Looking back at our lives 10 years ago, we will be surprised at how much our world has developed. We thrive from doing things manually to having things done automatically. We thrive from waiting hours at a place to finishing the transaction just within 1 click. The world has been changing at a flashing pace. Following the world trend in technology, a lot of SaaS and Fintech enterprises have been born and even increased astoundingly during the Covid-19 pandemic. The number of SaaS and Fintech companies is also expected to rise even after the pandemic.
Since both types of business are leading trends in the market, in this writing, we would like to introduce to you the relationship between SaaS (Software as a Service) and Fintech.
1. SaaS services
Together with the development of technology, SaaS (Software as a Service) becomes a trend and gradually replaces the existence of traditional SaaP (Software as a Product) due to its convenience, flexibility, fast implementation, and cost-saving benefit.
SaaS allows businesses to access a particular service remotely through a web browser, using the internet connection. With SaaS, after implementing the application, companies just need to pay a certain amount to “hire” the service from the provider. They do not have to invest in setting up a server and other maintenance tasks afterward. Each amount of fees paid indicates a certain number of functions that can be performed. By this form of service, business owners can adjust which service plans are best suited for them, hence they can cut unnecessary maintenance costs.
With its certain benefits, SaaS is favored among big companies, as well as start-ups and entrepreneurs. By applying SaaS, companies can spend more time on how to increase their revenue, or how to improve their operating efficiency, instead of focusing on handling, upgrading, and maintaining the system.
Moreover, nowadays, SaaS services are specialized and can be applied to different departments in a company such as HR, Operations, Finance & Accounting, Sales & Marketing, Customer Service, and so on.
Let’s take the following as an example. Shoeboxed is a SaaS company that specializes in managing receipts for not only individuals but also businesses (both small-size and big-size). All of the data on the receipts are scanned and stored in the system in both picture and data format. Users then can keep track of the payment history by exporting the file later. The receipt managing task can contribute a big help for the Accounting department in tax preparation, as well as the reimbursement procedure. Besides, since all the receipts data are well organized, it is easier for the Operations Team to consider which tasks need cutting off, or it is useful for the Sales and Marketing Team to sit back and examine which marketing strategies are worth investing in.
2. Fintech and its growing trend
We believe that many of us have heard about the word ‘Fintech’ a lot of times. It even becomes a famous term and topic especially among people in the IT sector. However, according to Statista, 67% of the US population said that they had not heard about Fintech, while 21% have heard the word somewhere, and only 16% have heard and understood clearly the meaning of it. Despite those low numbers, the industry is still growing fast. So what is Fintech and why do people talk about it?
‘Fintech’ is a short form of Financial Technology. Fintech is a recently-created term that describes the new trend in the Financial and Banking area that “employs new technologies to improve or innovate financial service”, according to the World Bank. The word can be applied to all companies that use the internet, cell phones, cloud computing technology, and other open-source software to advance the efficiency of the Banking and Investment business.
Companies of Fintech can be divided into 2 groups:
- The first group is companies that focus on the end-users. Their main businesses are to provide digital tools that help improve the customer experience in borrowing, money managing, and start-up funding.
- The second group is companies that play the “back office” roles in supporting other financial institutions.
So, is the e-wallet function on the mobile application of a banking institution called fintech? Unfortunately, the answer is no. It is just called an application of IT in the banking area.
However, for example, if Shoeboxed develops and applies a new data security technology to the e-wallet application of a banking institution, to provide convenience and safety to the customers, yes it is fintech.
Fintech is now providing services in different areas such as banking technology, payment, financial management, cryptocurrency, … with diverse services including
- Digital wallet (or e-wallet) – “a software-based system that securely stores users’ payment information and passwords for numerous payment methods and websites” (Example: PayPal).
- Distributed ledger technology on a blockchain platform. A distributed ledger is a database that is distributed to more than one computer or node. Each node maintains a ledger and the ledger will be updated if there are any changes in data. A blockchain is a type of distributed ledger where every node has its copies of the ledger. When data changes happen, all the copies of the ledger will be updated. (Example: Bitcoin).
- B2C e-commerce – online transactions between businesses and customers.
- mPOS – known as mPOS, a portable point of sale of a smartphone or tablet that acts as a register. The service is widely used for businesses such as food trucks, convenience stores, supermarkets, etc. that allows the customers to complete payment transactions just within a touch.
Besides some examples of Fintech products listed above, there are still a lot of services that might be a bit less popular such as:
- Peer-to-peer lending (abbreviated as P2P lending) – a website that allows users to borrow and lend money directly. The P2P lending website helps to connect the borrowers directly to investors. In exchange for that, they control the transaction by setting the fee, interest rate, and other terms of conditions.
- Crowdfunding – a platform that allows start-ups to sell some of their future products to potential investors. If start-ups can fund enough money, they can start their project right away and vice versa, if the amount of money funded is not enough, start-ups will return them to investors.
- Personal finance – a different branch of P2P lending that collaborates with banks to give end-users insights and advice about their bankings.
- Data management
- Insurtech and so on
It is undeniable that Fintech has been encouraging a trend of entrepreneurship in the Financial and Banking, the industries that are famous for their requirement of huge capital when joining the game. Thanks to this trend, there is a wide range of services available in the market, yet going along with the difficulties in management.
However, if wisely used, Fintech can bring several benefits such as:
- Improving customer satisfaction since the customers save time when completing a transaction
- Analyzing customer behavior easier than before with reliable recorded data
- Saving operating costs for business owners
- Setting limits on manual inaccuracies
Following the Industrial Evolution 4.0, and now is 5.0, a lot of traditional financial institutions are changing their ways of approaching more customers by collaborating with Fintech companies. According to PwC, 82% of traditional financial institutions plan to increase collaboration with Fintech in 3 – 5 years to avoid losing revenue.
With the explanation of SaaS and Fintech mentioned above, can we say Fintech is a type of SaaS? Or should Fintech be positioned as SaaS? Well, IT DEPENDS. We say “it depends” because both have a lot of similarities in the purposes, the ecosystems, the applications, and so on. Therefore, it depends on the ultimate goals of the companies and how they operate their business.
As you can see that Fintech companies provide a wide range of services but mainly in the Finance area, while SaaS services are broadly provided in different areas. Though, since there are so many services available nowadays, and surely will increase in the future, that may confuse the users of what to choose, SaaS, Fintech, and other traditional business platforms can consider collaborating to introduce better and compact services. Despite their similarities yet differences, they are offering great values not only to the world economy but also to the development of technology.