Always up to date with SaaS for banks

In a year ‘Software-as-a-Service’ solutions (SaaS) are mass adopted in core banking, according to Gartner’s Hype Cycle. The article “Is Fintech ‘Innovation’ Diverting Attention Away From ‘Unglamorous’ Core Banking?” on Bobsguide raises questions about the pace of replacement projects in core banking, but SaaS is an innovative development that can’t be denied. In this blog we zoom in on the advantages of SaaS and how banks can reap those benefits.

SaaS enables you to use up-to-date software applications without the need to purchase expensive systems or pay for their maintenance. It allows you to use software without having to download it. An example of SaaS is internet banking, which you can do from your browser. Banks are also increasingly moving towards this type of service in their back offices due to their growing popularity in the payments industry. SaaS is an excellent alternative for parties that need to respond quickly to technological developments.

For banks, it is often difficult to get to grips with innovations straight away. The introduction of SEPA, in particular, has led to the development of many new products with new functionalities. Developments such as consumer protection and e-mandates have made both payment functionality and technology more complex. Furthermore, it is becoming increasingly difficult for many market parties to comply with legislation and regulations. In addition to national legislation and monitoring, for instance, they need to comply with European guidelines. The question for banks is how to deal with the many changes in the area of technology while still complying with legislation and regulations.

Remote technology and infrastructure

As a result of these developments, market parties prefer to use a single software supplier without the need to invest in systems. In the software industry, this is referred to as SaaS; in the payments industry, it is sometimes referred to as the Application Service Provider (ASP) model. However, these are simply differences in terminology. In both cases, the service is the same: the supplier provides software for the market party to use. This enables banks to use software applications to run their payments, without the need to run those applications on their own systems. The applications and infrastructure are housed at Equens and the bank uses them remotely. This also applies to the core payment processing system used both by banks and by Equens in its role as an Automated Clearing House (ACH). Van Lanschot was the first bank in the Netherlands to use a SaaS solution of this type supplied by Equens.

The major advantage of this way of working is that the bank no longer needs to worry about managing increasingly complex functionalities and making sure the software applications are up to date and/or compliant with the various legislation and regulations. Equens takes care of everything, enabling the bank to focus on its core business and clients. The clients are connected to Equens’ technology and infrastructure and interact via interfaces and file uploads.

No legacy systems

For banks, another advantage of a SaaS solution is that they are not left with legacy systems, such as specific software that still serves its purpose but requires frequent updates in order to remain operational. This costs both time and money. For this reason, banks are increasingly opting for generic software, so as to be sure that the supplier is committed to keeping the software up to date and innovative. Specific software applications are often tailor-made for a particular client, which ultimately results in high maintenance costs.

By using a generic backbone for all of their applications, the banks benefit from economies of scale. When it comes to cost savings for banks who use their solutions, Equens has a proven track record. Thanks to the extensive configuration options of its solutions, Equens also has the flexibility to fulfil client-specific requirements. For instance, routing and cut-off times are easy to configure.

A further advantage in addition to cost savings is cost transparency. As a bank, you will face fewer unwelcome surprises, as Equens is always abreast of upcoming changes and better able to upscale and downscale accordingly.

Growth in Europe

SaaS solutions therefore offer banks numerous advantages, and demand in the market is clearly growing. Van Lanschot is still Equens’ only SaaS client in the Netherlands, but Equens has various clients throughout Europe who use its back-office systems. Thanks to the introduction of SEPA, demand in Europe is growing, so there are certainly opportunities in that market for further growth.