Why banks outsource software development to external software companies
There are many reasons why a company outsources parts of their business including reducing costs and improving efficiency, but why banks outsource software development to external software companies is also about keeping current and competitive in a growing and changing industry.
The banking business and their customers are demanding more. They want exceptional service, faster access to information, personalised products, and more.
Technology is advancing at such a fast pace, and banks need help to stay on top.
Meet technological challenges
Outsourcing development to a software company will help banks meet these technological challenges. This can be done more efficiently and cost effectively, allowing the bank to focus on their core banking services. The bank can do this while the developer can handle the technology.
Banks used to use outsourcing for IT processes and client relationship management, but they have broadened their outsourcing requirements to include compliance processing tasks to critical day-to-day business activities as well as software development.
It is definitely a changing world; the banking industry is being bombarded by blockchain, influenced by AI and moved by mobile technology. They need to stay on top of all these developments.
Here are some of the reasons banks outsource software development to external software companies.
Reasons banks use external software companies to develop their software
The main reasons to outsource software development to external software companies as mentioned before are to reduce costs and improve efficiency.
Other reasons include:
- Risk management
A benefit of outsourcing your development is that the risk is shared with the software company. Using an external software company helps you to manage the risks involved with software development as they are responsible for the development project – right up to the delivery of the product.
The scale of the project lies in their hands as well. If the project grows, hiring new developers for the duration of the project is their responsibility.
These software companies are able to retain great developers. They provide them with an environment and culture in which they can learn and grow. Unlike an inhouse developer that could possibly find it difficult to fit into the culture of a banking organisation.
- Cost savings
You can reduce the overhead and operational costs that would be incurred doing any inhouse development. Hiring and training costs and an ongoing payroll are costs that will be saved. You will have the best developers available to you without the extra cost.
Banks are there to manage money, not to innovate in the technology space.
Software companies create environments that are designed to inspire innovation and creation. This kind of environment provides access to talented developers. These developers come up with new and innovative ideas that probably wouldn’t happen in a traditional banking setting.
An external software company brings with it experienced developers that can use their skills and expertise on a project. These teams use their collective knowledge to solve problems and innovate on your software development project.
Professional and experienced developers adhere to standards that ensure quality. They focus on the overall objectives and intended results. They are more thoughtful and methodical in their approach to developing code.
- Access to the latest information and technologies
Technological expertise and know how are provided by these software companies. Outsourced staff are regularly trained, ensuring they are always up to date with the latest technologies available.
They are also current when it comes to applying the latest regulation and cybersecurity solutions. Using the specialist, cutting-edge talent-and-resource pool can add a lot of value to banking business functions, and it can provide a quicker turnaround in meeting changing needs than an inhouse solution.
Because technology and development is their core business, they will have the best developers with proven development practices and methodologies at their, and your fingertips.
You want an outsourcing partner that is flexible enough to meet any changes required on the development project. You also want a partner that will ensure your solution is created in on time.
An external software company should be able to put in a rapid collaborative effort to reach the delivery date effectively and ensure the product reaches the market on time.
Focus on your core business
Outsourcing allows you to focus on your core business needs. It provides time and space for your internal staff to worry about these. While the external software company focusses on the specialised systems like payment gateways, new mobile apps or any other development you may require.
Using an external software company will not only allow you to focus on your core business but will alleviate the need to ensure that your business is kept up to date with existing technologies. They can ensure that your business is being innovative, while you manage other aspects of your business.
New technologies, frameworks, and tools in IT are developed so fast that it might be challenging for banks to be up to date with newest solutions. This is why many companies acquire the help of a software company that specializes in specific or new technologies.
Keeping up with a changing banking industry
Consumers have become accustomed to using their mobile devices to do their banking. Or they use the internet to purchase goods and make payments. These innovations have made electronic payments and remittances possible across the world. Development of these payment solutions has advanced over recent years.
It is crucial that software companies keep up with all these changes. Finteq is one such company that does this, particularly with payment solutions. They develop payment solutions used by banks and financial services.
Finteq enables financial institutions to address the challenge of interoperability between proprietary and legacy systems as well as payment management and processing, together with tracking and auditing functionality.
They specialise in advanced workflow solutions for payments origination, national payment systems, payment hubs and cheque truncation systems for participant banks, banking utilities and clearing houses.
When choosing a software company to outsource your business to, you want a specialist in the industry, especially in niche markets such as payment solutions. Finding experts in niche markets to partner with will help you reach your development goals.
Choosing an external software company to partner with
Digital transformation is non-negotiable if you want to be successful in business today.
Banks realise they are faced with challenges. These challenges are caused by technology and have created a change in customer and client expectations.
To achieve digital transformation, you need agility, creativity and to be ‘all in’ digitally speaking.
Few banks have these skills in-house, and need to use an outsource partner. The right outsourcing partner will bring vast experience, skills, and creativity to ensure your digital transformation.