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SaaS is a new trend in the market. Legacy technology applications are being replaced by API-first, cloud-first SaaS-based applications. For many small lenders, using SaaS-based lending systems is making their lives easier.
Software-as-a-Service (SaaS): Definition and Examples
SaaS (Software as a Service) is a model where the users pay per usage, instead of buying it outright. In the case of traditional software, users bought, installed, and maintained the software themselves. They also had to buy and maintain the servers on which the software was installed. They had to depend on the technical support team to install and maintain the software and the servers. This was not only very expensive but also very complicated.
SaaS has changed all this. Organizations don't need to buy software, employ IT staff, or maintain servers. They can use the software and pay for the subscription fees on a monthly or yearly basis. Vendors upgrade and maintain it, while users can focus only on utilizing the software to benefit their business. It's a cloud-based service that saves the organization’s efforts and costs associated with the maintenance, installation, and upgradation of the software. It can be deployed and made accessible over mobile and laptops too.
SaaS platforms can be B2C (Business to consumer) or B2B (Business to business). B2C is used by end consumers, whereas B2B products are used by businesses. Some examples of SaaS platforms from day-to-day life could be social platforms like LinkedIn, Facebook, Google workspace, Zoom, etc.
What's In It for You?
Feature richness
SaaS-based software is used by numerous lenders. The product becomes very rich if everybody’s requirements have been taken care of.
Moreover, a configurable platform will be able to accommodate the requirements of multiple loan products too. Thus, it will be built considering scenarios of various loan products (Housing, Gold, Vehicle loan, etc.,) with super-rich functionalities and features such as scalability and configurability.
Better User Experience
Because a large number of users use SaaS products, they will tend to become easy to use, and hence less training will be required for the users.
Multi-Tenancy
SaaS-based software should ideally have a multi-tenant architecture, and so it can accommodate multiple users and user organizations in the same server instance. Each customer is like a tenant and various tenants will be renting the software at the same time.
This reduces the cost of ownership, by reducing the cost of server hosting.
Data security: A Challenge for SaaS applications
SaaS is becoming popular in the market but data security is seen by many as a major concern.
As many users use it, some may not have the right intentions and may try to hack. Hence, SaaS-based systems need to take extra care of security. Once they do it, the system becomes super safe.
Large banks will hesitate to go for SaaS-based systems because they will be concerned about the control over security. However, this can be debatable because, with large usage, SaaS can also become better on the security front.
How does Lending software as a Service becomes cost-effective?
For small lenders, rather than spending on buying LOS, LMS, Collection, and software, switching to a cloud-based SaaS system could be a good business strategy. If we assume a case where the lender has a capital of ₹10 CR to invest, he will have to spend ₹1 CR on the outright software purchase. The amount of ₹ 1CR will be spent on software in the beginning, and the same will be used for approx 4-5 years. But, if lenders choose a SaaS-based software system then the cost can be around ₹ 20 lakhs for the first year. As a result, ₹80 lakhs will be saved, and the lender can lend this saved amount and can earn interest income from it.
Unlike SaaS, outright lending software costs more money. Expenses in software upgrading, maintenance, and hiring IT for technical issues like bug resolution, installation, support, quality analysis, etc., add extra costs to the product. Customization efforts and charges will also be required, whereas this will not be required in SaaS system usage.
As the business expands and the number of users grows, the per-user pricing system may look expensive to some. Due to the increase in cost with size, large and growing lenders may consider switching to in-prem software. They may also be able to afford the costs associated with hiring IT, and maintenance of software and servers. SaaS product owners may have to think about offering an in-prem installation in such cases. If this happens, it will be great for the buyers, because they will get all the advantages of SaaS software, without the disadvantages related to costs at high numbers of users.
The digital transformation from traditional non-SaaS to SaaS
Lenders grow their business gradually by launching different loan products (Housing, Gold, Vehicle loan, etc.,). Functionalities of the lending software vary according to the loan products, hence configurability plays a key role. If a lender having SaaS-based software wants to make changes in the processes then they can achieve this quickly if the software is configurable. Many SaaS players in the market do not support configurability. It will be good if SaaS applications offer configurability and customizability.
The future of SaaS
As evolution is the rule of nature, there will be a shift from legacy systems to modern systems. As a result, many lenders will move towards SaaS-based software. Using a SaaS-based lending system overcomes the difficulties of installing, maintaining, and upgrading software.
B2C has shifted to SaaS earlier, whereas B2B has started moving towards SaaS now. The obstacle that can wreak havoc on the performance of the SaaS is internet connectivity. Therefore, the upcoming 5G network will be a booster for SaaS technology. Cloud infrastructure is becoming better with time therefore, the saas will grow even more.
Synoriq Filling the Void in SaaS lending.
The SaaS-based LMS players in the market are fewer. At SynoFin, a product by Synoriq, we have built a super-rich SaaS-based LMS, which is also highly configurable.
To know more visit: https://www.synofin.tech/