The amount of fintech (financial technology) companies that are outsourcing has risen exponentially over the last year, largely because financial startups are now realizing that they have the ability to outsource their entire technology operation.
The big motivation factor for fintechs is that outsourcing will enable them to be competitive within the global banking industry. This flexibility to outsource stems from most of them not having a fixed place of operation, and their ability to offer financial products and services online to clients worldwide.
The consensus among fintechs who have already used outsourcing companies is a high level of satisfaction due to cost minimization, but also the increased speed and quality of their processes.
One of the major drivers for the rapid growth of outsourcing recently has been big data analytics. This is due to financial startups simply not having the capability nor resources to analyze big data in-house. Thus, many have decided to outsource this process to providers with the analytical tools and software to deliver their required analysis.
Another area which has been identified for rapid growth is the outsourcing of software development by fintechs. Although some companies may have the requisite technology, what they will often not have is the necessary development skill sets within their teams.
More recently there has been an interesting shift within this area, with many leading outsourcing companies, deciding to partner alongside certain fintechs to help them better achieve their software objectives. The creation of these partnerships, has ultimately given these companies the opportunity to increase their current market share. This has led to many established retail banks being forced to swiftly increase their pace of digital adoption to stay relevant, and stop mass client attrition to these agile financial startups.
There are now several reasons why fintechs should use an outsourcing company, according to research conducted by Deloitte Global:
- The reduction of costs due to the lack of need for various processes to be maintained in-house.
- The ability for fintechs to focus on their core products and services.
- Using an outsourcing company often solves capability issues, and this then contributes to major enhancements in customer service for clients.
- Bringing onboard an outsourcing company will often add intellectual capital to fintechs which will be critical to helping them with the adaptive and changing needs of the industry.
I firmly believe that going it alone in this highly competitive industry without use of an outsourcing company could prove fatal for many overconfident fintechs that are just starting out.
The motivation factors for using outsourcing companies in 2017 are compelling, especially since this will contribute to the competitive advantage of most fintech companies. This will ensure that they can continue to adapt, evolve, and succeed within a financial services industry that is constantly being disrupted by innovative technology