reduce indirect costs, improve performance efficiency, and enhance services. And, with the latest innovations, the pace increases with new technologies disrupting the market. It’s no surprise that outsourcing in the banking industry has turned into a survival strategy.

Since we closely work with innovative fintech firms and global banks to help them build game-changing solutions, we can speak from experience. Outsourcing has great potential to become mainstream and can change the way businesses work. However, for a fintech solution, choosing an engaged and experienced vendor is vital and can sometimes be difficult. That’s why we’ve prepared a checklist to help you make the right choice. You can check out the checklist below and then read an explanation.

• Culture: we’ve already mentioned that it’s important to make sure that you and your outsourcing vendor follow the same values and principles. Similar priorities, such as commitment to quality and drive for results, will make your cooperation more profitable.
• Communication: no matter if you choose to outsource the full-cycle development or one process, communication is a key. Discuss the preferred tools and vendor’s methods. If you decide to proceed, elaborate a comprehensive strategy for everyday and urgent meetings. Identify key people on both sides, this will help you deal with issues faster and more transparently.
• Technical competence: Technical knowledge and experience are the main reasons for most financial companies to opt for outsourced developers. Make sure that the vendor has vast experience with the frameworks and tools you are interested in. If you need knowledge of emerging technologies like the Internet of Things or Beacons, ask for relevant cases in the outsource partner’s portfolio. If you need post-release support, ensure that your vendor provides this service and will help your product during the release.
• Domain’s experience: Domain-specific expertise is a must-have for the fintech industry. Global and local regulations, dealing with sensitive data, critical vulnerabilities and risks, and other nuances require honed skills. Check the vendor’s portfolio and don’t forget to ask questions that can showcase their wide grasp of industry trends.
• Maturity of processes: This criteria is often disregarded, however it can help you significantly save time and costs. Well-established knowledge management (KM) processes and risk management methods are mandatory for an experienced software development company. During the negotiations, ask for recommendations on the processes, examples of implemented KM strategies, and applied risk management techniques. Pay attention to how your potential product development outsourcing provider handles issues since it is the only way to see what they’ll do in a critical situation.

Why Outsource To Dashdevs

DashDevs is a trusted IT outsourcing company, specializing in fintech. With more than 13 years on the market, over 500 projects completed, and more than 200 specialists at middle and senior levels in the team, we can provide you with:

1. Custom mobile app development
2. Web development
3. Fintech software development
4. QA and Testing
5. High-tech consulting
6. Cloud and DevOps

Surely, we don’t limit ourselves to the listed. You can discover more information about DashDevs on our website. And the best thing is that we can start a new project within days and help you enter the market in a very brief time, starting from one month only. 

We also have to offer our custom product:

• Fintech core: A white-label modular fintech solution for the creation and fast launch of digital banking. It features cutting-edge technologies and is PCI and DSS-compliant. Our Fintech core helps to save on the development of core banking and standard fintech modules and offers an accelerated time to launch — weeks instead of months. 

Your project matters, so trust it to the best. Contact DashDevs, schedule your free strategy session with our experts, and let’s discuss business opportunities.