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Research: You spend 50 percent extra time and money if your development vendor isn't into fintech

You’d think by now fintech companies must have a clue about finding the right software development vendor, but as it turns out many of them still don’t. Over the years of working in this industry, we've talked to numerous companies to find out what the main pitfalls of outsourcing in fintech are. The main takeaway is that the lack of domain expertise in “generic” software development outsourcing companies often leads to different issues that cost clients their money — here are some of them.

Increase in costs for the offshore development team

The most obvious consequence of hiring a software development team without fintech domain expertise is that it's going to spend much more time on various tasks that require an understanding of the topic. Over the stages of planning, development, testing, and user acceptance testing (UAT), the team can rack up extra time due to the lack of understanding of the client's business.

Here's an estimation of how this increase would pan out for an average 800-hour iteration that involves a team of 10 people.

In our experience, the lack of domain expertise leads to a 50% increase in time spent on planning, 20% on development, 25% on testing, and 10% on UAT. Taking into account how long each stage takes, the final result is a 25% bump; if the team in question costs you some $50,000 a month, we're talking about $13,000 lost per month.

Taking into account how long each stage takes, the final result is a 25% bump; if the team in question costs you some $50,000 a month, we're talking about $13,000 lost per month. 

Increase in time and costs for the in-house team

Another pitfall of working with a “generic” offshore development team is that it increases the time spent by the in-house product owners on onboarding and explaining the tasks. Although the decision to outsource software development is normally made on the CEO/CTO level, it's usually the product owner who's talking to the remote development team day in, day out. The industry standard is that a product owner is usually a business person who isn't — and doesn't have to be — deeply involved in the technical part of things.

What comes out of this situation is that if the developers are not able to understand what a non-technical business person tells them about the product and features, it's a sure recipe for missed deadlines and general unhappiness across the board.

One of the worst scenarios that happen often is that the team would say they understand the task and come back with a module that's impossible to integrate into the rest of the product. These issues usually come up further down the line, creating a lot of friction.

Another possible outcome is the development team raising a gazillion questions, answering which takes a lot of valuable time of the project owner. One way or the other, this increase in time spent by the in-house team could eat up the entire amount saved outsourcing the development.

In-house team demotivation

A less obvious negative consequence of the situations we discussed above is the decrease in morale for the in-house team. The issues begin to happen when the project moves to the integration stage, where all the components have to be integrated into the end product. That's where the lack of understanding of the fintech space by the offshore development team bites you in the back.

What tends to happen in this case — and what we've seen a number of times — is that the in-house team effectively begins to work for the offshore team, and not the other way around. In order to finish the integration process, some of the core code might have to be changed in order to accommodate the components created by the outsourcing team.

Predictably, this kind of change results in the low motivation of the in-house team of both developers and product owners, who suddenly need to do work they've never planned on doing. This can take a while to fix.

The risk of losing clients and partners

In fintech and WealthTech, the price of a mistake is extremely high. There are mistakes, however, that can only be caught if the development team understands the basics of the domain.

A great example of such mistake is report generation in WealthTech, particularly in the advisory tech. Pretty much any piece of software created for this space generates reports based on third-party data and internal algorithms in order to visualise investment advice.

What we've seen in our experience is that some of the more nasty reporting bugs can only be caught by someone who understands what they're looking at. For a developer or QA engineer without any understanding of the investment industry, a 50% share price increase and fall of a public company within a day don't look wrong, while anyone who's worked with investment advice knows that something is awry.

When not caught in time, mistakes of this kind can often cost you a customer. Seeing something as glaring can easily deter a professional investment advisor from using your product.

Another possible outcome is that the customer would blame the data that came from a third party rather than the developers. This can result in spoiling the relationship with the data provider, who wouldn't be happy to receive complaints about issues it's not responsible for.

All in all, hiring an offshore development team that doesn't understand the fintech domain can lead to different issues, ultimately costing time, money, and customer relationships. The specifics of the financial industry are such that the price of a mistake is very high, and experimenting with less knowledgeable development partners doesn't look like a viable strategy.


On the other hand, the right approach taken when choosing a fintech-focused outsourcing development provider can result in a range of benefits. The right team can help you with rapid growth and scaling of the product, as well as add competencies and expertise that would perfectly complement those of your in-house team.



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Vasyl Soloshchuk

Vasyl Soloshchuk


INSART, WealthTech Club

Member since

11 Jan 2019


New York

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This post is from a series of posts in the group:

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