Why Embedded Software Teams Are the Backbone of Modern Fintech Solutions

Embedded software teams play a crucial role in the success of modern fintech companies in many ways. First, they provide the expertise to develop and maintain secure, efficient systems. Second, these teams are not just technical support but are deeply integrated into the development process, helping fintech firms navigate challenges like regulatory compliance, data security, and the need for rapid innovation. In this article, we’ll explain what embedded software teams are, why fintech companies increasingly rely on them, and how these teams help solve some of the industry’s most pressing pain points.

The Role of Embedded Software in Fintech

What are Embedded Software Teams?

So, what exactly does the term “embedded software teams” mean? It can be confusing because “embedded software” is the software that runs and operates machinery, such as airplanes and gaming platforms. But this article is not about that type of “embedded software.” For our purposes, “embedded software teams” refer to the strategic placement of specialists, engineers, designers, and product managers within different teams or departments. This practice aims to bridge the communication gap between various technical roles in software development.

This dissonance meant that the vital knowledge that individual team members had was not transferred and disseminated throughout the company, which we’ll discuss in more detail later. Agile sought to eliminate this lack of communication and, by extension, trust by introducing the concept of strategically embedding* *specialists, engineers, designers, and product managers wherever needed.

Why Do You Need Embedded Software Teams?

Where embedding comes into software development is when teams “lack necessary intellectual resources and must create new team-level capital by integrating individual knowledge.” Contrary to what many in management may believe about embedded software teams, embedding has many advantages - if done properly. Embedding involves more than moving people around; it “involves creatively assimilating a team’s internal knowledge resources” **AND **“enriching it by selectively absorbing valuable external knowledge.”

Here, we come to the most important contribution of embedded software teams, which is, essentially, knowledge - “diverse knowledge is a software team’s most valuable resource.” Using knowledge as our foundation, we can explore how embedded software engineering can affect an organization’s ability to innovate and optimize performance through real-world examples, case studies, and testimonials. We’ll eventually get to how embedded software teams are becoming indispensable in fintech, but first we’ll look at other verticals to see how embedded software development has impacted them.

Innovation and Development

To quote the study on organizational learning, a company’s ability to “innovate depends on its potential to create new knowledge.” As we already discussed, the most valuable addition of “embeds” is their unique knowledge, experience, and skill set. But what are some real-world examples of when embedded software teams were able to innovate? Above, we quoted an essay from Asif Shaikh, who embedded with Spotify. First, Shaikh says his desire to embed came from feeling “under-utilized” as an Android engineer working on development teams. Using himself as an example, Shaikh said that embedding helped him “hone his skills,” with the eventual outcome of “becoming a more versatile full-stack developer.” Shaikh lists many positive aspects of being on an embedded software team, but the gist of his argument is that embedded teams are a win-win.

Employees get a boost in job satisfaction by being able to explore different positions, while still adding value through their contributions. Companies, on the other hand, gain immensely from the “transfer of knowledge.” Using embedded teams lets organizations “enhance resource utilization and ensure more effective and streamlined operations.” Think of when “development” merged with “operations” to create today's DevOps structure.

There is evidence to back up Shaikh’s arguments. McKinsey surveyed over 600 different public and private companies about their talent distribution practices. The survey found that companies that purposefully embedded high-talent individuals into struggling departments were 2.2 times more likely to outperform those companies that shunned embedded teams. Findings like these are critical to helping organizations overcome their reluctance to use embedded software engineering teams.

Performance Optimization

One of the most significant benefits of embedding engineers into different teams is performance optimization. As we’ve established, embedded teams, by nature, foster focused, targeted efforts toward solving specific challenges or enhancing certain processes. This kind of commitment can lead to substantial improvements in a relatively short time frame.

A principal engineer at Recursion, Shweta Bhandare, experienced this firsthand when she embedded with two teams for a year. Through her work, she was able to "improve our delivery on quarterly goals from less than 30% to 90% in a span of two quarters." Her presence as a dedicated team member allowed the team to focus more intently on meeting their goals, rather than getting caught up in distractions or misaligned priorities. This story is a prime example of how embedding an engineer or technical expert can boost team performance and enhance organizational efficiency.

Scalability and Flexibility

Another essential advantage of embedding engineers into software teams is the scalability and flexibility it offers. Embedding engineers is a flexible solution that allows teams to quickly adapt to these changing needs without the overhead and delays associated with hiring external talent. Returning to the example of Spotify, Shaikh says, "what sets Spotify’s approach apart is its flexibility.” The company has not only been quick to promote from within and reallocate specialists to different departments, but it has also found that this practice has had positive, second-hand benefits for the rest of its organization. The ability to move value-producing employees to needed junctures means that Spotify’s HR department does not have to undertake a costly and arduous hiring drive. In their own words, the company says, "It has less of a need for external talent, so our managers can take some respite from the hiring and onboarding processes and instead think through how we get work done with internal talent.”

Case Studies: Success Stories in Fintech

By employing embedded software services, or using embedded software outsourcing when necessary, many fintech companies build secure, scalable, and user-friendly platforms that meet the needs of today’s consumers and businesses. Whether through improving security in payment gateways or optimizing investment algorithms, embedded teams have contributed significantly to the growth of several companies in the fintech sector, enabling them to stay ahead in an increasingly competitive fintech landscape.

Digital Banking

Companies like N26 and Monzo have relied heavily on embedded software teams to optimize their digital platforms, ensuring users can easily open bank accounts, make transactions, and manage their finances. N26, for example, expanded rapidly by employing embedded software outsourcing, where embedded software companies provided the needed expertise to scale their platform across multiple countries. N26’s ability to handle international currency exchange transfers and even offer budgeting tools—all within a sleek mobile app—stems from the power of embedded software engineering.

Embedded teams at N26 were instrumental in developing the underlying architecture that allowed the app to handle millions of users concurrently without sacrificing performance. A critical component of this success was embedded software testing to ensure security and reliability, which is particularly important in financial services. These embedded teams brought their unique expertise in handling real-time data and optimizing hardware-software interactions, which allowed N26 to efficiently process payments, integrate with external financial systems, and offer a highly responsive user interface. N26 accelerated the development process and provided a competitive product that was both user-friendly and secure.

Payment Processing

Regarding payment processing, Stripe stands out as a prime example of how fintech companies have used embedded teams to revolutionize how online payments are handled. Stripe’s success is due to its developer-first approach and its effective use of embedded software services. By embedding software engineers within specific product teams, Stripe could continually innovate its payment gateway to support a wide variety of payment methods, currencies, and fraud detection algorithms. An essential aspect of Stripe’s growth has been embedded software development tools that allowed its engineers to build, test, and deploy updates rapidly without disrupting service.

For example, embedded teams at Stripe worked on developing Stripe Radar, the company’s AI-driven fraud detection tool. The tool’s success lies in its ability to process millions of transactions in real-time, flagging suspicious activity and protecting users without impacting transaction speeds. This level of performance was made possible by the expertise of embedded software companies who helped build and fine-tune the algorithms running on the embedded software architecture.

Wealth Management

In wealth management, Betterment stands as a pioneering company that has disrupted the traditional investment advisory model by offering automated, algorithm-driven financial planning services. The ability to scale personalized investment advice for hundreds of thousands of users at once would be impossible without the contributions of embedded software teams. These teams were essential in building the platform’s complex algorithms to analyze a user’s financial situation and automatically adjust portfolios based on risk tolerance, investment goals, and market conditions.

The platform’s success in embedded software engineering has allowed Betterment to offer a suite of advanced features such as tax-efficient investing strategies, automatic portfolio rebalancing, and seamless integration with external financial accounts. Embedded software testing played a crucial role in ensuring these features worked flawlessly across various devices and systems. This allowed Betterment to gain user trust quickly, as the platform demonstrated reliability, security, and ease of use from day one.

Challenges and Solutions

In fintech, embedding software engineers within teams offers numerous advantages, such as agility, innovation, and improved resource utilization. However, there are significant challenges that fintech companies face when attempting to embed engineers into their development process. By recognizing these hurdles and addressing them effectively, companies can maximize the potential of their embedded software teams.

Shweta Bhandare provides a structured approach to the embedding process, identifying four key stages: tactical, partnership, support, and redundant. Each stage plays a crucial role in ensuring the success of the embedded teams and optimizing the contributions they bring to fintech projects. Let's explore these four stages in detail and understand how they can be effectively applied in the fintech industry.

Future Trends in Fintech and Embedded Software

The future of fintech and embedded software is shaped by rapid technological advancements and the growing demand for faster, more secure, and flexible financial services. As financial institutions and fintech companies adapt to an increasingly digital world, embedded software teams drive innovation across the sector. By examining key trends such as artificial intelligence (AI), blockchain, edge computing, and the rise of open banking, it’s clear that the evolution of fintech is intertwined with breakthroughs in embedded software engineering.

AI-Driven Fintech Solutions

Artificial intelligence is one of the most transformative trends in both fintech and embedded software. Financial institutions are increasingly integrating AI-driven tools to automate processes, improve customer service, and detect fraudulent activity. Embedded software teams are vital to implementing AI solutions, as they ensure that these systems are scalable, efficient, and seamlessly integrated into existing financial platforms.

One successful example is how AI-powered chatbots have been embedded into mobile banking applications, providing customers with 24/7 service without requiring human intervention. These AI chatbots, built with embedded software, can assist users with common banking inquiries, such as checking account balances or transferring funds. By embedding AI into their systems, banks can improve customer service while reducing costs.

Blockchain and Distributed Ledger Technology

Blockchain and distributed ledger technology (DLT) are revolutionizing the financial sector, particularly in areas like payment processing and cross-border transactions. In payment processing, blockchain enables faster, more transparent, and more secure payments, especially in cross-border transactions. By embedding blockchain into payment systems, financial institutions can reduce the number of intermediaries involved, lowering transaction costs and improving efficiency.

For example, Ripple, a global payments company, uses blockchain technology to facilitate instant, low-cost international money transfers. This innovation has revolutionized how payments are processed globally, with embedded software engineering teams behind the scenes ensuring the system runs seamlessly.

Edge Computing for Real-Time Financial Services

Edge computing is becoming increasingly important in fintech, particularly as the demand for real-time processing grows. Edge computing involves processing data closer to the source, reducing latency, and improving performance. In fintech, edge computing allows for faster transaction processing and more responsive digital banking services.

Embedded software companies are helping financial institutions implement edge computing solutions, enabling real-time data analysis and decision-making at the point of transaction. For instance, in digital banking, edge computing can be used to process transactions instantly, without the need to send data back to a centralized server. This reduces transaction times and improves the customer experience. Embedded software teams are crucial in developing and optimizing the software that powers edge computing systems, ensuring they are efficient and secure.

Conclusion

VodWorks has built a reputation for its exceptional ability to embed engineers and other specialized professionals at critical stages of the software development cycle. Their tailored approach ensures that the right professionals are embedded within your teams, bringing specialized knowledge, experience, and technical expertise to drive your project’s success. Contact Vodworks today to learn more about embedding top-tier talent at the right time, ensuring seamless development, enhanced performance, and innovative solutions.