Investment in fintech rose significantly worldwide in 2021. According to PitchBook, the fintech sector grew at an unrelenting pace, with a 153% year-over-year increase in terms of global venture capital deal value.
The key growth factors were the rising number of customers who wanted to access financial services instantly from their smartphones, the surge of e-commerce, and the rush of the coronavirus pandemic, which pushed up the demand for remote finance management.
Competitive pressure in the industry requires finance companies to adopt technologies and build their own tech expertise both for customer-facing services and internal operations. What options does a finance business have here? Let’s explore.
Solution development alternatives for a finance company
To introduce technical innovations, a firm has two options:
- to hire and maintain their own team of software engineers who will streamline internal processes, create products for customers, and support software.
- to engage an outside full-fledged software development team that will deliver digital finance products to you on a turnkey basis.
What to expect when building software in-house
Developing software in-house may sound promising. Creating a product by yourself often leads to something made specifically for your needs and could save you money. If your desired solution is intended to be central to your business and your team has enough resources and skills to “hatch” it, developing in-house is a nice option.
However, this approach has pitfalls, and one should keep in mind long-term consequences when making their decision. Let’s look at some things to consider before developing in-house and why it may be better to let someone else pull the laboring oar.
Huge time commitment
Creating a new solution from scratch can be a long, drawn-out process. On average, it usually takes 3 to 4 months to make an app ready for public release. And this span embraces only the engineering part of the process. Preliminary stages, such as ideation, estimation, and design, are not included in the timeframe.
Incredibly large expenses
When you create software in-house, it’s common to assume you’re saving money. But this is not always the case, especially for small enterprises.
A finance business can’t hire just any software engineer because a simple coding error may cause a loss worth millions of cash. You have to employ only the best and brightest engineers, and their pay is far from being low. Most probably, your developers team will be larger than one person, so the pay amounts multiplied by the project duration will be sky-high in the end.
Unfortunately, expenses don’t stop with the end of development. The released product has to be maintained and updated all the time. This often leads to significant over-budgeting.
It may take a substantial time to find the appropriate software specialists. Moreover, for a team of developers to be cohesive and effective, the candidates must fit one another in terms of technical strengths and soft skills. And it will be your job to pick out the best.
The employer has to create favorable working conditions and provide workplaces equipped with all the resources needed. Also, programming experts usually ask for salary bonuses after several years of employment.
Need for post-release support
As mentioned before, once launched, your application needs to be supported and updated with new features. Constant product improvement involves ongoing time dedication and continuous efforts from the team to keep their knowledge of emerging technologies adequate.
This makes maintaining an in-house software development team even more high-cost.
Why software development outsourcing works better
More and more organizations outsource their application building to third-party technology providers. Here are the major reasons why.
Cost-effectiveness and time saving
According to the Deloitte study, 70% of companies chose to outsource their software development projects for cost reduction in 2020.
Delegating app building to a third-party vendor minimizes time-to-market and software creation and maintenance costs. You’ll save money on scouting, training, and onboarding new hires. Additionally, you won’t need to invest in workplace equipment or skill upgrading.
This cost-effectiveness allows companies to focus primarily on their finance competence and other adding-value priorities, limiting their involvement to app development monitoring and control.
The solution you’re searching for (probably) already exists. Why reinvent the wheel?
Though your case is unique, there’s a great chance it contains components or tools someone has already built. The technology vendor has put time and effort into creating, testing, and polishing their solution to ensure its immaculate functioning. Understanding the ins and outs of their product, they know how to customize it to satisfy your specific requirements. So, you won’t need to waste your time on inventing something that already works perfectly.
Access to solid experience
Third-party software providers usually have dedicated specialists with solid experience in fintech, so they’re aware of all the latest industry-specific trends.
What’s more, they’ve invested years in testing and upgrading their services. As a result, they offer a fine-tuned product tailored to a customer’s demands.
If you have security or compliance requirements, the outside programmers’ experience works in your favor, too. Having been in the field for a while, they’re well-versed in the approaches for meeting industry standards or privacy regulations and can even advise on how to do it better.
Use of best practices and cutting-edge technology
Companies building software do it for hundreds of businesses, and they see what works and what fails. They know how to make a finance system that won’t be time-consuming to use or too challenging for your users. Outsource developers put all their industry expertise into your product.
Maintenance and future orientation
Technologies emerge faster than your in-house team’s expertise grows. To offer your customers front-line features, you must keep pace with the tech progress.
Fintech providers are at the bleeding edge of their sector. Usually, they’re better qualified and equipped to handle maintenance. Additionally, by outsourcing software support, you’ll let your own IT team concentrate on your internal processes.
Today, software vendors tend to be more responsive to their clients’ feedback and offer more involvement in the product design process.
The same applies to the common business strategy. Many providers offer personalized approaches for every customer. For example, instead of outsourcing the entire project, you can integrate outside specialists into your in-house team, if you require more expertise to go along with your software. It’s a nice option when you need bang-up-to-date technology stacks, such as artificial intelligence, machine learning, or blockchain.
There’s no single right decision on whether to make software in-house or buy it from a technology vendor. After all, an in-house built product can be tailored exactly to the needs of your business.
However, consider the big opportunities outsourcing brings. Buying apps or augmenting your team is one of the easiest ways to save money and speed up your software development process. Outside programmers will offer you effective, up-to-date fintech solutions, with all the security features added and risks prevented.
Ultimately, you’ll keep up with the technology growth, bringing the most relevant applications to your customers, gaining a competitive advantage, and driving your business growth.