Does it Make Sense to Outsource Fintech Development?
You’ve polished your fintech app concept, and now all that’s left to do is develop it. But before you get a product to launch and market, there are several important decisions to make, such as choosing between in-house and outsourced development.
Sometimes, outsourcing makes good business sense, but how well does it work with fintech software?
Here, we take a closer look at outsourcing in general, including the benefits and potential pitfalls. We also cover the essential questions businesses face when approaching fintech development outsourcing:
- How can outsourcing software development help fintech businesses?
- How to know if a project is eligible for outsourcing?
- What to ask when hiring an outsourced development provider?
First of all, what is outsourcing?
Outsourcing product development means hiring a software engineering team and entrusting them with the whole development cycle. Sometimes, different IT tasks are distributed across several outsources teams or individual professionals, but this isn’t considered a sustainable practice.
Outsourcing is an alternative to in-house development. With the latter, a company creates an internal team to handle software development.
Each approach has benefits and downsides. Below is an overview of the advantages and potential pitfalls of outsourcing.
Why do companies outsource software development?
In 2019, the global outsourcing market was estimated to be worth $92.5 billion, and IT outsourcing accounted for more than half with a $66.5 billion share. Outsourcing is increasingly common in businesses of all sizes and across sectors. The pandemic has further stimulated this growth, as well as the evolution of requirements to development providers.
The complexity of financial services doesn’t stop companies outsourcing fintech. For example, Apiax, a fintech startup, was recognised by both FinTech50 and RegTech100 as a top financial product, and it began as an outsourced minimal viable product (MVP).
Why do companies choose fintech development outsourcing?
Outsourcing isa cost-cutting tool
Cutting costs is the most popular and enduring reason companies outsource services; data from 2016 shows that cost reduction was the major driver for outsourcing and a 2020 survey states the same. Deloitte notes that the cost-cutting factor is more relevant than ever because of the economic uncertainties brought about by Covid-19.
Besides saving on development itself, companies don’t incur the expenses associated with traditional employees such as office space, HR processes, and benefits packages. In a development context, there’s also a significant saving on hardware and software. Plus, there are no concerns over development downtime or developer turnover — issues that companies might struggle with while building an internal team.
Greater access to talent
The job market for developers isn’t going to shrink anytime soon. The Bureau of Labor Statistics predicts a 22% growth in IT job positions from 2019 to 2029, and the unemployment rate is currently set at 1.4%. In fact, the demand for software engineering professionals is growing so quickly that it has created a global shortage.
In 2018, Gartner named talent shortage as the top emerging risk. In software development, sourcing talent is increasingly problematic. Tech hiring takes more time and effort (one study showed 66 days on average compared to 43 days for non-tech roles), especially for companies looking for a very specific skill set or proficiency in relatively new technologies.
Outsourcing software development is a natural answer to this problem as it gives companies access to a larger pool of global talent as they are not limited to a specific area or region.
In short, you don’t have to make the compromises that can arise when building an in-house team but can’t find professionals with the right skills or relevant experience — instead, you can focus on what matters to your project.
Outsourcingallows for greater flexibility and innovation
Respondents to a Deloitte survey stated that outsourcing offered flexibility, and that this flexibility facilitated business transformations. When choosing from a variety of providers, there is a better chance of finding professionals who can adopt the latest technologies and elevate business processes overall.
The 2018 survey showed that businesses see a competitive advantage in outsourcing because it can drive innovation and prioritise emerging technologies. The idea of outsourcing enabling innovation has contributed to a growing demand for increasingly more complex outsourced services.
Why outsourcing strategies can fail
In some cases, cooperation with outsourced providers doesn’t live up to a business’ expectations. The reasons why this can happen include:
The business objectives and desired outcomes were not properly communicated
If you don’t set your expectations and discuss these with a provider, it leads to a lot of uncertainties in the process. Describe all the features you need and communicate how the overall product should look and function. Set a deadline and budget and indicate how you want to interact with developers regarding updates and any emerging issues.
You don’t need to have all the details straightened out before you talk to an outsourcing company. On the contrary, it’s best to discuss the project together and adjust your requirements according to the developers’ expertise. For instance, you may want a certain feature but the provider, who is seasoned in your industry, knows that the feature is not beneficial to your product and will just stretch the timeline and budget.
It’s also important to agree on a certain price model. While some companies still charge a fixed price for development services, at MadAppGang we always follow the Time and Materials approach, which involves charging for hours worked. The fixed price model might work with small, predictable projects, but we don’t recommend it with complex fintech apps.
Time and Materials allows for greater flexibility, and together with the Agile methodology in software development processes, it offers transparency and control over each stage of development. You need to have an estimate of how much it costs to develop an app, but also maintain flexibility with the process.
Poorcommunication between client and provider
It’s important to have a communication plan and knowing how much you will be involved in the processes, consider how often you will have meetings and via which channels. Cultural differences and time zones might pose a problem when working on a product, so you should weigh all the options and find the right balance.
For instance, offshore outsourcing, which means cooperating with developers from other continents, might be up to 10 times cheaper for Northern American businesses. However, it might come at the cost of scheduling issues, language barriers, and misunderstandings in general. Other options include nearshore outsourcing, when you choose providers from nearby countries, and onshore outsourcing, selecting a development firm from your country.
The chosen provider doesn’t understand the industry, product, target users, or delivers poor-quality results
Outsourcing is a mixed blessing: it can give you access to more innovative and knowledgeable teams, or it could result in poor-quality quality results due to the lack of technical expertise. Proper interviews with a potential outsourcing partner alongside vetting their portfolio and reviews are crucial. If you want to build a strong fintech product, you don’t want to cooperate with someone who doesn’t know the first thing about transactions, financial regulations, and user demands in this sector. Look into companies’ background and find similar development cases or features and technologies you need.
At MadAppGang, we’ve been providing fintech app development services for over a decade, transforming our approach along with the changes in the industry, adjusting to local regulations for projects based in different continents, and improving security measures with advanced technologies.
When working with clients, we don’t just meet functional requirements, we take responsibility for the whole product, from designing its architecture to ensuring its scalability, reliability, and compliance.
What to ask a fintech outsourcing provider?
Deloitte’s outsourcing survey also discovered that companies are putting more effort into learning about providers prior to cooperation. It’s crucial to take your time and select an outsourcing partner with all considerations in mind.
Ask these questions when interviewing for fintech software outsourcing:
- What experience does the company have in fintech? What fintech solutions have already been developed, who were the target users, how successful were the products?
- On what platforms were these products released?
- What scope of fintech software development services does the company provide? How do they manage their processes, from concept to design, development, and testing to post-release support and scaling?
- Which features are must-haves for your project and which are better left for post-MVP releases?
- How will the company ensure regulatory compliance and what security measures will be at work?
- What does the company see as the major challenges in your project and how will they approach these?
- What is the provider’s pricing model?
- How do they handle client communications?
- Will you be able to review each developed functionality and set adjustments to development?
- How much can you be involved in general?
When you have answers to these questions, you’ll already understand if the provider’s fintech expertise is sufficient and if their ways and methods of communication work for you. Don’t forget to check out the vendor's website and browse through reviews on B2B platforms like Clutch — after that, you’ll have enough information to hire fintech developers who will deliver exactly what you’re looking for, or even better.
Finding the right fintech developers to outsource your product
When choosing between outsourcing fintech app development or building an in-house team of engineers, you should build your decision on your budget, language and location preferences, and the tech stack you need.
Outsourcing can give much broader access to industry knowledge and talented fintech software developers, and you can end up with a brilliant, innovative product. But it also can limit your level of involvement or lead to communication issues.
To find your outsourcing match, look into the fintech software development companies’ expertise, ask questions, and cooperate with providers who have sufficient experience and offer trust and transparency throughout the development process.
If you're looking for an outsourcing partner for your fintech app, drop us a line and we'll discuss your project, required technologies, and the scope of work. Whether you're interested in Android app development, iOS app development, or cross-platform app development with Flutter or another tool, we can provide guidance and develop a fintech solution according to your vision.