How to leverage the cost-benefits of integrated services

By Canay Özel, Co-Founder & CTO of Integrated Finance

In the highly competitive world of fintech, optimising costs is not just a strategy but a key determinant of long-term success. Growth is often measured by increased revenues, but this measurement of progress is meaningless if your margins continue to be below par.
Fortifying your bottom line and optimising costs can be achieved by buying vs building your financial technology’s mandatory and complex software components. That’s where financial infrastructure, enabled by SaaS, is a pivotal catalyst in creating a more streamlined and cost-effective business.

Financial APIs have emerged as vital tools to consume and extract value from SaaS through reduced workload for in-house teams, allowing companies to focus on core activities.

Decoding the Development Costs

Creating a robust fintech ecosystem is an intricate process and generally needs at least three mid-range engineers and two senior engineers with deep expertise in financial software to get off the ground. The expected delivery time with such a setup is estimated to be up to 12 months, and you are looking at north of £400,000 per annum for these roles alone. One thing that is not accounted for with this setup is the ongoing development costs of maintaining robust financial systems to delight customers, which is often the next step after your MVP is launched.

Assuming you also want to partner with various banking providers, this further adds to this complexity and, correspondingly, the costs. Critical services such as compliance and cloud provider costs carry their own financial burden in addition to the costs of third-party financial services – all vital factors you should pay attention to as part of your cost analysis.

Navigating Maintenance, Security and Operational Expenses

Focusing only on getting off the ground and building a product is short-sighted, and too often, the long-term recurring costs of technology, not only in fintech but in all areas of software development, are underestimated. Such long-term systematic technology costs include managing mandatory software changes and patches, monthly service charges and hosting operations which can significantly contribute to the overall financial burden – sometimes up to 25% of all operating costs.

In addition, you should also consider costs incurred due to security requirements set by third-party financial services providers, such as strong authentication mechanisms, including using an HSM service for cryptography and self-certification or conformance testing processes. Furthermore, paying particular attention to the costs of building your financial software product in a way that ensures a high level of security for financial transactions by protecting sensitive data and using credentials against potential attacks is extremely important.

Integrating third-party applications into an existing fintech ecosystem also translates to an increased load on cloud services. This greater demand, in turn, leads to higher cloud computing costs as data storage, bandwidth, and computing power needs surge. Third-party integrations can also require additional resources for proper functionality and maintenance, such as skilled personnel and potentially more expensive infrastructure upgrades.

While on-demand is now the norm in fintech, it is also essential to consider the added expenses of ‘always-on’ applications designed to provide consistent and continuous services to users. Although their 24/7 availability is a significant advantage in terms of customer experience, it also entails more intensive resource use, leading to increased operational costs.

Notably, applications with geographical restrictions add another layer of complexity and cost. They may require regional servers or specific regional cloud services to ensure adherence to data sovereignty laws and provide low-latency services. These geographically specific deployments may necessitate local compliance measures, which can involve considerable time and financial investment.

API-first fintech infrastructure: Transforming the Cost Paradigm

Fintech infrastructure powered by robust APIs is now the bedrock of financial sustainability and competitiveness for any fintech firm. Embracing a SaaS and API-centric approach is not just a tactical manoeuvre but a strategic imperative crucial for fostering sustained growth and success. In the long run, the total cost of ownership and fees associated with service continuity can be reduced significantly.

In the quest to protect the bottom line and radically trim costs, the focus of every fintech business leader must be on harnessing the full potential of consuming financial services via APIs. We must acknowledge their capability to transform and redefine the fintech cost paradigm as they emerge as the strategic linchpins of the industry.

In this competitive fintech landscape, mastering the buy vs build strategy isn’t just a nice-to-have skill—it could very well be the decisive factor differentiating the industry trailblazers from the rest. So, as leaders in this sector, let us champion the power of APIs and leverage them to catalyse our drive towards financial efficiency and market dominance.