By Vasif Syed

How can Banks embrace SaaS for Banking? 

The digital banking market is poised to grow globally from $8.2 billion (2021) to $13.9 billion (2026) at a CAGR of 11.3%. From increasing smartphone adoption, rising demand for digital payment solutions, and the growing popularity of digital-only banks –the increasing scenarios are making it incumbent for traditional banks to embrace SaaS platforms.

SaaS (Software as a Service) platform-based banking is the online financial services provided through a cloud-based software platform. These include online banking, mobile banking, digital wallets, and other financial services that are accessed online. SaaS platforms benefit as the Fintech services have lower fees, faster transaction times, and enhanced security features.

Understanding the transition process with a case-in-point

The example of New 10 for ABN AMRO is an illustration. When the Dutch Banking giant faced innovative Fintechs and BigTechs, it had to pivot from its legacy systems and seek new market opportunities. ABN AMRO took on an agile approach to leverage best-of-service cloud technologies. As a result, New10 grew to become a standalone business – with the dual benefits of an agile FinTech and the longstanding financial competence of ABN AMRO.

Deeper migration considerations – finding solutions to the key challenges

1. Data security and compliance:

Understandably, data in the banking industry must maintain military-grade security. Hence, organizations must assess the data’s criticality and whether it is a regulatory requirement. Only data that can be mapped without impacting adaptability should be considered.

2. Integration complexity:

Three themes determine the integration complexity:

• Stability of core banking applications (how can different applications be enhanced without disrupting other versions)
• ­Adapting without replicating as-is (aligning legacy applications so the entire SaaS advantages are received as planned)
• ­Technology-friendly Open APIs (the ease of adaptability and API compliance to the standards)

3. Performance and scalability:

Real-time releases that do not disrupt BU operations decide the optimal performance for SaaS platforms. Furthermore, regular updates must come in with zero downtimes, and an automated release process should provide prior notice of upcoming changes. Scalability advantages are evaluated via the current transaction numbers and determined if the scalability provided aligns with the bank’s growth vision.

4. Vendor selection and relationship management:

Vendor Relationship Management (VRM) is crucial in technology procurement, particularly in SaaS buying. As per Gartner, VRM is a discipline that organizations use to manage costs, strive for service excellence, and mitigate risks. The outcome? Increased value from their vendors throughout the deal lifecycle.

Transitioning from on-prem to SaaS model: A pre-evaluation checklist

Create roadmap:

Make a detailed inventory of all the on-premises systems and architecture to identify products and features to be retained or discarded. Once the migrating apps are determined, the next step is to examine the underlying infrastructure, like storage requirements, statistics, data produced, connections, and SLAs.

Be ready to change app architecture:

Moving from a monolithic to a microservices structure needs a multi-layered model with functional and data layers and an integration layer for third-party integration. Working with microservices enables companies to effect individual/layer changes, accelerating development.

Choose a SaaS hosting provider:

Based on the computational power, storage needs, and future-proof banking applications, the next stage determines if the hosting requires load balancers, outsourced cluster counterparts, or database replication. So, choosing an appropriate SaaS hosting provider, like AWS, Microsoft’s Azure, or the Google Cloud Platform becomes critical.

Define data migration process:

Crucial migration considerations include tenant data representation, compression, and transfer. These data storage options come in various shapes and sizes, with pros and cons. The methods depend on the chosen architecture – single-tenant architecture, multi-tenant, or a layered migration model.

Mitigating challenges and adopting best practices with vendors:

A few practical strategies to help overcome challenges are establishing strong vendor communication channels and creating annual vendor scorecards that include KPIs. Additionally, it is vital to keep track of the following discussion items- compliance, satisfaction metrics, guaranteed cost savings, waste reductions (like shelfware), project management metrics, and constant ideas for innovation pipelines.

What will the future look like?

Financial services technology is currently in the middle of a seismic shift. The challenges are significant as CIOs prepare to embrace the next phase of digital transformation. Rapid action and response are imperative in a hyper-competitive environment of rising cost pressures. FIs must modernize their platforms, processes, and technology programs across the backend and the front end, across software, hardware, and middleware. In this context, transitioning to the SaaS model represents three distinct shifts:

1. Reimagining technology’s role as a business and innovation partner.
2. Reinventing tech delivery to enhance productivity and speed.
3. Future-proof the tech foundation by building flexibility and security.

Partnering with niche BankTech specialists like Maveric equips future-thinking FIs with demonstrated ways to achieve inclusive and sustainable growth through emergent technologies.

(The author is Vasif Syed, Vice President – Growth Management, Maveric Systems Pvt. Ltd., and the views expressed in this article are his own)