Software-as-a-Service (SaaS) spending shows no sign of slowing down. According to forecasts by Gartner, global public cloud spending on SaaS will jump almost 18% in 2023, from $176,622 million to $208,080 million. The rise of cloud technology has facilitated the growth of SaaS solutions; as a result, banks are increasingly partnering with SaaS providers to upgrade their core software, improve the customer experience, reduce costs, and generate revenue.
Given the buoyancy of the SaaS market, here are a few upcoming trends and strategies that illustrate how financial institutions can make the most of this ever-evolving technology.
Enhanced cloud security
Security remains as important as ever in banking: a high or critical priority for 70% of financial institutions as per the 2022 Future of Digital Banking study. This is unsurprising given the increase in cyber threat incidents, with more than a quarter (27%) of consumers victims of attempted identity or data theft, according to our 2022 Consumer Report.
Cloud vendors thus enable security by design for their SaaS customers, allowing them to build in security and compliance from the outset. Additionally, they adhere to a “shared responsibility” model with the customers. As such, the vendor takes care of infrastructure, hardware, and main services – storage, database, and networking. Meanwhile, the customer is responsible for the security of their own data, including – access controls and firewalls, data encryption, and applications that are designed and implemented securely.
Given that the SaaS layer continues to have a bigger market share than Infrastructure-as-a-Service and Platform-as-a-Service, it’s likely SaaS security objectives will become even more of a priority in cloud security strategies.
Rise of cloud-native applications
Alongside banking customers capitalizing on enhanced multi-layered security, they’ll have more choice in terms of cloud-native SaaS solutions. Typically built with a microservices architecture, these apps are packaged separately and offer high levels of automation for building, testing and deployment.
Another trend we’re likely to see is the unbundling of SaaS packages. SaaS providers may consider adapting pricing and personalizing packages to attract and retain customers – particularly during these turbulent economic times.
AI as a standard SaaS feature to meet banks’ needs
AI is benefiting many industries and swiftly becoming a standard feature in the SaaS sector. By combining SaaS and AI capabilities, it’s possible for banks to:
- Personalize services
- Enhance security
- Augment human capacity
- Better understand customer needs
- Improve efficiency
- Reduce costs
- Automate threat findings
CTO,
Sopra Banking Software
Furthermore, as developers gather more data from users and consumers, innovations will continue to advance, helping SaaS banking customers gain a competitive advantage.
With the continuing specialization of Service-as-as-Software, vertical SaaS solutions have grown in popularity, and financial services is biggest spender, accounting for 40% of the total vertical SaaS market in 2020. With that in mind, banks should make the most of businesses offering bespoke finance-related software.
APIs: the heart of SaaS innovations
Application programming interfaces (APIs) are changing the way SaaS works, enabling software solutions to connect seamlessly with other applications and enhance the original service with external data.
With the recent increase in embedded finance and Banking-as-a-Service (BaaS), there’s an opportunity for financial institutions to generate revenue by delivering those services via SaaS and capitalizing on APIs to offer even more flexibility.
Sustainable SaaS
An increasing concern for many, we will likely see more SaaS providers helping to combat CO2 emissions by switching to green energy, automating processes and prioritizing scaling over growth. With sustainability deemed a critical priority by 32% of global banking decision-makers, financial institutions will be looking for eco-friendly partners and services.
New horizon for SaaS and banking
Throughout 2023, we will likely see more partnerships between SaaS providers and cloud infrastructure players. Through those, financial institutions will reap the benefits of enhanced multi-layered security, agile cloud-native applications that suit their industry-specific needs, and new-generation subscription models to reduce costs. At the same time, we expect banks will increasingly use SaaS and APIs to optimize internal processes, innovate, and generate revenue.
