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Fintech Outsourcing: How to do it Right

Since the global pandemic brought the business world to a standstill, it seemed wise to hold off on major decisions until the future is more promising and secure. Although fintech products helped society live contactless life more conveniently, the 2020’s fintech market still saw a decrease. As per Statista, investments into fintech were cut down from $168B. in 2019 to $105,3B In 2020. 

However, 2021 – another story. Fintech market growth has finally taken off. Just in the first half of this year, there were almost 2500 deals and $98B in investments. So there’s a chance of coming close to pre-pandemic figures if the investments continue to grow in numbers. 

A growing need for fintech solutions means that there will be a rising demand for those able to develop them. Outsourcing is one of the crucial channels for additional help when creating new solutions. According to Moonward research, one-eighth of the total fintech budget is devoted to outsourcing, while nearly all outsourced services are deemed business-critical.

There are several factors that drive outsourcing among fintech businesses:

Quick and efficient scaling up of capabilities

Addressing skills gaps in the existing software development teams

Expanding new markets and attracting new customers

Enhancing the user experience

Accelerating the delivery of products and services

Cost reduction

Source of the picture: Deloitte Global Outsourcing Survey 2020

The B2B partnerships. Investors are likely to recognize B2B services such as banking-as-a-service as a growing trend. Financial companies are likely to collaborate with insurtech, wealthtech, and regtech businesses as they strive to integrate financial solutions into other environments.

Digitalization at all levels. Wouldn’t it be great if banks didn’t have queues? Well, Fintech was exactly what we needed. Businesses were forced to find ways to stay relevant to users during the lockdown, which led to an increase in only digital financial operations. 

New fintech markets emerging. New fintech hubs will pop up in new regions, such as South America and Central and North Asia. Even so, the US fintech market remains dominant.

Blockchain and cryptocurrency are gaining popularity. Again. But this time even from governments and regulators.  As people get used to digital transactions, there is a need for more reliable security measures. The way blockchain is working ensures passwordless cyber security, fraud management, and protection from cyber-attacks.

Outsourcing is not a plug-and-play tool that will immediately give you the right people at the right place and at the right time. For this collaboration to be successful, both you and your vendor need to understand the intricacies of outsourcing relationships. How are you going to collaborate and communicate? To what extent do you have to detail requirements? What if unexpected issues arise? This, and much more, will need to be addressed by not only your vendor but by you as well. Before you regard outsourcing as your major patch solution, remember to check if you can manage the following factors.

It is essential that organizations take the following steps to realize the full benefits of outsourcing:

The ability to plan, manage, and control retail outsourcing relationships appropriately. By doing so, you’ll avoid leaving your outsourcing partner in the dark without your presence in the processes. Therefore, if you cannot devote some time to attending meetings, providing inputs, and delivering feedback, hire a representative to handle all of that for you. 

Management of transition and transformation risks. When you adopt a new way of doing business, new problems inevitably emerge. Outsourcing for the first time has many risks that can be avoided with a proper risk management plan. 

The clarity in terms of collaboration. Before coming at actually doing the work, you need to clearly establish the zones of responsibility with your vendor. Do you need just to hire additional people in your team and you will manage them yourself? Or will you need the custom development team, creating your app from scratch?

If you think outsourcing does not work, there’s a great chance you actually just did not have a mature vendor. In this case, no matter how many risk plans, communication channels, and requirements clarifications you prepare, the collaboration just won’t launch well. 

Consider the following when choosing an outsourcing vendor:

Maturity. How many years is company X had on the market? What is their history? What is their average project size and how many people are working there.

Business operations. Does X’s approach to business matters suit your needs? Ask the company for its collaboration terms or schedule a call to learn how things will be if you hire them. 

Projects with a long-term scope. A company’s big number of lasting collaborations is a positive sign. You can find out this info by visiting the website of the company. 

Experience in your domain. The best outsourcing company won’t contribute much to your business if they do not understand the nuances of your industry. 

Company website. If their website does not work well and is not presentable, will they really be able to create a high-quality solution for you?

Employment quality. The way employees are treated in a company defines the quality of their work. Review job platforms for reviews. 

Participation. Participation in global events, including knowledge sharing and training within the company is a great way to see: the company wants to improve. 

Clients reviews. Clutch.co and other independent review sites are good places to check out the company’s performance.

Case studies. Case studies provide insights into past projects and collaborations. You’ll be able to see problems the company’s clients wanted to solve, challenges they faced, and solutions provided. That will help you understand if the company’s approaches suit you.

It’s hard to overestimate the importance of clear requirements. Without them no product creation is possible. If requirements are vague, you will not get what you initially wanted to develop. Writing and managing requirements and ensuring they are aligned to the vision of the final product can be challenging. The challenge is exacerbated when we deal with multiple systems interacting in one project.

So how do you provide clear requirements to your vendor?

Ideally, you need to refer to an outsourcing vendor, having at least a vision of what your product should be. This is a starting point. Explain your business objectives, describe your current and changing processes, and describe your technical requirements to your vendor. Communicate your requirements to our representative as best you can. We need to see your business needs and then understand how to address them without technical expertise. 

With such communication sessions, we will be able to gather initial requirements and turn them into the scope of work. Then we will need your feedback: often some initial requirements are not relevant or are not enough, and it’s okay.

It is crucial to consider security when you contract a partnership.  

Ensure your vendor can ensure GDPR compliance. In the EU, it is aiming to simplify compliance and regulate national data protection laws. Businesses will benefit from better legal protection, as it will ensure that their personal data is prevented from misuse and theft.

Ask if the company will sign a non-disclosure agreement (NDA), if necessary. 

Make sure the company has worked on sensitive data before. 

Trust proven outsourcing vendor with a substantial client base and positive reviews.

Outsourcing has become increasingly important in the modern business landscape. Frequently, we do not realize that it is not a magic pill that you take, and then the next day you’ll end up with a perfectly functioning business process. Together with your vendor, you have to form a strong partnership, contributing to the success of your project.

SapientPro can become your partner with our proven expertise in outsourced projects. Contact us to schedule a call and see what we can do for you!