How Outcome-Based Development Reduces Risk in Banking and Fintech Projects

According to research from McKinsey, the average large IT project runs 45 percent over budget and exceeds its initial timeline by seven percent.

But fixed-scope approaches complicate things because they lock in requirements from the start. They’re resistant to change. They skew incentives. The result? Large-scale rework, compliance gaps, and products that don’t give the market what it’s asking for.

But outcome-based software development flips the script. Let’s take a look at how.

Why Fintech Software Development is a Risky Business

There are many factors that increase the risk profile of a fintech software development project. Fast-changing regulations, cyberthreats, data privacy issues, and the evolving needs of consumers are just a few.

Another issue at play is the presence of legacy systems. They’re outdated and usually difficult to modernize. As a result, data breaches — and the fines they incur — can become difficult to avoid.

With all this in mind, it won’t surprise you to learn that nearly three-quarters of banking and fintech software development projects fail within their first three years.

The larger the project, the larger the risks involved. But if you have an experienced fintech software development company in your corner — working as a strategic partner — your project can avoid the following issues:

• Scope creep
• Launch delays
• Budget overruns
• Products that comply technically but deliver poor user value or adoption

The risks you have to contend with as a fintech app founder aren’t limited to technical issues; they involve financial, reputational, and systemic risks, too.

Fixed-Scope Models Increase Exposure

There’s comfort in predictability. Founders and investors like to know what the costs and timelines are upfront. That’s why budgets and timelines get baked into the process from the outset. But this fixed-price approach can exacerbate the risk profile of fintech software development projects considerably.

In a highly regulated environment such as fintech, demands such as AML and KYC updates evolve all the time. And with each change comes the need for change orders — leading to awkward disputes with fintech software developers, negotiations, costly amendments, and stretched timelines.

For small software development teams, getting paid quickly can be the difference between keeping the lights on and long-term success. So, with a fixed-scope approach, the developers focus on ticking boxes. They simply deliver what was agreed at the beginning of the process. In other words, they stick to what was agreed. Anything else requires a change order and a fee.

But when developers aren’t able to roll with the punches, changing needs and regulatory demands can lead to significant technical debt.

In any other sector, the fixed-scope, fixed-price approach to fintech software development can avoid the biggest risks. But in a highly regulated landscape such as banking or fintech, the consequences can quickly escalate:

• Compliance gaps from outdated assumptions
• Fines and enforcement
• Rework and delays
• Budget overruns from disputes
• Products that miss goals despite meeting specs

How Outcome-Based Fintech Software Development Minimizes Risk

Forget deliverables. Instead, prioritize verifiable outcomes that positively impact your business. Link milestones and payments to key metrics. For example, you may want to reduce transaction times by a specific amount. You may decide that improved fraud detection is your priority outcome. Other potential targets include customer retention rates, successful regulatory audits, and increased user adoption.

When you adopt outcome-based software development in such a highly regulated environment, you can reduce risk in a number of ways:

Baked-In Flexibility

When regulatory changes occur, teams are able to adapt quickly. Pivots due to market feedback or changing user demands occur collaboratively and relatively early in the process.

Shared Accountability

Founders, investors, and fintech software developers have shared goals and responsibilities from the outset. Instead of being a client relationship, the dynamic becomes more strategic in nature. As a result, solving problems and innovating take the place of disputes and friction.

Early Detection of Issues

Value takes precedence over tick-box exercises. This means products are both technically compliant and effective. Continuously tracking outcomes means detecting issues early is much easier — making mitigation a relative breeze!

And there’s evidence to back up our claims. According to the Standish Group CHAOS Report, agile approaches to fintech software development are three times more likely to succeed than traditional waterfall/fixed-scope methods.

The Benefits of Outcome-Based Fintech Software Development

Fintech development is notoriously complex. That’s why most startups fail in three years. But with the right approach, and an experienced strategic partner such as DigINeat, you can give your next project the best possible chance of long-term success.

Take it from us when we say that locking in exhaustive scopes from the outset will increase your project’s risk profile considerably. But collaborate with us and share accountability from day one, and the potential rewards could be the difference between failure and long-term success.

Over the years, our multidisciplinary fintech software development team has partnered with fintech and banking application founders to deliver the kind of features and enhancements that claim and protect market share. They include:

• Reduced transaction processing time
• Improved fraud detection capabilities
• Meeting pre-agreed user adoption and retention targets
• Passing regulatory audits
• Baking in scalability and ease of integration — essential for long-term development and growth

Reduce Risk, Increase the Chances of Long-Term Commercial Success

The stakes are high in fintech and banking. Yes, user experience and meeting the needs of the market are vital, but they can’t come at the expense of regulatory compliance. If they do, fines and reputational damage could put an end to your venture before it really gets going.

When you choose DigiNeat for fintech software development services, you get a strategic partner that only gets paid when specific business outcomes are achieved.

Want to know more? Contact us to arrange an initial strategy session.