In the financial market, technology is a determining factor for competitiveness and innovation. Companies that work with payments and loans need powerful, secure, and scalable solutions. However, is it more worthwhile to develop in-house or to partner with third parties?

This choice involves not only costs, but also factors such as speed of implementation, control over data, flexibility, and regulatory compliance. While some companies choose to create their solutions to ensure customization and autonomy, others prefer to rely on specialized partners to reduce risks and accelerate market entry.

Building in-house: control and customization

Many companies choose to develop their solutions to have total control over technology, security, and compliance. This approach allows them to create highly customized systems, aligned with the specific demands and goals of the business. Some of the main benefits include:

• Strategic differentiation: Owned solutions can become a competitive advantage, offering unique functionalities to the market.
• Greater control over data and compliance: Developing in-house avoids external dependencies and allows for more rigorous management of data privacy and security.
• On-demand evolution: The company sets the pace of innovation, ensuring that updates meet its exact needs.

However, this choice comes with significant challenges.  Development and maintenance costs are high, and finding qualified talent to build and sustain the technology can be an obstacle. In addition, building a system from scratch takes time, which can delay market entry and compromise growth opportunities.

Developing software in-house can take up to 4 times longer and cost 2 to 3 times more than using outsourced solutions. The average time to develop a complete solution in-house can range from 12 to 24 months while partnering with vendors can reduce this time to 3 to 6 months.

Choosing partners: speed and efficiency

On the other hand, working with specialized suppliers can be the best choice for companies looking for speed and efficiency. Many fintechs, banks, and financial institutions adopt this model to speed up the implementation of solutions and reduce operational costs. The main advantages are:

• Faster time-to-market: Ready-made solutions go live quickly, allowing the company to focus on its core business.
• Reduced regulatory risks: Specialized companies handle compliance, ensuring that solutions are aligned with industry standards.
• Reduced operating costs: Maintenance and updates are the partner’s responsibility, avoiding excessive spending on in-house technology teams.

According to Deloitte, around 70% of financial services companies have already adopted outsourcing for technology development, partially or fully. The main reasons are cost reduction (59%), access to specialized talent (57%), and gain in operational efficiency (47%). Companies like Luby offer tailored solutions that combine technology expertise with regulatory knowledge, ensuring efficiency and security in financial operations.

However, this model has limitations. The company can lose flexibility depending on the supplier’s ability to adapt. In addition, dependence on third parties can generate costs in the long term and impact competitiveness.

When each approach makes sense

The choice between internal development or partnership depends on the context of the company and its strategic objectives. Here are some common scenarios:

When to develop in-house

• Large companies: Companies with a strong structure and a big budget can develop their platforms to maintain full control over innovation and security.
• Innovative proposals: Startups that need to create differentiated functionalities to stand out in the market tend to invest in their solutions.
• Specific regulatory requirements: When there is a need for strict compliance control, it may be safer to keep the technology in-house.

When to partner with third parties

• Need to scale quickly: Growing startups often don’t have time to develop solutions from scratch.
• Reduce costs:  Partnerships avoid high upfront investments and allow for a leaner model.
• Ensure ongoing compliance: Specialized vendors already deal with complex regulations, reducing risk.

The hybrid path

Many companies adopt a hybrid model, combining in-house development, outsourcing, and strategic partnerships. This format allows them to customize critical processes while gaining efficiencies in less sensitive areas. 

For example, a fintech might build its credit analysis system and use an outsourced solution for payment processing. A bank might develop its Internet banking platform in-house but rely on an outsourcer for ongoing maintenance and support. Companies might outsource specific services, such as cybersecurity and fraud monitoring while keeping core operations in-house.

Outsourcing within a hybrid model not only reduces operational costs but also allows companies to leverage the expertise of technology specialists, ensuring continuous innovation and regulatory compliance without compromising business efficiency.

How to make the right decision

When evaluating which model to pursue, consider these questions:

• What is the strategic impact of this solution on the business? Developing it in-house may be the best choice if it is a competitive differentiator.
• Is there a budget and talent available to build and maintain this technology? Without a skilled team, it may be safer to go with a partner.
• Does the company need to launch this solution quickly? If so, a vendor can expedite implementation.
• Does this solution’s security and compliance require full control? If so, in-house development may be necessary.

Choosing the best way to grow your business

There is no one-size-fits-all answer to the decision between developing in-house or partnering with third parties. Companies seeking complete control and differentiation may benefit from developing in-house, while those prioritizing efficiency and speed may find advantages in partnering. A hybrid model, combining both worlds, may be the ideal solution for many organizations.

The key is to evaluate cost, time, flexibility, and strategic impact to choose the most advantageous path for business growth. For companies that want to transform projects into reality quickly and safely, Luby offers the expertise needed to create customized and scalable solutions, ensuring efficiency without compromising innovation. 

Talk to one of our experts and find out how we can help your company achieve the best results with custom technology.