Business

Choosing the Right Resource Locations for Financial Services: Latin America and Central Europe

  • 71%

    executives outsource or offshore their services

As the global outsourcing market reaches new heights, the financial services industry is taking note. According to a 2022 Fortunly review, an impressive 71% of financial service executives outsource or offshore a portion of their services. The review further reveals that the global financial services outsourcing market is worth $130 billion (USD) and that the market is projected to rise 7.5% annually.

To compete globally, banks and other financial institutions (FIs) need access to more scalable and cost-effective resources. Moreover, institutions must find resourcing partners that work in their time zones.

The solution? Location-specific offshore outsourcing.

By focusing on specific locations for outsourcing needs, FIs can find the right partners needed to drive business resilience and establish a balanced model for resources.

Two of the best regions for outsourcing today are Latin America and Central Europe. The key questions for FIs are which of these regions better suits their needs and is a hybrid approach that utilizes both locations the best way to adopt a balanced resource model?

Let’s begin our exploration of this topic with a comparison of the two regions.

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    Latin America vs. Central Europe: A Strategic Resourcing Overview

    Before an FI can determine whether Latin America, Central Europe, or a combination of the two is better for their outsourcing needs, an examination of outsourcing in each of these regions is needed.

    Specifically, institutions need to know how each region stacks up in terms of providing outsourcing solutions for the financial services industry.

    With this in mind, here is an overview of the strengths and advantages of strategic resourcing in Latin America and Central Europe:

    Latin America

    Latin America has been an up-and-coming region on the financial services landscape for some time now. Since 2016, more than $7 billion in investments have been made into Latin American financial service companies, with annual investments growing to $2 billion in 2020.

    Key benefits for resource outsourcing include:

    • Nearshore Opportunities

      One of the biggest benefits of the Latin American region is its proximity to North America, home to major financial services powerhouses like the U.S. and Canada. This proximity opens up better nearshore opportunities, meaning companies in North America can collaborate with partners in or close to their exact time zones.

    • Lower Costs

      Since Latin America is still largely considered a developing region, the costs of labor and resources tend to be moderately to significantly lower than costs compared to North American regions. As a result, FIs can leverage cutting-edge technologies and talent without having to venture outside their resourcing budgets.

    • Bilingual Advantage

      Financial services professionals working in Latin America are commonly fluent in both English and Spanish since these languages are highly prevalent in the region. This is a huge advantage to have, as English and Spanish are two of the top five languages spoken around the globe, with 1,121 million and 512 million speakers respectively.

    Despite the many advantages of outsourcing to Latin America, the region is not without its challenges as well. Some of the hurdles FIs may encounter when outsourcing to Latin America include:

    • Tightened Financial Conditions

      Like many regions worldwide, Latin America is feeling the effects of the geopolitical climate in Europe. The biggest challenge some countries in Latin America are facing from the conflict is scarcer financing brought on by rising interest rates, according to the International Monetary Fund (IMF).

    • Data Security

      Though Latin American regulators have taken major strides in recent years to bring improved regulatory standards to the region’s FinTech industry, some countries in the region still have areas of improvement surrounding data security. This makes it important to find outsourcing partners that are trustworthy, have a well-proven track record of top-notch compliance, and can help you navigate the region, like Exadel.

    • Segment Limitations

      Depending on which services an FI hopes to outsource to Latin America, the region may or may not be the right choice. According to a 2022 Inter-American Development Bank (IDB) study, the largest segment in Latin America for financial services is payments and remittances, followed by lending.

    Leverage tech experts from LATAM and Central Europe for strategic development.

    Central & Eastern Europe

    Central & Eastern Europe is comprised of several key countries that make it an excellent choice for financial services outsourcing including Poland, Georgia, Hungary, and Bulgaria.

    In the 2022 State of IT Outsourcing in Poland report, it is revealed that Poland alone is home to more than 400,000 IT outsourcing professionals and that 66% of the country’s tech talent is employed by international companies.

    Crucial benefits to consider include:

    • More Talent

      Europe as a whole is often renowned for its education system, leading to more professionals seeking careers in technical fields like IT and financial services. Deloitte reports that the size of the FinTech market across Central Europe is valued at €2.2 billion (USD $2.35 billion), with a focus on technologies like payments, cybersecurity, and data and analytics.

    • Western Alignment

      Europe tends to align with Western business practices and ideals. Central Europeans also typically speak two or more languages, with English being a widely-spoken language in the region, making this region a good choice for Western-based businesses.

    • Regulatory Standards

      Central & Eastern Europe and the European Union as a whole are very advanced when it comes to financial regulation. Moreover, many European regulatory frameworks (such as PSD2) have been used as a framework by other regions to improve their own regulatory standards, including both North and Latin America.

    Like Latin America, however, Central Europe presents its own challenges to outsourcing. The disadvantages of outsourcing in Central Europe include:

    • Brain Drain

      The “brain drain” of Europe has been an ongoing problem for some years now, as more professionals seek out better working and living conditions, especially in the wake of recent supply chain issues in Europe. For instance, in Poland, the share of Polish citizens working in another member state increased from 4% to 9% between 2011 to 2020. However, talent is still extremely strong in the region and strong working opportunities will temper this in future years.

    • Time Zone Differences

      Unlike Latin America, Central Europe does not have the same proximity advantage to North America. This can make collaborations more difficult, as the time zone difference is more dramatic. However, it does make this region perfect for businesses in countries like the U.K, and of course, still makes Europe a great alternative for North America-based companies currently outsourcing further afield, looking to bring things a little closer.

    Is Latin America or Central Europe Better for Outsourcing?

    Answering the question, “Is Latin America or Central Europe better for outsourcing,” requires more than a simple comparison of each region’s pros and cons.

    Choosing which region better fits an FI’s needs is highly dependent on what type of work a company is hoping to outsource, which resources are needed, and what skill sets are being targeted.

    In many cases, the solution lies creating a balanced resourcing model that utilizes more than one region for outsourcing. Not only does this give an FI greater business flexibility but it also provides access to an even wider pool of FinTech experts.

    For instance, let’s say a North American bank is working to build a more secure payment platform. Latin America has a thriving payments segment, while Central & Eastern Europe may have a larger talent pool of relevant developers. Each has something to offer that can benefit the bank, making it more advantageous to adopt an approach that leverages collaborations with both regions rather than only one.

    Choose a Partner with Strategic Positions in Latin America & Central & Eastern Europe

    To establish a strong and balanced model for resource outsourcing, it is vital for FIs and other financial service providers to choose a partner with strategic positioning.

    When seeking out an outsourcing partner in the financial services industry, look for these key qualities:

    • Specialized Expertise

      The need for specialized expertise is clear when it comes to financial services. FIs need a partner they can trust with their most complex issues, be those domestic or international. Along with finding a provider that offers the specialized services needed, FIs should also ensure that the company they partner with has a strong compliance strategy.

    • Nearshore Offices

      The key to finding the right outsourcing partner is to search for a company that prioritizes nearshore offices. To put it simply, the more offices a provider has around the globe, the better. Along with Latin America and Central Europe, seek out a provider that can help you build connections with other regions, such as North America and Asia.

    • Thorough Consultations

      Finally, finding a provider that offers thorough and personalized consultations is key. Always seek out companies that put a strong emphasis on the consultation aspect of outsourcing.

    Final Thoughts: Partner with Exadel Today

    At Exadel, we have offices spread out around the globe in the Americas (North, Latin, & South), Europe, and Central Asia. This expansive network of expertise enables Exadel to provide our clients with the resources and talent needed in the time zones they require.

    Plus, Exadel focuses on more than just strategic positioning to drive outsourcing value for clients.

    In addition to nearshore offices all around the world, Exadel also specializes in Agile transformations and digital adoption to ensure our clients have the technical competitive edge needed for global expansion.

    Exadel is a leader in outsourcing, with both offshore and nearshore options available.

    Contact the Exadel team today to learn more about how we can help you connect with the resources you need, no matter where in the world you need them from.