Software-as-a-Service (SaaS) in the financial industry

We spoke to Mr. Martin Wallmann (DACH Managing Director of Clearwater Analytics) about Software-as-a-Service (SaaS) for financial service providers – including scalability and automation, strategic advantages through outsourcing, customer focus and the transformation of the market in the coming years .

Founded in 2004, Clearwater Analytics is a leading provider of SaaS solutions for automated aggregation, reconciliation, accounting and reporting of investment data. Martin Wallmann started as Managing Director for Germany, Austria and Switzerland with effect from July 1, 2021. His vision is part of the company’s growth strategy in continental Europe and now also in Germany. The Clearwater platform generates data and reports on customer assets valued at over $ 5.5 trillion on a daily basis.

The cost pressure in the area of ​​financial services is noticeable, scalability and automation are becoming more and more important. What role does Software-as-a-Service (SaaS) play on this path?

We see the increasing use of SaaS solutions as one of the main trends in the short to medium term future. The amount of data that companies have to manage is increasing inexorably, while at the same time ever more powerful technology enables ever increasing data complexity. This makes it increasingly difficult to ensure consistent data processing processes from the data source to the user as well as high data quality.

Users of SaaS solutions not only benefit from the fact that they receive an already “finished output”, but can also outsource those upstream processes that are required to produce these “outputs”. In this respect, SaaS solutions eliminate the need to maintain a corresponding infrastructure (e.g. server, software licenses and releases, IT and cyber security, etc.), as well as the necessary “manpower”. Ultimately, the need to ensure that the technology or system architecture is always up-to-date is shifting from the customer to the provider. At the same time, there are greater economies of scale for providers, as they offer their infrastructure to a large number of customers and as a result can show a significantly better “business case”, which in turn justifies continuous investments in their own technology infrastructure.

Take the insurance industry as an example – due to increasing demands on data management, combined with ever higher expectations on the part of customers and regulators, many insurers were faced with never-ending challenges. At the same time, however, these challenges also turned into opportunities – for all those houses that not only tried to meet the various new requirements, but also used them as an opportunity to question and optimize their entire business model, and thereby find themselves in the position enable them to publish financial information faster and in better quality.

Clearwater Analytics specializes in the automation of investment data. In your opinion, what makes this market segment so exciting?

To this day, the processing of investment data generates various “touchpoints” which, for internal and external process participants, extend across a wide variety of systems, which are still often fragmented today. This regularly leads to the problem that the corresponding investment data lose their data quality and integrity across the various necessary process steps.

Insurance companies and asset managers are therefore confronted with continuously increasing costs in order to ensure that the data sources used can be traced at all times, as well as unequivocal data quality. Both areas are of crucial importance for avoiding damage to the reputation of end customers and in the context of compliance with fiduciary duties and duties of care. In this context, Clearwater uses a single central data platform for all investment accounting processes. This platform in turn is based on a single, uniform data model, which is operated by a central team as a “managed service”.

In fact, we find it particularly exciting that we can offer our customers a precise and holistic view of their data management through our innovative technology (“Single Source of Truth”) and, as a result, enable the aggregation and forwarding of consistent follow-up data. This in turn considerably simplifies the administration of investment data for our customers, in this respect we make a lasting contribution to improving our customers’ processes in their day-to-day work. Work processes are becoming leaner, which, thanks to a higher degree of automation, leads to the elimination of manual work processes and, at the same time, to an upgrading of the employee profiles involved in the process.

In addition, we enable our clients’ decision-makers and risk managers to assess the risk profile of their investments and portfolios, e. B. in the case of financial market turbulence, to evaluate immediately and on the basis of completely correct data bases and thus to initiate the necessary measures to protect the underlying investments particularly quickly. This is simply not possible to this extent with traditional technological solutions.

Does this mean that SaaS also has a strategic component in the area of ​​investment data?

Yes, we absolutely believe there is a strategic component to using SaaS solutions in the area of ​​investment data for a number of reasons, some of which we have already mentioned.

Companies that use SaaS providers can concentrate fully on their core competencies without being distracted by the administration of software solutions and the associated infrastructure. Since a SaaS provider also operates a uniform solution for all customers on a central platform, new functionalities are automatically rolled out for all customers without delay. As a result, there is no longer any need to develop individual solutions for individual customers. In addition, SaaS solutions drive the development of standards with the inclusion of changing market requirements.

In addition, customers can very easily integrate SaaS applications into the “digital ecosystem” of their company using APIs (Application Programming Interfaces), which subsequently supports the further development of the “Internet of Things” (IoT). There are various other points that could be listed at this point, but the aforementioned aspects are certainly relevant for the majority of users of SaaS solutions. Depending on the individual application scenario of individual users, there will be other noteworthy points.

Keyword “transformation”: How do you think the market will change in the next few years?

The industry is currently going through a process of transformation. A number of providers offer cloud-based SaaS solutions which, on closer inspection, are actually based on “hosted” infrastructure and, in this respect, are more traditional “application service providers (ASP)” or “full service providers (FSP)”. Resemble models.

From the point of view of institutional investors, the insurance industry should be mentioned here again, and to cite a few concrete examples of market changes: IFRS 9 will come into force on January 1, 2023 and will change the industry significantly from January 1, 2022 in a direct comparison to the analogous period as well as have lasting effects on company-wide investment processes. In the future, too, changes like these will motivate companies to put their traditional structures to the test and to open their eyes to alternative options.

It can be assumed with a high degree of probability that precisely such provider reviews will lead to a form of reassessment of the options offered on the market – and then to the realization that different models initially resemble “real” SaaS infrastructures, but not in the case of closer examination Generate the same level of qualitative and economic advantages for customers. This can go so far that, due to their high costs, the corresponding offers completely lose their attractiveness for customers – and possibly even for their providers.

What role does customer centricity play in this?

There can be no doubt that customer centricity will play an absolutely key role in the success of any individual provider. But customer centricity is not an end in itself. Vendors who actually appear and act in a customer-centric manner are characterized by the fact that they make the problems of their customers their own problems and the offer of solutions to these problems at the core of their product development strategy.

To achieve this, providers in the financial services sector will need to develop a profound understanding of the challenges institutional investors – be they insurers, pension funds or corporates – are confronted with due to increasing requirements and / or outdated infrastructures. Often, different problems will arise at the same time and this will further increase the complexity of finding a solution. Providers then have to provide products that simplify the customer’s life again holistically, that is, across the range of problems – and at correspondingly lower costs. In the area of ​​asset management there are thematically very similar challenges to those on the investor side. Customers are faced with the problem of fragmented “operating models” that urgently need purification and automation in order to subsequently enable a better “client experience” for their own customers and thereby create a basis for greater customer loyalty and the acquisition of new business .

Any organization that puts its customers at the center of its considerations will therefore act in a customer-centric manner per se – and be able to record long-term customer relationships and sustainable growth.

Thank you very much for the interview!