The financial services industry is quickly becoming a leader in software development. Research shows that investments in financial technology, or fintech, reached $34 billion in 2018. Much of this growth is attributed to the rise of emerging technologies like blockchain, data analytics and cloud computing.
These new technologies are expected to revolutionize the way payments are made and transactions tracked. In addition, they will help banks increase profits through data analytics and protect their customers' valuable data through software security.
Many of these financial services organizations are turning to offshore software outsourcing to build custom software while maintaining a lean in-house development team. That's because these companies come with decades of invaluable experience from working with big tech and other Fortune 500 companies to develop custom software.
Banks are turning to offshore development services to access the best talent. This is especially important given the stranglehold that big tech has over software development talent and the historically low unemployment rate enjoyed by software developers, which has increased salaries and competition for the entire industry.
In addition, offshore development teams are being used to shorten the development cycle and improve the quality of data analytics in the industry. Read on to learn more about how software outsourcing is shaping the future of fintech and helping companies grow.
1. Access to in-demand experts
Offshore software outsourcing companies help financial service organizations find the right talent for their development needs. This is especially important given the current hiring market – software engineers have an ultralow unemployment rate of just 1.9%.
This candidate-driven job market means that more companies are competing to hire a limited number of experienced software engineers. Hiring for the fintech industry is even more difficult, since working in finance has historically been viewed as less prestigious than working for well-recognized tech companies like Google or Facebook. Furthermore, while the tech talent crisis may have started in the United States, it's beginning to affect companies across the world, including ones in Western Europe and Canada.
That's why businesses across the globe are turning to offshore development companies to avoid the tough American hiring market and secure the right talent for their needs. Many of these companies are located in regions like Latin America and Asia, which have an excess of experienced software developers with the same education and experience levels as their American counterparts. Software engineers in Latin America are also valued for their advanced fluency in English and understanding of American tech culture. Developers in this region also work the same business hours as their in-house colleagues, making collaboration seamless.
2. Faster project completion
Fintech companies are working with offshore software development firms in order to start projects quicker and complete them in less time.
Financial service firms have long used traditional hiring processes to staff their software development projects. This involves finding candidates through traditional hiring channels and training those new employees to company standards. However, offshore development services have a range of experienced developers on staff who can start a project on cue, eliminating the time-consuming hiring process.
These specialists can also shorten the development lifecycle. That's because these developers have years of experience as contractors and have worked on a wide variety of projects over their careers. They can apply this experience to quickly resolve common problems, streamline the most complex parts of the development cycle and reduce the overall length of the project.
Finally, the type of multidisciplinary development teams favored by outsourcing companies allow for the rapid development of high-quality software. That's because they include important considerations like user design, quality assurance and data privacy in every step of the development process. This eliminates much of the workload at the tail end of the project and results in a superior final product.
3. Increased profits through data analytics
The finance industry is a leader in data collection and analytics. Investment banks like JPMorgan Chase and Goldman Sachs have long employed specialists who analyze data to reduce risk when underwriting loans, issuing securities or trading futures.
These same financial service organizations are now analyzing consumer data to increase sales and promote customer loyalty. They use credit scores, spending habits, and demographic data to analyze creditworthiness and offer tailored services to each consumer.
Both small credit unions and large multinational banks are utilizing a combination of in-house engineers and offshore development services to improve their analytics. In particular, these offshore software outsourcing services help financial institutions build data analytics software with the popular Python programming language. They also help companies protect valuable consumer data by providing experienced software security experts as needed.
4. Reduced server load through cloud computing
The banking and finance industry has been reluctant to implement cloud computing technology, largely because web-based storage is vulnerable to hackers. However, recent improvements in data privacy protections have led some banks to begin integrating the technology into their core business.
Financial institutions love cloud computing because it reduces the need for physical infrastructure. Rather than maintaining fleets of expensive servers, banks can now store information offsite with a third party through a software-as-a-service (SaaS) arrangement. That's one reason researchers estimate that banks are cutting technology costs by 25% using cloud computing, saving more than $15 billion.
Banks are already using cloud computing to store information related to communications, human resources and accounting. In fact, one of the most popular SaaS models is Microsoft Office 365, which allows companies to store documents, emails, calendars, contact lists and other sensitive information online.
5. Protection of valuable consumer data
One of the most important challenges facing financial executives today is how to reduce the number of data breaches, which increases each year. Furthermore, savvy cybercriminals levy an outsized portion of their attacks against the finance industry, attempting data breaches against banks 300 times more frequently than companies in other industries – with each American financial service firm withstanding an estimated 1 billion attacks every year.
This problem is even more important when you consider the type of information. Banks store incredibly sensitive data, including Social Security numbers, credit card information, salaries, purchase habits and home addresses. This is valuable information that criminals can use for profit.
Banks are responding to this crisis by increasing investments in their cybersecurity defenses and by hiring software security experts in droves. In fact, research has found that financial institutions currently spend roughly $2,300 per person on cybersecurity every year. This spending accounts for nearly 15% of their information technology budgets.
The U.S. government has released new regulations dictating how banks should secure their information. This means that banks of all sizes must continue to increase investments in data privacy and shore up their defenses against increasingly sophisticated cybercriminals.
The financial services industry is investing billions of dollars a year to develop the type of custom software that their businesses need to survive in the new data-driven marketplace. Many of these organizations are turning to offshore software outsourcing to accomplish this goal without distracting from their core missions.
These offshore development services help banks develop well-crafted software without committing to large and unnecessary in-house engineering teams. In addition, outsourcing partners help businesses start projects quicker and shorten the overall development lifecycle.
Finally, these offshore developers are improving the quality of data analytics for fintech. This will enable banks to offer targeted services to their customers and increase the quality of their investment banking operations.