By Olivier Asuncion, CEO of Tradista

For the majority of organisations, the pandemic has meant an acceleration in digital transformation by months or even years, placing technology at the cornerstone of global leadership. As organisations adjusted to these realities, the most successful ones have become experts at ‘change’. In many instances, “organisations have seen two years’ worth of digital transformation in two months”, according to Satya Nadella, Microsoft CEO, from remote teamwork and customer services to critical cloud infrastructure and security.

Long-standing norms about how companies operate and how people work have been rapidly transformed during COVID-19. Financial institutions were required to pivot, more quickly than planned, to digital offerings. We have seen the digitisation of operations and the creation of next-generation operating models; the creation of new digital business models and revenue streams; and the creation of a new workforce model with human workers augmented by automation and artificial intelligence (AI).

The acceptance of cloud-based digital transformation across financial services

Across global markets, this change in business dynamics has catalysed trends across the Cloud and Software-as-a Service (SaaS) market that many expected to see later in the future. When SaaS was introduced at the turn of this century, it established a market that would explode over the next two decades and was only further accelerated by COVID. SaaS solutions are irresistible to many companies for their reliability, accessibility and cost-effectiveness, with cost spread over the period where value is received. Working on a subscription basis and centrally located on a remote cloud network that connects users to a suite of services on the cloud, companies can get applications running with minimal time wasted on burdensome start-up and maintenance processes.

This shift in customer behaviour has had a knock-on effect on businesses, pushing them to accelerate their digital business model strategy. Consequently, there has been a major change in the acceptance of cloud-based, real-time, digitally-delivered business information services. In a matter of days or weeks, business functions in which it was once unthinkable to operate remotely, such as trading desks, were doing so – and on the whole, made this transition effectively. Cloud models are now a norm within the financial industry. Those who previously expressed concerns about migrating all of their business to the cloud, have now erased hesitation.

The steady rise of the subscription-based economy across SMEs

Even before the arrival of COVID-19, SaaS was increasingly favoured due to the steady rise in the subscription-based economy. In a report by Gartner, global spending on SaaS and cloud services grew by 18.4% in 2021 to $304.9 billion (£232.5 billion); up from $257.5 billion in 2020. In fact, Gartner forecasts end-user spending on public cloud services to grow 21.7% to reach $482 billion in 2022.

This, together with the fact that it also provides greater flexibility and security while reducing software expenses and time-to-market, means that many financial services companies, particularly small and medium enterprises (SMEs), have transitioned to the SaaS model to benefit from the efficiencies, cost-savings and modularity of design:

• The rise of subscription-based services: The convenience and cost saving benefits of digital subscrip-tion offerings has led to an increased uptake across a range of software services. SMEs have been com-pelled by the ability to choose annual or monthly licensing fees along with simplified procurement and a lower cost of entry.
• The evolution of the SaaS model: The SaaS model allows for software applications to be hosted in the cloud, eliminating the need for local storage. The cost of acquisition and the burden of software manage-ment is also minimised. Multiple users can use the model remotely at a time, offering more robust and se-cure data backups and recovery.
• Reduced software expenses: The cost savings inherent in the SaaS model are significant. The lower cost of entry means that customers are able to categorise software investments as operating expenses rather than capital expenditures. The vertical scalability offered by SaaS means that licences can be easily ex-panded or reduced based on changing business requirements. Across financial services, the modularity of design means that SMEs have the option to pay only for the services required or based on the volume of their activity.

For many companies, the accelerated demand for digital technology solutions has been a boon to their business, albeit under difficult circumstances. Companies have had to move more quickly than expected without all the necessary capital and human resources in place. Cloud environments coupled with automated deployments and updates have considerably streamlined internal operational processes.

SaaS versatility across financial services

SaaS has permanently reshaped the way companies use technology. As the digital transformation continues to accelerate, SaaS will be one of the most significant engines of productivity and innovation across financial services. Trading from anywhere, anytime is now a reality for several banks; a practice that was unimaginable a few years ago. Several major banks including UBS, JP Morgan and Barclays now use SaaS for their own trading activities, and likewise, Société Générale is proposing a new treasury solution for their corporate clients.

This surging SaaS market has given organisations plenty of options and a lot of leverage, with many providers anticipating a rapid evolution of the SaaS model — companies will demand even greater flexibility and modularity, along with technical versatility and increased functionality. While SaaS has emerged as the dominant model for digital productivity and trading communication tools, the market is becoming increasingly competitive. The innovations this competition produces will be the story for SaaS in 2022 and beyond.