The banking and financial services industry has been witnessing rapid technological advancement for the last few years. The new FinTech startups and the conventional banks and financial institutions are also investing heavily in financial technologies.
With a cutthroat competition of rolling out innovative financial services in the market, it is essential for banking and financial institutions to prioritize time to market for their next FinTech software development. And this urge to be faster than the competition requires a faster development process that ensures a better product and undertakes the FinTech security concerns.
Hence there is an increase in the number of FinTech projects that were developed via outsourcing. However, outsourcing has both good and bad sides. Let’s discuss the cons first.
Drawbacks of Outsourcing FinTech Software Development Services
The most common complaint companies have with outsourcing is the communication gap. Companies find it difficult to explain their requirements to the software development agency they hire, either offshore or nearshore.
One can overcome this drawback by creating a detailed product requirement document that incorporates everything you want in your product, including technologies, features, integrations, UI/UX elements, etc.
Transparency is the most well-addressed drawback of financial software development outsourcing. A few years ago, when companies considered outsourcing software product development, they feared that they wouldn’t be able to tune with the development approach and process.
This issue was addressed by collaboration tools like Jira, Slack, Google Teams, etc. Hence, before hiring them, always ask your development company about their tools for collaboration and transparency.
Financial technology projects tend to carry sensitive information about the bank or financial institution’s customers or internal infrastructure. Hence, outsourcing such projects is full of risks to data or idea theft.
One can eliminate the risk of privacy breach by signing an NDA (Non-Disclosure Agreement) with the company to whom you’re outsourcing your project. The NDA should be signed before you share any confidential information with the company. I recommend you sign the NDA along with an SLA (Service Level Agreement) before you share your requirement document with them.
Benefits of FinTech Software Outsourcing
Time and Money Efficient
Many CIOs complain about allocating a significant amount of their focus to their in-house agile software development teams. It ultimately leaves them with very little time to plan future strategies. Development of FinTech projects in-house is also very costly as the institutions have to procure resources and manage them.
On the other hand, software development outsourcing for FinTech development is cost-efficient and helps banking and financial institutions roll out products in very little time. Deloitte claims that 59% of the businesses agree that they find software development outsourcing a cost-cutting tool.
FinTech software development companies have the required skill set in developing FinTech solutions. They tend to have in-house developers ready to jump on a project which means that the agile software development will take less time to market.
Provides Access to Global Talent
This is where the perks of offshore come in. Companies that outsource their software development process can access a pool of global talent that is quite impossible and expensive to hire in-house. This ensures quality development and keeps the development cost very low as software development projects are charged hourly. The hourly rate in some regions is comparatively low.
Ensure Quality Deliverables
FinTech software development companies have expertise in developing software solutions for banking and financial institutions. Developing technology solutions in the FinTech domain is tricky due to strict regulatory requirements and security challenges.
When it comes to information technology, this initiative can encompass a host of components, including UI/UX design, agile software development, quality assurance and testing, or even cloud computing services.
FinTech App development companies have experience in managing the compliances and building solutions that meet customer expectations. Moreover, designing a FinTech app is challenging; hence it is sensible to partner with an experienced FinTech software development company for FinTech projects.
Avoid Unnecessary Recruitment
In developing the FinTech solution independently, companies would have to hire software engineers in-house and manage them. This puts an additional burden on their hierarchical infrastructure. Not only this, managing the IT resources after the development of your FinTech project is also a major concern. They cannot simply fire them afterward. Hence, unless the business model requires continuous IT support, it’s inefficient to hire an in-house team of developers.
FinTech Market Scenario
- As of February 2019, over 12000 FinTech startups across the globe, and the sector exceeded $55 billion in investments. Meanwhile, the financial industry is expected to cost over $22 billion in 2022 worldwide.
- Latin America had a 45 million unbanked population, out of which 60 percent were women in May 2019.
- In 2021, nearly 11 thousand FinTech startups in the American region, 87 percent more than the number of FinTech institutions registered in 2018.
- During May-September 2020, Forty million people have been banked in America.
- Out of the 11,000 FinTech startups, 2,300 pertained to the Latin American region in the American region. Most of these FinTech startups deal in lending, remittances, and payments.
- Peru, Uruguay, and Colombia were the nations with more than 75% financial inclusion in 2019.
How Much Does FinTech Projects Cost To Outsource?
The development cost associated with finance software project outsourcing is majorly influenced by the hourly rate of development companies which varies as per the geographical location of the development company. Following is the hourly rate distribution for different regions across the world.
The development cost for different FinTech applications is as follows:
- E-Wallet App Development Cost – $30,000 and $100,000
- Cryptocurrency Wallet App Development Cost – $50,000 to $150,000
- Banking App Development Cost – $90,000 to $130,000
- Crowdfunding Platform Development Cost – $40,000 to $400,000
- Insurance App Development Cost – $60,000 to $100,000
Types of FinTech Software Development Companies
1. Enterprise-Class FinTech Software Development Company and their Services
Enterprise-class financial software service providers are the most prominent players in the FinTech software outsourcing market. They accommodate hundreds of software developers and work with governments and Fortune 500 companies that can afford to hire them. These FinTech development companies primarily work on projects budgeting around $500,000 and more. Furthermore, their hourly rates usually range between $200 to $800.
However, the biggest drawback of these FinTech app development companies is that they try to develop the entire software solution all at once via using the waterfall development approach. Instead, the agile development approach is usually much more effective in running out a minimum viable product (MVP) first and then loading the app with additional innovative features.
2. Small-Mid Scale Class FinTech Software Development Companies
These IT consultants work with companies that can’t afford the cost of enterprise-class development companies. These FinTech software development companies usually have 50-100 in-house software developers and offices worldwide. Moreover, their hourly rate for financial software development services falls between $25 to $175.
Nimble AppGenie caters to both small-mid scale FinTech companies and startups, along with established finance and banking companies. Most development companies falling in this type of category often use Agile development methodologies to ensure timely project delivery and less chance of project failure.
Indeed, the FinTech ecosystem is changing rapidly, and because of that, most of the requirements aren’t clear at the initiation stage. Hence, using the Agile development approach is the best way to incorporate changes at any stage of development.
3. Freelance Developers
Suppose you don’t have the expertise to manage the financial technology development challenges with design complexity and strict industry compliance. In that scenario, hiring freelancers for your FinTech software outsourcing project is not at all a good idea. However, if you have in-house project managers who have previously managed FinTech projects, I recommend hiring freelance developers because they don’t charge as much as a company charges.
How to Hire the Best FinTech App Development Company?
The key to successful FinTech software development outsourcing is partnering with the right FinTech software development company. Here is a checklist to find the right development partner.
- Make sure that the company has technical expertise in the technologies you require for development.
- Know about their project management approach. Also, ask them how they will ensure transparency.
- I always prefer a company that has expertise in developing FinTech software solutions.
- Ask them about their previous experience in developing FinTech software solutions.
- Check out their previous work on applications that are related to financial software development. Including UI/UX and overall app performance.
Which Development Approach Is The Best For Outsourcing FinTech Development?
While Agile being the most customer-centric development methodology, the majority of the banking and finance companies prefer FinTech software outsourcing to companies that are dextrous in Agile product engineering. Agile allows development teams to welcome the frequent changes coming from the client’s side.
On the other hand, the Waterfall approach is not completely obsolete yet. Many large-scale IT consulting firms still make use of waterfall methodology to build scalable and secure software solutions.
It is recommended that for the projects that don’t have specific requirements or are prone to changes in the future, the Agile software development methodology is most suitable. Whereas for projects with detailed requirements that won’t change at the later stage, the Waterfall methodology is the best.