Curated by: Sergio A. Martínez
When it comes to software development, the core principle of “Know Your Customer” is as important as ever; after all, you can’t develop a truly useful application without a deep understanding of your user base. And when it comes to the world of Financial Technology, this is especially true, as the stakes are higher, so to ensure safety in your product, there’s simply no substitute for due diligence. And by collaborating closely with our clients and understanding their unique risks, we at Scio can develop FinTech applications that are both useful and safe.
“With FinTech apps constantly flooding the market, FinTech app design might seem like a pretty sweet and easy job to do. But, in reality, designing a FinTech app is probably one of the toughest jobs out there, as it carries a number of unique challenges that can significantly impact the efficiency and adoption of the final product. One such challenge is the “KYC” or “Know Your Customer” requirement that all financial services providers need to comply with”, explains the article “The pain of KYC in FinTech”.
In other words, developing financial software is a challenge that requires regulations and laws that avoid any serious issues for the user. It’s a puzzle of many pieces, and getting them to fit together can be a tricky situation, but when everything comes together, the result is a beautiful thing. So by taking the time to get to know your clients inside and out, you can develop a much better FinTech application that meets their needs and exceeds their expectations.
However, when it comes the time to expand your team, and choose to collaborate with a Nearshore partner like Scio, what are the challenges faced during the project by our teams, and what are the best ways to ensure the products we helped create are the best they can be, and guarantee that KYC checks are followed properly?
Keeping Your Compliance: The other meaning for “KYC”
Very few industries have higher stakes than FinTech, and that’s a core belief that any team developing financial service software has to internalize down to instinct: money is no laughing matter. Be it transferring, keeping it, or doing important operations with it (such as insurance, or billing), regulations on money and banking are an issue taken seriously by all, both private and public organizations. This is, then, what poses the biggest challenges faced when developing FinTech products, summarized so well in the initialism “KYC”: Knowing Your Customers.
“KYC is a regulatory requirement for financial institutions. By law, they are obliged to verify the identities of their clients to prevent fraud and constrain the service access of users who don’t fulfill certain standards of credibility”, says the article Keep Your Compliance: The FinTech’s Guide to KYC. “But Know Your Customer policies are not just regulatory boundaries. They also act as competitive factors. KYC yields insightful data on one’s own services and customers.”
So mastering KYC is critical for any FinTech related-product, although it should be noted that this concept doesn’t establish a concrete set of guidelines, and different types of clients (from a single person to an entire corporation) may have different requirements for their projects, with varying levels of detail, based on the type of transaction needed from the application. This, in turn, can have an extra layer of complexity by building an application meant to work in different territories, each with its regulations, laws, and context, which means that profound knowledge of the financial sector is often required to successfully develop such products.
And although following KYC to achieve the best outcome in FinTech products is necessary for any successful project, the truth is that the costs of these procedures add up, with the average cost of a single KYC check between 13 and 130 dollars (depending on the personnel number, as well as the cost of the particular platform used to do the checks), and up to 25% of FinTech platforms abandoned it due to friction in the customer’s end, which can require a long process to verify one’s ID.
This poses FinTech as a notoriously risky venture, where tight regulations, costs, and market demand for easy interaction that, nonetheless, also require a rigorous procedure to avoid issues like fraud and money laundering, so any organization attempting it is incentivized to look for any help that might alleviate development, and Nearshore development might hold an answer.
Nearshore and FinTech: Easier than you may think
When it comes to software development, a FinTech company has options; either choosing to do everything in-house or looking to augment their team with the help of a Nearshore organization. There are pros and cons to both approaches, but it can be a particularly good option for FinTech companies, helping them access the expertise they need to build a successful product by working with a partner with a deep understanding of the financial sector, with the skills they need close by.
Opting for team augmentation this way allows companies to tap into a larger pool of talent, or “Adding workforce the Nearshore way” in the words of Rod Aburto, Service Delivery Manager, and Co-Founder at Scio, ensuring that communication and progress overview is done in a timely and convenient manner. This ability to collaborate in real-time is another key advantage of Nearshore partnering, and critical to ensuring that KYC is followed, with the final product meeting all the requirements needed.
Ultimately, there are many reasons why these partnerships are a good idea for FinTech companies, and the biggest one is that you can get the best of both worlds: someone who knows the ins and outs of the industry and can help you navigate the regulatory KYC landscape and also shares a passion for developing amazing software.
After all, FinTech companies are under constant pressure to release new features and products quickly, without compromising on quality or security, so to meet these demands, many firms are discovering that by expanding their team resources with a Nearshore organization, a Fintech company can access some expertise that might otherwise be unavailable, and in the case of the financial sector, the proximity between the US and LATAM means that companies like Scio already have a close understanding of all the culturally and legally relevant details that are so important for the correct implementation of KYC checks.
As a result, FinTech companies stay ahead of the competition, speeding up the development process, easing the costs of KYC in the project, and all in all, getting all the talent and expertise you need to develop FinTech applications. So if you’re looking to develop FinTech applications, don’t be afraid to reach out and collaborate with a Nearshore partner: with the right team in your corner, anything is possible.
The Key Takeaways
- Although FinTech solutions are in high demand, developing applications for it is full of challenges and obstacles that need a critical eye.
- One of the biggest is KYC, or Know Your Customer, which dictates plenty of the requirements of any software, platform, or app.
- KYC can be costly, so most FinTech organizations need to proceed with development in an especially careful way, and seek the best support available.
- Nearshore development can offer plenty of solutions for the FinTech sector of the US, as the geographical, economic, and cultural proximity between North America and LATAM can ease many of the challenges of KYC.
Scio is a Nearshore software development company based in Mexico where we believe that everyone deserves everyone should have the opportunity to work in an environment where they feel like a part of something. A place to excel and unlock their full potential which is the best approach to create a better world. We have been collaborating with US-based clients since 2003, solving challenging programming puzzles, and in the process showcasing the skills of Latin American Engineers. Want to be part of Scio? Get in contact today!