In today’s dynamic business landscape, Fintech software companies are constantly seeking to differentiate themselves and ways to forge lasting relationships with their clients. Trust is a critical component in any vendor-client relationship and it is difficult to build pre-sale with a potential new customer. Financial Institutional clients are looking for assurances to feel secure, knowing that their company, business unit or job are not on the line if a new supplier they have chosen to work with fails. Safeguarding their investments in their new technology and their partnerships is crucial. Hence many enterprises have stringent onboarding and due- questions for their supply chain. Often requiring compelling and detailed evidence that their software partners have robust mechanisms in place to protect their interests. These questionnaires usually cover a variety of areas such as size, locations, financials, longevity, credentials, case studies or references, security practices and disaster recovery plans. How many times have you seen a questionnaire that seems to go on forever and take considerable time to complete and even then, you may not win the deal.
Meeting requirements not only facilitates a smoother sales process but also accelerates it, which is crucial where speed to market can make a significant difference not only to the vendor’s revenue but also to the success of the project itself. Software escrow arrangements help software companies address pressing questions during client due diligence and supplier onboarding reviews. These arrangements provide the necessary assurances that clients demand, eliminating the need for alternative provisions. They are particularly important in situations where there is an imbalance of negotiating power, often found when scale-up vendors are selling to enterprise customers, ensuring that both parties’ interests are protected.
An effective way to achieve this is through the implementation of software escrow provisions, which significantly assist in closing deals and establishing trust. Software escrow or SaaS escrow services essentially act as a safety net for the client or end-user, assuring them that the software as well as client data will remain available or recoverable, no matter what happens across their supply chain. This assurance becomes a vital selling point, especially for clients cautious of unforeseen risks that might disrupt their operations when working with a new vendor, technology or go-to-market solution. Software escrow services are pivotal in protecting against specific risks around supplier failure such as insolvency, bankruptcy or sale of the company which could provide significant risk to a client outside of their control. Where critical digital assets such as source code, deployment scripts, data or even the production cloud account credentials can be utilised under certain agreed conditions.
Standout
In a competitive market, the reassurance provided through software escrow services is a powerful differentiator for many startups or scale up fintech companies. For many potential software buyers, the decision to invest in a software solution hinges on the reliability and availability of service. The client has no control over your finances, funding or market performance. As a software vendor, offering certain guarantees through software escrow agreements, is not just a strategic advantage, it’s becoming an essential requirement to compete effectively and meet discerning customers’ evolving needs to minimise their risk. No matter the size of your software company, if you can provide these assurances , this will stand you in good stead to win deals with more and larger customers who care deeply about continuity of service and their business reputation.
Regulations
For software vendors selling into highly regulated sectors like financial services, this isn’t just a strong desire but a must for their customers to onboard critical vendors. Layers of assurances are often mandated by regulations for different countries, such as:
EU:
In the EU, the Digital Operational Resilience Act (DORA) is a regulatory framework designed to ensure the operational resilience of the digital sector within the European Union (EU). It aims to establish a harmonized approach to address the potential risks and challenges associated with digital services, including cybersecurity threats, incidents, and disruptions. The regulations introduced by DORA apply to a wide range of digital service providers, including cloud services, online marketplaces, and search engines, operating within the EU region. Compliance with DORA requires these entities to implement robust risk management practices, maintain effective cybersecurity measures, and establish incident reporting mechanisms to ensure the continuity and security of their services.
UK:
The Prudential Regulation Authority (PRA) SS2/21 & PS7/21 is a regulatory framework issued by the Prudential Regulation Authority in the United Kingdom. It sets out requirements for companies to have robust continuity measures in place for services that are designated under outsourcing. This framework aims to ensure effective third-party risk management and enhance the resilience of the financial sector in the face of potential disruptions.
The PRA SS2/21 & PS7/21 framework applies to companies operating within the United Kingdom’s financial sector. It is designed to ensure that these companies have appropriate arrangements in place to manage the risks associated with outsourcing critical services to third parties. Compliance with this framework is crucial for maintaining the stability and continuity of financial services provided by these companies.
Australia:
In July 2025, the Australian Prudential Regulation Authority (APRA) finalized the CPS230 standard, marking a significant milestone in enhancing the resilience of entities against operational risks and disruptions. The CPS230 standard aims to ensure that financial institutions and entities operating in Australia have robust frameworks in place to identify, manage, and mitigate operational risks effectively. By implementing this standard, financial institutions can strengthen their ability to withstand potential threats and maintain uninterrupted operations, safeguarding the interests of their customers and stakeholders.
Canada:
The Office of the Superintendent of Financial Institutions (OSFI) in Canada has outlined its expectations for financial institutions in managing the risks associated with third-party arrangements. These expectations encompass various aspects of risk management, including governance, due diligence, contract negotiations, ongoing monitoring, and contingency planning.
One specific area of focus highlighted by OSFI is the risk of supplier insolvency. In May 2024, OSFI will be introducing new guidelines and requirements to address this particular risk. Financial institutions will be expected to establish robust processes and safeguards to mitigate the potential impact of supplier insolvency on their operations and the services provided to their customers.
It is crucial for financial institutions to proactively assess and manage the risks associated with third-party arrangements in order to ensure the safety and soundness of their operations. By adhering to OSFI’s expectations and implementing effective risk management practices, financial institutions can enhance their resilience and maintain the trust of their stakeholders in an ever-evolving business landscape.
USA:
The financial landscape in the United States is governed by various regulatory bodies and systems that play a crucial role in ensuring stability and protecting the interests of consumers and institutions. Let’s explore some key entities and their functions:
- FFIEC (Federal Financial Institutions Examination Council): The FFIEC is a formal interagency body comprising five regulatory agencies, including the Federal Reserve, FDIC, OCC, NCUA, and CFPB. It develops uniform principles, standards, and reporting forms to promote consistent supervision of financial institutions.
- FDIC (Federal Deposit Insurance Corporation): The FDIC is an independent agency that provides deposit insurance to depositors in American banks and savings associations. It promotes stability and public confidence in the nation’s financial system by insuring deposits, supervising financial institutions, and managing receivership.
- OCC (Office of the Comptroller of the Currency): As part of the U.S. Department of the Treasury, the OCC supervises and regulates national banks and federal savings associations. It ensures these institutions operate in a safe and sound manner, treat customers fairly, and comply with applicable laws and regulations.
- Federal Reserve Banking System: The Federal Reserve, often referred to as the “Fed,” is the central banking system of the United States. It conducts monetary policy, supervises and regulates banks, promotes financial system stability, and provides services to banks and the U.S. government.
- FINRA (Financial Industry Regulatory Authority): FINRA is a non-governmental organization that regulates securities firms and professionals in the United States. Its mission is to protect investors and maintain market integrity by enforcing high ethical standards, educating investors, and facilitating fair and efficient capital markets.
Assessing and managing risks associated with third-party relationships is a critical aspect of maintaining a robust and secure financial system. Financial institutions are responsible for conducting due diligence, establishing risk management frameworks, and implementing controls to mitigate potential risks arising from their interactions with third-party service providers. These risks include cybersecurity vulnerabilities, data breaches, compliance issues, and financial risks. Supervisory bodies like the FFIEC and regulatory agencies provide guidance and oversight to ensure that financial institutions effectively identify, assess, and manage these risks to protect the interests of all stakeholders involved.
Incorporating software provisions assists customers meet needs for stressed exit planning, testing and operational resilience in instances of supplier failure or insolvency called out in these markets. Getting to grips with how software companies can help their customer’s meet regulatory demands, positions the software company as a responsible and forward-thinking partner the financial institution can trust and build a long term partnership with.
Protect IP / Commonly used framework
Furthermore, software escrow services protect not only the client’s interests but also the intellectual property (IP) of the software company under a commonly used and easily deployed framework with the use of an intermediary software escrow agent. This can be implemented under single beneficiary agreements or multi beneficiary agreements allowing you to scale escrow commitments for your customers. By incorporating software escrow provisions into software licence agreements, companies can protect their IP while still collaborating effectively with their customers or partners. It provides a clear framework that outlines how IP will be managed and protected, enabling partnerships to thrive on mutual benefits and understanding. This safeguards critical assets without stifling innovation or damaging relationships, especially important when collaborating on joint projects.
Summary
Software escrow services play a multifaceted role in the software industry’s landscape. Enhancing sales processes by answering due diligence queries, fortifying trust through compliance with regulations, and protecting crucial IP assets. The assurance that software will remain available, regardless of challenges within the supply chain, is a compelling reason for clients to move forward with a purchase and continued use of the system. Thus, whether a software vendor is looking to streamline its sales processes, enhance trust, ensure they enable their customers to meet required governance and compliance, or protect its own IP, software escrow software services offer a robust solution. Embracing this approach empowers software vendors to not only enhance their value proposition but also build a solid, resilient foundation for sustainable growth in the digital age.
