Submitted by: Joseph Aldrich

Why the Financial Sector is Hesitant to Adopt the SaaS Model

Software as a Service (SaaS) has become a common deployment option for various applications such as CRM, HR etc. However, for verticals, such as the banking and financial sector and insurance sector there has been slow absorption. One of the main reasons for this lag is the concern related to security and privacy. Regulations also become extremely important for the financial sector. Obviously, SaaS resides on a public cloud, and banks are extremely cautious about putting their data out there. However, things are slowly changing and we see more and more adoption of SaaS by financial institutions. The reason for this changeover is the value that these organizations are seeing in the SaaS model, i.e. leaner and meaner performance. Insurance companies and financial institutions can, therefore, experience a host of benefits including cost savings, operational efficiency, and better customer satisfaction if they adopt SaaS.

Also, financial institutions go through constant audits where they need their data to be securely controlled, easily accessible and comply with statutory regulations. Application Service Providers (ASP) have always been in a good position to work with individual organizations providing them with customized solutions. Thus, so far the ASP model has worked really well for the banking and financial sector. In the ASP model, the `hosting is protected by firewalls to ensure that data is never compromised. The fact that this whole process is expensive is another story.

SaaS providers who focus on the financial sector understand the concerns and incorporate systems to ensure that their customers get only the benefits of a SaaS model. In the new SaaS model, applications are architected to offer customers the same level of control, integration, transparency, and security that they look for in ASPs. Thus they combine the strengths of the ASP model while also giving them all the benefits of the SaaS model.

SaaS providers need to offer:

Integration SaaS providers must provide all the operational and secure environment that financial institutions look for. Their model has to mirror the ASP model to such an extent that the customer wont be able to notice any difference at all between the two.

Strong Domain knowledge Not every service provider will understand the nuances of a financial institution. Their regulatory requirements, governance procedures and stringent policies. Therefore, it is not possible for any and every SaaS provider to succeed in this sector. The requirement is for a SaaS provider who understands this industry really well and can incorporate all the requirements in the solution.

Privacy and confidentiality – are two words which rhyme with banking and finance. There are no two ways about this. SaaS solutions are cloud-based. There are still unclear ideas on how privacy and confidentiality will be protected in a public cloud. However, understanding regulations, offering PINs and passwords can help to provide a layer of protection.

Thus, SaaS solutions can provide a welcome alternative to the financial sector. It all depends on how well the provider knows this industry segment.

About the Author: Joseph Aldrich is a Freelance Digital Consultant working in the Information Technology sector. Joseph shares his expertise and knowledge through articles and blogs on trending subjects in the field of technology innovation, software, and IT outsourcing. Follow us on :https://twitter.com/aldrichj99,

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