FinTechs increasingly turning to third parties to boost UX, accelerate time to market, and plug gaps in existing capabilities 

Moorwand, a payments solution provider, today revealed that issuing tops the list of services that fintechs outsource, with mobile wallets and customer communications coming second and third respectively. With the rise of Open Banking, Banking-as-a-Service and Embedded Finance, nearly half of fintechs (49%) now spend 10-20% of their annual revenues on outsourced services according to the report ‘Specialists vs. generalists: How do fintechs fuel growth?’. 

FinTech companies both big and small are increasingly outsourcing capabilities to either specialist partners that provide a specific service, or generalist partners that provide a range of services. The report, based on a survey of 75 senior decision makers at FinTech firms across the United Kingdom, France, Germany, Ireland and Lithuania, explores the state of outsourcing in FinTech and the use of either specialists or generalists on FinTech growth. 

Overall, FinTechs are relying on specialist partners (55%) over generalists (45%) for their outsourcing needs. 

Top 10 services outsourced by FinTechsRanking% outsourced to specialists% outsourced to generalists

Issuing services 57% 43% Mobile wallets 51% 49% Customer communications including chatbots 69% 31% Credit / borrowing capabilities 51% 49% Accounts 54% 46% Developer resources 49% 51% Payment gateway 54% 46% Project Management 46% 54% Payment processing 51% 49% Crypto capabilities 63% 37%.

Based on the report findings, there are three key reasons FinTechs outsource: 

Scale – FinTech is moving from adolescence to maturity, and firms are looking to partners to help them scale their services. 45% of fintechs are looking for third parties to plug gaps in existing capabilities for example. 

Expansion – Across the industry we are seeing the ‘rebundling’ of financial services. FinTechs have worked hard to acquire customers, and now they have their attention they are looking to offer more services. 43% of firms outsource to accelerate their time to market.
 

Regulation – As the sector matures it is becoming increasingly regulated. This has prompted the rise of Banking-as-a-Service (BaaS), as fintechs effectively outsource compliance to a licensed third party. Seven out of the top 10 most outsourced services are regulated. And FinTechs prefer to work with specialists for all of them. 

“FinTechs are growing fast and increasingly looking to outsource services and capabilities to fuel their expansion,” said Vicki Gladstone, CEO and COO at Moorwand. “The card and wider payment offering usually takes centre stage in most FinTechs’ proposition and is a key point of differentiation for the business. So, it’s no surprise to see issuing come out top nor that fintechs are turning to firms with deep specialisms to help them to stand out from the crowd.”  

“Across the board the services that are mission critical, complex and involve compliance are outsourced to specialist providers,” concluded Gladstone. 

The report ‘Specialists vs. generalists: How do FinTechs fuel growth?’ can be downloaded here: https://www.moorwand.com/specialists-vs-generalists/.