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

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

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. In 2021, the number of fintech startups globally exceeded over 26,340, which is twice as much as in 2019. Moreso, in the same year, the US became a home for over 100 fintech unicorns.

The market value is expected to reach over $698.48 billion by 2030. And with the growth comes the 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. This type of collaborative relationship has already turned into common practice since among its benefits are new talent discovery and faster time to market.

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

Outsourcing IT development is a procedure of handling specific tasks, operations, or duties to an external company or individual specialists; they are identified as third parties or service providers. In information technology, this term can refer to a scope of services, including a UI/UX design, programming, quality assurance, cloud computing, or software prototyping, or to full-cycle software development.

There are many reasons why companies turn to software development outsourcing. Most reasons include upscaling a team with new talents, accessing expert knowledge, cutting expenses, innovating, freeing up a core team to work on more crucial tasks, or gaining faster time to market.

Businesses often cooperate with outsourcing companies offshore, nearshore, and onshore, all of which are different by the services provider’s location.

  • Offshore is one of the cooperation models you can choose while picking up a vendor. In fintech offshore outsourcing, you cooperate with a provider from a different country and, most likely, even a different continent.
  • Nearshore software development outsourcing means working with someone closer to home, maybe a vendor from your neighboring country or at least from the same time zone.
  • Onshore outsourcing is also domestic, and its name speaks for itself. It refers to a process of delegating tasks to a third-party development services vendor company that is based in your home country.

Nearshore and offshore outsourcing models usually are more cost-effective but require tougher management and planning due to time differences and possible cultural barriers. However, whatever your choice lays upon, you might be sure that it is safe outsourcing since any firm, no matter the distance, will be bound by law to provide you services according to the contract.

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 global outsourcing market value is reaching $92.5 billion, with $62 billion of the total revenue being brought by the US. In the graph below you can see the vector of growth of the outsourcing market size.

A visual interpretation of global outsourcing market size growth 2000 - 2019

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:

+ 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;

— 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 and cons of business process outsourcing services:

+ Faster time-to-market for new projects;

+ Free in-house resources to focus upon the critical areas of the business;

+ Opportunity to attract multilingual team and scale the business globally;

— 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 and cons of fintech outsourced product development services:

+ Opportunity to get expert opinions and hire new talents, which is extremely beneficial for fintech startups owners with not a lot of technical experience;

+ More cost-efficient fintech app development, accelerated time-to-market, and availability of necessary knowledge to implement new technologies rapidly and smoothly;

— A non-reliable vendor can do more harm than good to your business, so choosing a provider might be a complex process.

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 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.

Do you want to hire an outsourcing team?
We can offer you a top notch specialist in the field.

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.

A checklist for companies that struggle to find an outsourcing provider for fintech

  • 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

We’ve been on the market for 12+ years and honed our skills, polishing every line of code to bring excellent results. Our team has extensive experience with fintech solutions and we understand the risks, pains, and needs of this market better than any other. This niche knowledge and the top talents on board allow us to exceed expectations.

Dashdevs offers a holistic set of services, ranging from prototyping to post-release support and maintenance.

FAQ

How to successfully outsource?

Start by defining the processes you need to outsource and the desired objectives. Compose your budget to find the optimal outsourcing payment. Conduct several interviews with a development team to find the right people to work with. Find a way to measure the performance, and, finally, strike a deal.

How can a business outsource?

Product development is not the only process you can outsource. If you struggle with accounting, marketing, sales, customer service, or administrative tasks, you can hire a third-party provider to help you with those as well. These processes are among the most popular to outsource, along with the IT services.

The two most popular types of software development outsourcing are staff augmentation and dedicated teams. In the first one, you hire an individual expert from a provider to join your team and help you with development processes. In the second, you hire a whole team, often with a project manager on board, to join your IT development department or work as a separate one.

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