Vertical FinSaaS – A road to success for SaaS companies
Apple launching its credit cards, Uber and Lyft using their drivers as a medium for bank-like transactions, Shopify earning more than 40% of its revenue from financial services prove and validates that every company will be a fintech company in the future. A B2B business model called Vertical FinSaaS opens the road wide open to reach this destination.
But before understanding Vertical FinSaaS, let us go through a brief history of SaaS and the different business models it follows driving the massive growth in the industry.
SaaS business models are old enough to bring a new revolution. Microsoft Office, Slack, or quickbooks are a few of the classic examples that explain show long SaaS business model is prominent in the market. SaaS in simple language means a set of software solutions designed for different use cases for an enterprise to manage its operations smoothly. This bundle of services is packaged and is sold on a subscription basis. The SaaS industry knows no stop and is forecasted to grow and be worth $60.39 billion with a CAGR of 9% between 2019 and 2023. SaaS products have till now mainly catered to solve certain general problems for various industries. Such a line of business is known as horizontal SaaS. Horizontal SaaS is not industry specific and is easy to use and maintain, it caters to a broad audience and takes time to match
industry trends. Such problems have given birth to a new business model under SaaS infrastructure known as a vertical SaaS. A vertical SaaS is designed in such a way that it serves to solve end-to-end problems of a specific industry. It is developed by industry experts within the niche which makes it more solution-rich software. Earlier and even today horizontal SaaS models resell or upsell certain services to their core clientele base, but with vertical SaaS, an era of revolution will rise in the market.
What’s Vertical FinSaaS
Every industry needs financial services and they generally go to their existing SaaS facilitators to solve this problem. This enables and helps horizontal SaaS services to grow their revenue by reselling fintech services to their core userbase. This business model was not that fruitful which brought vertical FinSaaS into the picture.
FinSaaS products are designed to take care of industry-specific rules, regulations, and styles of working which makes them more efficient. A vertical FinSaaS makes it possible to integrate and get embedded in the existing vertical SaaS catering to a niche. A FinSaaS comes with an integrated all-around solution in the financial services industry ranging from payments, loans, insurances to taxes and compliances, payrolls, and customized spending cards designed for internal or external usage.
Benefits of Vertical FinSaaS
- Reduced CAC
When a company is a one-stop solution for a clients’ needs, it is easy for them to up-sell or cross-sell to the existing client base. As the same client is catered to, there is an automatic growth in the revenue and even if there is no fall in the CAC, it ensures to be the same. - Improved Product Stickiness
Businesses find it viable to have a single vendor providing all the services instead of multiple vendors catering to smaller needs. It is cumbersome for them to manage different vendors and makes the operations complex. So, when a SaaS also has all the fintech services embedded in its software, it is easy and feasible to manage business seamlessly which improves product stickiness and brings repeated revenue to the company. - Market Leadership
As a vertical SaaS offers its services to a particular need, it is easier to capture the market and be a market leader in the industry. With the added advantage of embedding fintech services, it becomes a step easier for the companies to pave the way for being on the top in the industry.
Vertical FinSaaS – beyond payments
The fintech industry is more than just payments, it includes loans, insurances, cards, investments, and much more. Though payment is the most traditional system in fintech, companies are now asking for various services like loans to their employees, corporate insurances, and commercial card transaction system for their internal usage. FinSaaS are wired in such a way that makes it easy to embed and bring growth to the existing vertical.
Vertical FinSaaS – A profit-making machine
Bringing in the business via referral means just limits the revenue of the company to a flat fee and some additional benefits. While being a facilitator brings a bouquet of services opening multiple income stream opportunities increasing the revenue marginally. A client would trust more on its existing service provider rather than when diverted to a third-party unknown website. Thus, bringing trust, integrity, and stickiness to the product building a strong market presence, and cashing the revenue.
The Future
FinSaaS is a promising industry to jump in as it brings a plethora of benefits to the customers in turn bringing more clients and ramping up the business expansion. The only challenge in the space is following and adhering to regulatory compliances, which can also be solved by being a facilitator to the existing verticals in the market. Fintech and vertical SaaS are two promising models in their industry and when integrated it multiplies the power of both the industries that makes it stronger, scalable, and profitable.
