Fintech is one of Israel's most prominent high-tech sectors, accounting for over 20% of the country's total investment in 2022. As 2023 continues, the industry is set to explode even more with an expansion into crypto, web 3.0, and financial planning tools. Fintech companies operate in various fields, including Fintech Cybersecurity, Cloud+Data, AI, Quantum Computing, Medtech, Mobility, and more. For the successful development of a Fintech company, both startups and large companies, it is necessary to have low-cost, highly qualified experts who will understand both the product they are developing and the structure of the competitors' market. These factors are one of the keys to the successful development of companies in a period of uncertainty and the need to optimize the budget.
Many high-tech companies in Israel have unique products and services. Here is the list of some interesting Israeli startups that you should pay attention to in the field of Fintech:
The company provides a technology platform that empowers Banks, Fintechs, and other industry players in the embedded finance ecosystem to enable fast, efficient access to bank-rate credit opportunities, including term loans, lines of credit, etc.
Founding Year: 2022
DataRails is a financial planning and analysis platform (FP&A) that automates data consolidation, reporting, and planning while enabling finance teams to continue using their Excel spreadsheets and economic models. Automating these time-consuming manual processes paves the way for finance teams to spend more time analyzing data and less time gathering it.
Founding year: 2015
Rapyd is an online payment solution for international businesses. Rapyd offers a Fintech-as-a-Service platform to integrate local payment and Fintech capabilities into existing systems. Its features are multicurrency payment acceptance, accounts payable solutions, wallet-based payments, and more.
Founding year: 2016
Papaya Global includes cloud-based payroll management solutions for businesses. Its features include integrations like HRIS, ERP, etc., natural insurance, HR support, benefits management and administration, reporting, system integrations, and more.
Founding year: 2016
Thus, many Fintech projects in Israel have successfully attracted investments and are in the stage of scaling and growth. For such companies, it is essential to consider the selection of remote personnel from Central and Eastern Europe to solve business issues. This is especially true in 2023 when economic instability and political risks of doing business in the country increase.
East-Central European hubs for Israeli Fintech companies
For decades, Central and Eastern Europe has been one of the best places to outsource and outstaffing, mainly due to the region’s wealth of talent. Studies show that in both 2022 and 2023, more than half of Israeli companies, including Fintech companies, have outsourced the development of their technical solutions to the countries of Central and Eastern Europe. Eastern Europe software development outsourcing has become a popular solution for hundreds of leading tech companies suffering from runaway costs and an increasing shortage of qualified resources back in the West. Strong financial ties also strengthen international relations. Israeli managers come to European countries to hire software developers, form specialized development teams, and set up R&D centers, while European outsourcing companies seek clients in Israel.
Despite the complex regulatory system, there are now more than 600 different Fintech companies operating in the country. The Government of Israel promotes the safe introduction of innovative financial technologies into the Israeli economy in every possible way. Several Fintech accelerator programs and the national industry association FinTech-Aviv support Israel's Fintech ecosystem.
Thus, if you want to improve your return on investment (ROI) or increase the quality of your development, select an outsourcing provider with reasonable costs and skilled expertise. With over one million tech experts, the most prominent IT centers in Eastern Europe, including Romania, Serbia, Poland, and others, have become the best destinations for offshore software development among Israeli, Western European, and American companies.
In one of our earlier articles, we discussed the importance of the IT industry in Central and Eastern Europe, the region's main tech centers, the nations with the most advanced Fintech ecosystems, and the advantages the European tech experience can provide your company.
Many companies, enterprises, and startups in the Fintech industry face new challenges at the beginning of 2023. The labor market in the IT sector has changed significantly over the past few months, and now there are a lot of developers in the market due to cuts. Most Israeli technology firms are laying off junior employees, HR, marketers, and salespeople, and shareholders are increasingly asking to move from growth to sustainability and cut costs. Companies are now interested in optimizing costs and simultaneously hiring the best developers for their Fintech projects. Cost optimization and the ability to maintain a remote team of professional experts are one of the main reasons why Fintech companies use outsourcing and outstaffing. Thus, a great way to optimize the budget for companies and startups is to transfer part of the development to outstaffing and outsourcing. Let's look at this in more detail.
What Is An Outstaffing Model?
Outstaffing is a staff augmentation process where businesses engage software specialists from IT outsourcing companies to boost their existing teams. In this arrangement, the client company manages the outsourced developers in their current locations while they continue to work.
Key Components Of Outstaffing
Outstaffing enables the hiring of dedicated developers who become an essential staff component. You have complete control over coordination, direction, and task assignment for the outstaffed developers throughout the project. This indicates that you are crucial in guiding them to create measurable results.
What Is An Outsourcing Model?
Outsourcing is a contracting process in which organizations assign all software development obligations to an external IT firm. The contracted IT firm is accountable for hiring and administrating team members, performing daily work, and submitting project deliverables. With outsourcing, the hiring company need not maintain in-house IT capabilities.
Key Components Of Outsourcing
Outsourcing allows businesses to be more flexible when meeting their software development demands. In addition to having access to a worldwide talent pool of engineers, they delegate the whole software development lifecycle to third-party managed IT teams. Businesses have minimal influence over the functioning of their outsourced teams.
The primary reason the IT services market shifted towards outstaffing is the vast difference in prices set by outsourcing and outstaffing companies. By switching to the outstaff augmentation option, clients can save up to ninety percent of their software development costs.
Here are the average salaries of software developers in the largest cities of countries that are leaders in exporting IT services via outsourcing and outstaffing:
Level | Ukraine | Romania | Poland | Israel |
Junior | $12 000 | $13 700 | $24 000 | $82 920 |
Middle | $42 000 | $37 200 | $54 000 | $137 827 |
Senior | $68 400 | $61 200 | $65 500 | $165 000 |
Source: https://www.levels.fyi
What deserves special attention, the governments of the countries mentioned above know that a significant part of their exports is IT services and create additional preferential conditions for IT companies and developers, notably reduced taxes. Note that Israel has relatively high tax rates, with Corporate income tax (CIT) - of 23% and Personal income tax (PIT) - of 50%.
Previously, we considered the tax rates in Poland, Ukraine, Romania, and other countries. So you can compare taxes in Israel and the countries of Central and Eastern Europe to see where the taxation is more profitable. Hiring developers from East-Central Europe is a reliable way to optimize your budget.
An example would be Poland, which has one of the fastest-growing economies in Eastern Europe, which makes it an appealing destination for software development by international companies. The country has the most extensive working population in Central Europe, and Poland traditionally has a high level of English proficiency among developers and managers. Poland also has relatively low taxes, which we covered in more detail previously. Georgia and Ukraine are also countries with a lot of IT specialists. In Ukraine, for example, tax rates are significantly low, and the Ukrainian IT market operates on a private entrepreneurial model with a flat tax rate of 5%. These countries, along with other countries in Central and Eastern Europe, are excellent places to use the outstaffing model for Israeli Fintech companies and recruit qualified experts in these countries.
Why Israeli Fintech Companies Choose To Build Their Technology Solutions In Central and Eastern Europe.
Cost/ Quality Balance
Compared to those in developing countries, pay for experienced developers is significantly higher in the West, and companies can recruit competent developers with less money by outsourcing their work.
Software engineers worldwide, especially those with sought-after competencies, tend to be expensive. In the pursuit of lower costs, company leaders go to the top outsourcing countries in terms of price, like India or the Philippines.
However, experienced and successful leaders make more strategic decisions and invest in long-term outsourcing relationships with Central and Eastern European vendors. Hence, the result lies in getting high-end products and services at a higher cost but without compromising quality and with no overdosed hassle.
If you recruit an internal development staff, you agree to pay for vacations, sick days, and other perks. In addition, you are responsible for paying their taxes, renting a place large enough to accommodate the entire crew, and providing snacks, coffee, and other modern office amenities.
According to FullStack Labs, you can expect to pay $75 to $175 per hour for “small class” projects in the US. The rates for “mid-market class” projects range from $125 to $175 an hour. And this is how the situation is different in Eastern Europe – the average hourly rate amounts to $30 – $70.
This does not imply that your chosen outsourcing team does not pay taxes or receive paid holidays. In this model, it’s delegated to the company providing the services. Meanwhile, you can focus on the business objectives of your organization. Also, the cost of living in other economic zones may vary substantially, leading to lower pay rates for employees with the same expertise.
Engineering Smarts
Top IT centers in East-Central Europe are distinguished mainly by their skilled software engineers. The region's historical and political environment has forced its residents into a continual state of survival. This dynamic, coupled with the extensive technical institutions of partly post-Soviet schooling, has transformed the populace into top-tier professionals and remarkable problem-solvers. Ukraine, Serbia, Poland, Moldova, and other Central and Eastern European countries are traditional top performers in PISA Mathematics and the International Mathematics Olymiad.
Scalability
With government assistance across all Eastern European IT talent technology centers, the yearly inflow of graduates with technical specializations boosts the current tech talent pools of the countries. In Ukraine, 36 000 students receive IT-related degrees from local universities.
In addition, outsourcing service providers build personal skills training programs and provide world-class certifications to boost the number of tech experts even higher. So, organizations with ambitious growth plans and skill requirements will face no difficulty scaling up their existing teams in the best offshore software development countries, whether they have five or thirty developers.
Business Advisory
A decade ago, Central and Eastern European countries collaborated extensively with their Western clients and provided effective software development services. However, a bottleneck has prevented Eastern Europe from establishing itself in the global business arena. Despite its superior software development expertise, the region needed more business acumen and struggled to improve self-positioning.
Central and Eastern European vendors have gathered awe-inspiring knowledge across all business verticals and domains and a track record of delivering more complex end-to-end solutions. Business skills—from management to sales—are evolving. And today, East-Central European experts are not just an addition to the in-house team; they play a crucial role in generating business success, making them the finest places to outsource software development.
English Proficiency and Smooth Communication
Many organizations considering recruiting, for example, coders from Poland or Ukraine, have valid concerns about potential communication challenges. English proficiency is required for most IT positions in Eastern Europe. According to Statista, respondents in the CEE region have high levels of language proficiency.
The outsourcing model has another undeniable advantage. Your project is handled by a well-organized team led by a skilled project manager. Fundamentally, you do not need to communicate with each developer or QA engineer; the project manager assures a smooth and agile workflow, standard compliance, and the well-being of each team member.
With clear role delegation, outsourcing businesses' primary purpose is to provide services of the greatest quality.
Cultural Similarity & Extensive Cooperation with the US
A great draw toward outsourcing software development to Central and Eastern Europe is the cultural proximity largely defined by the US influence over the region. Western business etiquette is predominant here, making cooperation, interaction, and business deals smooth and straightforward.
While establishing a software outsourcing office in Hungary, you will likely discover that most Hungarians have a favorable overall opinion of the United States and Israel; 80% currently share this perspective.
In addition, many European software development outsourcing organizations have extensive experience working with Israeli and American clients. Your provider will likely be familiar with Israeli laws and customs. This is particularly advantageous for Israeli Fintech companies whose apps and services must comply with the US-Israeli and established system.
Convenient Time Zone
Unavoidably, a time overlap is one of the most crucial considerations when choosing a software development outsourcing company. Any Eastern European country is well-suited for business cooperation with North America, Western Europe, and Australia.
To illustrate, our offices in the US and Europe have 3-4 hours of business time overlap, allowing us to interact and tackle daily challenges in real-time efficiently. Undoubtedly, a convenient time zone was one of the reasons we chose Ukraine as our software development outsourcing destination.
Robust Critical Thinking
Our experience with outstaffing and outsourcing taught us that assertiveness and robust critical thinking are entrenched in "Slavic culture." This leads to exceptional strategic cooperation instead of an "order taker" experience.
Combine this with the region's high-quality IT education, and you'll significantly reduce your operational expenses and infuse your company with new ideas and perspectives.
According to Statista, the Eastern European software outsourcing market size is steadily growing, exceeding $106 billion in 2022, up from $93.1 billion in 2016. These figures indicate that Europe is becoming a leading outsourcing destination for software development services for organizations in various industries worldwide.
Poland
Poland is regarded as the top place to start a business in Eastern Europe and has the largest tech talent pool in the region. On the IT competitiveness index, Poland ranks #1 in IT employment, business climate, and IT industry exports.
Taking 34th position in Forbes's ranking of the best countries for business, Poland has yet to realize its full potential. Currently, Poland is a thriving tech center with over 400,000 tech workers. Google, IBM, Motorola, Delphi, Fujitsu, Capgemini, ShellAnother, and other foreign companies established over 400 R&D centers nationwide. Thus, the competition for tech talent is fierce, as the vast majority—almost 80% of IT professionals—are working for the R&D mentioned above centers, and only 20% are for outsourcing service companies. Another area for improvement lies in overcoming the outflow of local IT experts to other tech hubs across the European Union.
Ukraine
Ukraine is likely the most fantastic technology powerhouse in Eastern Europe. Today Ukraine is a flourishing tech hub and a home to more than 220,000 software developers. Kyiv, the capital of Ukraine, is listed among the top European cities for startups. In Ukraine, there are more than 2000 startups and two $1B+ unicorns, Grammarly and GitLab.
Over 15 Ukrainian IT companies were listed among the world's top outsourcing providers by IAOP. Over a hundred globally known tech corporations, like Samsung, Microsoft, and Google, opened R&D offices in Ukraine to capitalize on the country's innovation potential. However, these giants do not grab the competition for the best tech talent in Ukraine, as most of the talent pool work for IT outsourcing companies.
Czech Republic
Given the Czech Republic's attempts to invest extensively in research and development, its IT industry is rising. A further competitive advantage for the Czech Republic is its lower hourly wages than other EU nations. Nowadays, the Czech Republic is a vibrant digital center, home to more than 156 thousand software developers.
IT exports comprise around 2% of the country's GDP. The government's initiatives to roll out its innovation strategy have led to about 900 startups, one of the largest startup companies in Eastern European countries. A long history of automotive manufacturing and lens production established an ongoing research and innovation culture dominating today's tech industry.
Hungary
Hungary is one of the leading outsourcing countries in Eastern Europe, with an IT industry share of 10% of the country’s GDP. IT exports have grown more than 70% between 2015 and 2023. As of 2023, Hungary had a little over 81,000 professional developers among its population of over 9.7 million.
Approximately 63% of the IT revenue comes from R&D centers established in Hungary by US, UK, and German companies.
Hungary’s tech talent potential is 4th in Eastern Europe, the lion’s share of which lies in the high annual growth of IT students and graduates.
Romania
Since 2000, Romania's IT industry has grown about 15% annually. The STEM education system developed a large quantity of high-quality technological talent. This, together with English proficiency and software developer hourly salaries ranging from $31 to $51, enabled Romania to become a tech hotspot in Eastern Europe.
More than 140,000 software engineers reside in Romania, making it a vibrant tech hub. Bucharest, Cluj-Napoca, Timișoara, and Iași are Romania's most prominent outsourcing centers.
Serbia
In the past seven years, Serbian IT exports have tripled. Microsoft, Adobe, Siemens, and others have launched their research and development (R&D) centers in Serbia due to the country's increasing number of IT graduates and the skill of its labor force. Serbia is a thriving innovation hub with a population of more than 40.000 software engineers.
There are around 2,500 IT outsourcing companies in Serbia, and the overall growth of the IT sector is the fastest in Eastern Europe. The proficiency of Serbian software developers in gaming and blockchain technology resulted in gaming companies generating approximately $100 million in revenue.
Latvia
With the requisite infrastructure, Latvia is well on its way to becoming the leader in software development outsourcing in Eastern Europe. These factors—business-friendly legislation, a low cost of living, tech-focused colleges, and a flourishing startup scene—have contributed to the IT industry's progress in Latvia. Latvia, home to over 37,000 software developers, is a thriving innovation hub today.
The number of IT enterprises in the country has increased during the past decade. The same trend can be observed in the exports of IT services, which have doubled in the past five years to almost 850 million euros.
Lithuania
In the past ten years, the IT industry in Lithuania has undergone a dramatic transition. Today, the country boasts the largest number of startups in the Baltic region—more than one thousand. Almost 36,000 engineers are employed in Lithuania, making it a thriving IT center.
The country is also a world-known hub for Fintech solutions, and IT exports have almost tripled over the last five years. Lithuania is poised to continue advancing its IT industry's development by joining the ranks of nations that grant startup visas, streamlining bureaucratic procedures, and enhancing its technological skills.
Moldova
Moldova's IT industry is centered around exporting, which accounts for 80% of the overall industry. By providing simpler tax regimes and other perks, the so-called free economic zones established by the government across the country increased the number of information technology enterprises. With more than 30,000 tech employees, Moldova is currently a thriving IT hub.
Despite industry advances, Moldova is still on its approach to becoming a competitive participant in software development outsourcing services. Yet, significant progress has already been accomplished, as the nation's IT exports have increased by 7% over the past five years.
The biggest strength of East-Central Europe lies in its talent component. The solid engineering potential of the region is a result of geopolitical context, profound Fintech education, and decades of IT outsourcing/outstaffing experience that turned people here into the best problem solvers and innovators.
In addition to a perfect quality/ cost balance offered by East-Central European IT outsourcing service companies, the pro bono benefit of cooperation with this region is a cultural fit. Central and Eastern European countries learned to maintain good relations with both by bridging east and west.
Both outstaffing and outsourcing are the best ways to optimize development team costs for Israeli Fintech companies. Such optimization is essential for investors and creditors in 2023, making doing more tasks for less money possible.
You can lower overhead expenses and hourly compensation by working with fully managed, out-staffed remote teams. This ultimately allows you to have higher ROI and streamlined revenue. In addition, there are no infrastructure costs, eliminating various additional expenses.
If you want to compare the prices for outstaffing specialists with your existing costs, please request, and our managers will provide you with information. Thanks to outstaffing provided by Global Teams, our clients save 20 to 35% on developing their digital projects.
Global Teams is an international company that provides high-end IT professional outstaffing services to companies worldwide.
With dozens of loyal clients, including large-scale Western companies, we at Global Teams believe that the highest quality IT benefits and dedicated solutions are the keys to the business's success.
Let Global Teams help you find the right IT expert for Your Business. Hiring a new team player for your development team requires high expertise and commitment to deliver. As a business, your project is an essential part of your growth, and to make your strategy successful, you need to hire the right developers.
Global Teams hires dedicated development teams from scratch, be it an extended or managed team model, according to the client’s requirements. Just send us your requirements to info@globalteams.ltd or schedule a call and get your vacancies closed shortly with top tech talents from Central and Eastern Europe.
Contact Us if you have questions about how to profitably hire IT specialists for the unique needs of your business and users.
Today, Global Teams has expanded to include over 150 Experienced Software Developers and other professionals in Ukraine, Serbia, Hungary, Poland, Moldova, Romania, and other countries in East-Central Europe. We have more than seven years of experience in mobile application development.
The goal is to connect business owners with the professionalism and expertise they need to staff their teams at the best possible price. Our experts understand your needs well.