Scope, Benefits and Strategic Deployment of SaaS for Banks and FinTech Companies

Numerous banks and non-banking finance companies (NBFCs) are waking up to the potential that cloud offers for their business. Cloud solutions, when leveraged comprehensively, can lead to a transformation that position any finance company as a serious contender in the digital landscape.

Cloud computing is categorised into different solutions that companies can deploy as per their requirements and business goals. Chief among these are Software as a Service (SaaS), Platform as a Service (PaaS) and Infrastructure as a Service (IaaS).

The service provider manages the SaaS apps and provides the licenses on a pay-as-you-go model as per business requirements. They help a financial company to digitalise its business, strengthen security and compliance, reduce physical infrastructure footprint and introduce automation for enhanced efficiency and cost reduction.

Financial Technology (FinTech) start-ups initially disrupted the banking and finance sector by adopting the SaaS delivery model to enable online transactions. A popular example of this working model helps FinTech lenders to accept business loan applications online, process them in minutes, and issue requested amounts to eligible borrowers within two to three days.

As a business tool, SaaS helped these companies to improve their agility, secure existing revenue streams and seize new market opportunities. It enabled them to swiftly adapt to changing business environments and scale up or down as per customer demand patterns. Analysing the benefits of this technology, banks also started embracing SaaS for some of their transactions.

The top opportunities that SaaS brings for the financial industry include:

• Agility to support volatile business cycles and demand patterns
• Reorganisation of IT cost structure from CapEx to OpEx model
• Cost reduction and enhanced cost predictability
• Ease of data analysis for business growth
• Better operational control with web-based interfaces
• High and automated security and controls
• Business continuity assurance with data backups

Deploying SaaS Model in a Bank or NBFC
Security is the top concern for any business that is new to the cloud platform or needs to migrate new applications to SaaS. Banks and NBFCs have to consider certain standards while choosing their SaaS vendor and must also review their existing setups to ensure that they can be seamlessly moved to the cloud model.

The parameters and factors to consider in such deployments include:

Access Management:
Banks must clarify who can access their SaaS deployments and the kind of permissions they get. The SaaS vendor then offers a unified framework for managing user authentication. The users’ access must be based on their role in the organisation, the systems they have to access and the workflow assignments, irrespective of the device they use to access data.

Perimeter Network Control:
Perimeter defence usually concerns the control of traffic that flows in and out of a data centre network. The underlying technology is a firewall to filter out potential threats and unknown traffic that can harm the network. The firewall works on a set of predefined rules on the kinds of traffic and legitimate source/destination addresses on the network. In deploying SaaS, banks and NBFCs should also implement higher levels of perimeter control with intrusion detection and prevention systems.

Virtual Machine Management:
Frequent updates on virtual machines are necessary for the security of IT infrastructure. This also calls for knowledge of the latest threats in the cyber world and their patches. An accredited SaaS vendor continually takes care of this aspect on the standardised virtual machines (VM) images and third-party applications used in its systems. Thanks to such practices, the patch for a new security threat is designed and deployed in minimum time.

Data Protection:
The vendor’s methodologies for averting data breach are essential to consider while deploying SaaS solutions. The vendor must use reliable methods to encrypt data that may be at rest or in transit. Best practices in this regard give banks (SaaS users) the option to manage their encryption keys, which means that even the vendor’s staff cannot decrypt the data.
In deploying encryption procedures for data at rest, vendors offer options to build a hierarchy of server-side and client-side encryption for high security levels, with segregation of roles at different hierarchy levels, customer control and complete audit trails.

Governance and Incident Management:
In managing finance operations based on SaaS applications, specific incidents need to be captured, reported and monitored till closure. While deploying SaaS, the procedure to investigate such issues must be clearly defined and documented.

Reliability and Scalability:
A prime feature of SaaS is its ability to enhance the capabilities of the organisation’s existing hardware and software by supplementing it with essential resources. There is a limitation to vertical scaling as it can only be extended within the size of the server. Horizontal scaling implies the ability to link various software or hardware entities, including servers, so that they function as a single logical unit. However, this kind of scaling cannot be deployed at short notice. For seamless continuity of service, therefore, the SaaS vendor must be able to create a significant amount of horizontal redundancy for the infrastructure. With a content delivery network (CDN), the vendor can add more robustness in their cloud solutions. This becomes possible with a network of proxy servers and their data centres distributed across geographies.

Besides these factors, the organisation soliciting SaaS deployment must also ask its vendor for solid disaster recovery (DR) plan to replicate data and apps to counteract the consequences of any disaster at their location.

Is Your Bank or NBFC Ready for SaaS?
As India moves ahead with its vision to become an economic superpower, banks and NBFCs have a critical role to play. In the domain of technology-based financial operations, SaaS holds the promise of low costs and efficient performance along with the assurance of regulatory compliance. With the application of best practices and up-to-date techniques, it is also more secure than on-premise applications.

To know more about custom SaaS applications for banks and NBFCs, contact Tata Tele Business Services on 1800 266 1800.