In “FinTech”, technology is at least half the battle. As new FinTech firms move up to cruising speed, there is a temptation to develop that technology in house. Proprietary trading platforms allow differentiation in a crowded market, or so the logic goes. Being a platfrom-as-a-service provider we, at ETNA, hear this every day to the extent, that we realized: our main competitor is “building technology in-house”.
In our previous post, we talked about cash-strapped FinTech startups and why they should consider outsourcing at least part of their technology needs. But after a FinTech company makes it out of a survival mode and into the growth phase, is technology outsourcing still the way to go?
Focus on Being a Great FinTech
What your FinTech firm does with technology is more important than whether it makes that technology. Time to market, costs, and difficulties in acquiring the best financial technology developers all add up to a challenge that many FinTech companies can no longer meet. Outsourcing makes more and more sense.
Some FinTech firms approach the idea of outsourcing with nothing but dollar signs in their eyes. True, a recent report by Accenture indicates that financial institutions can realize 30 to 40% savings by outsourcing for their technology needs. And HSBC points out that the traditional approach with its cost of making and operating a middle and back office inhouse is becoming unsustainable for broker-dealers. In a sense, like it or not, circumstances are pushing FinTech companies into saving money through outsourcing. However, unduly obsessing about cost reduction can blindside a FinTech company to other crucial advantages of working with an external technology supplier.
Five Key Reasons to Outsource Your Technology Needs
Cost savings should be one part of a total tech outsourcing strategy with five key dimensions to help put any FinTech firm into orbit.
- Operational efficiency. The right technology provider with its domain specialization will outperform many in-house initiatives. The reasons are simple. The technology company already has the best financial technology developers with proven development practices and methodologies, because technology is its core business.
- Agility. FinTech companies do not have the luxury of long lead times for getting technology ready. In fast-moving financial markets, you need solutions now, not next year. An outsourced technology platform with built-in flexibility and scalability can keep you nimble and responsive to changing customer needs.
- Risk management. Agile companies have more control over their environment. More control means higher resilience and greater ability to manage risks and weather storms. Outsourcing to use agile trading technology reinforces your business continuity. Fast regrouping and optimization in times of financial crises also lets your FinTech company trim its expenses without capsizing its operations.
- Attractiveness to customers. Using an outsourced tech platform lets you develop your own specialized functionality faster and more reliably to serve your market. If you license that functionality to others, making it work with a leading trading platform adds value and reduces switching costs for your customers, making your offering even more attractive.
- Cost savings. Now that the other outsourcing advantages have been brought into the spotlight, we can talk about the money you can save! Hiring costs, training and retraining expenses, and ongoing payroll are a major part of any FinTech company’s budget. Outsourcing can give your company the benefit of the very best financial technology developers without having to foot these bills for additional headcount.
So, count the dollars you can save by using technology outsourcing, but remember how much more you can get. Operational efficiency, agility, risk management, attractiveness to your market, and cost savings are all key reasons why outsourcing is the best tech strategy for any growing FinTech firm. Contact us to learn more how we helped to build more than 200+ FinTech projects since 2002!