FinTech is no longer just a trend or a buzzword. It is one of the most lucrative and promising sectors. Recent figures place teh sector on an ascending curve: there are more than 12,000 Fintech startups worldwide and, according to Goldman Sachs, Fintech will soon be worth a record $4.7 trillion.
From business owners to regular individuals, more and more people are becoming increasingly aware of the benefits and applications of FinTech and even financial institutions, which have been direct competitors for a long time, are starting to incorporate FinTech products into their portfolio.
The growing influence of the FinTech sphere can only be advantageous for start-ups, which now have more opportunities than ever before. In the first half of 2018 alone, the FinTech sector raised $41.7 billion and investment rates are growing steadily. Fueled by the latest developments in AI, Big Data, and Blockchain technology, FinTech will continue to expand its reach. Nevertheless, startups still have some challenges to overcome.
FinTech is a dynamic and competitive field with a focus on innovation. Often strapped for cash, start-up owners have to take one important decision: should they develop their products in-house or consider outsourcing?
From a financial standpoint, outsourcing is a great idea. According to an Accenture study, businesses in the finance sector can save up to 40% by outsourcing and reach their strategic goals faster because outsourcing increases operational efficiency and agility. Although it can be tempting to develop everything-house, these three processes can run more smoothly if outsourced to a professional company.
Big Data analytics
Big data plays a crucial role in the operational efficiency of Fintech companies because it helps them understand what products and services customers prefer. The world generates 2.5 quintillion bytes of data, both structured and unstructured. The data coming from electronic devices allows financial providers to understand customer spending patterns depending on age, gender, location, and social class, identify fraudulent behavior, and personalize their services.
However, this amount of data is too much to be analyzed in-house. Although most FinTech companies understand the value of data, very few startups can afford to hire the necessary staff for data analytics. This is why outsourcing Big Data analytics to a third-party provider is a better option.
Small financial technology start-ups are often understaffed and face financial challenges until they find an investor, which is why CEOs need to delegate tasks strategically. Ignoring data insights is clearly not an option in the industry, but neither is losing focus of key business processes. In a Fintech start-up, workers should be focused on innovation and developing growth strategies. Although hiring a third-party provider for Big Data analytics implies an extra cost, you are saving money in the long run because your employees will have more time to apply what you’ve learned.
Software development
In an outsourcing industry that continues to mature, FinTech companies are no longer forced to develop all their tech in-house. Why? Because what you do with your tech is often more important than how you make it.
In many cases, FinTech startups have a brilliant concept in mind, but they don’t have the tech to bring it to life. Or, they have the tech, but not enough staff to complete development within an acceptable time frame. In a fast-evolving sector such as FinTech, where startups compete to capture investors’ attention every day, delaying product launch because you don’t have the staff can set you back months. Hiring a dedicated development team can help companies avoid staffing challenges and complete projects on time and on budget.
Outsourcing software development offers three key benefits for FinTech companies:
– Improved flexibility
– Cost savings
– Responsiveness
Depending on the expertise needed, you can outsource the entire project, hire a dedicated team as an extension to your current IT department, or solve one particular issue that your staff struggles with.
According to the PwC Global FinTech report, only 20% of all FinTech businesses outsource their tech, but 65% of them expressed their intention to outsource in the future because this would help them reduce the time-to-market and save money. In fact, Deloitte reports that a FinTech startup which outsources software development saves 35% compared to one that deals with development in-house and launches the product 21% faster.
Social media
Every informed entrepreneur knows by now that an active social media presence is crucial for customer engagement, brand awareness, and conflict resolution, but, for the FinTech sector, the role played by social media is even bigger.
When FinTech startups first appeared on the market, the way they interacted with customers was one of their major strengths. Unlike traditional financial institutions, which had a slow and cumbersome communication process, FinTechs were young, active, dynamic, and took customer communication beyond emails. But it didn’t stop there. Through FinTech, social media started to reshape financial services. Several companies now allow their clients to log in to their banking app using their Facebook details or even offer banking services through Facebook.
As new business models are emerging, it’s crucial for FinTech businesses to consolidate their social media presence, but this yet another process that should be outsourced.
– Managing one single social network requires more than 30 hours a week
– Most social media interactions take place outside business hours
– Although everyone is on social media, not everyone is a social media expert. Engaging with clients on social media requires marketing skills and platform-specific knowledge that the average employee may not have.
Hiring an agency or a social media expert on an hourly basis not only saves time but also improves customer satisfaction. If social media is handled internally and that person is busy doing other things, the page’s response rate will be affected and this can reduce customer trust.
In the FinTech era, a brilliant business concept is no longer enough to succeed. What matters more now is how that concept is executed and brought to market, and outsourcing can help businesses stay ahead of the game.