How outsourcing companies are satisfying the needs of FinTechs who are eager to enhance their digital strategy and capabilities.
The amount of FinTech companies outsourcing, has risen exponentially over the last year, and this trend has largely been due to financial startups realizing that they now have the ability, to have their entire technology operation outsourced. The big motivation factor for FinTechs is that by them 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 rather they offer their financial products and services online to clients worldwide.
The consensus amongst FinTechs who have already used outsourcing companies is a high level of satisfaction due to the minimization of their costs, but also in receiving increases in the speed and quality of their processes. The major driver for the rapid growth of outsourcing companies recently has been because of big data analytics. This is due to financial startups simply not having the capability nor resources to analyze big data inhouse. Thus, many have decided to outsource this process to those providers which have 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.
According to research conducted by Deloitte Global, there are now several reasons why FinTechs should use an outsourcing company, and a select few of these are:
- The reduction in costs due to no longer a need for various processes to be maintained inhouse.
- Once having outsourced their processes, this will then enable FinTechs to focus on their core products and services.
- Using an outsourcing company often solves capability issues, and this then contributing 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 thus firmly believe that going it alone in this highly competitive industry without use of an outsourcing company could prove fatal for many overconfident FinTechs just starting out. The motivation factors for using outsourcing companies in 2017 are compelling, especially since this will contribute to FinTech companies competitive advantage. 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.
About Luigi Wewege
Luigi is the Chief Executive Officer of Vivier & Co, a boutique financial services firm offering private digital banking solutions to its clients worldwide. Outside of Vivier he serves as the Non-executive Chairman of Nikau Global an international trade development company, as a Partner/Director of Palmetto Global Ventures a bespoke financial management consultancy based in South Carolina, and is an invited member of Massachusetts non-profit The YEC. He is also the author of the book: The Digital Banking Revolution which is available in audio, kindle and paperback formats through all major online bookstores in over fifty countries.