Payments as a Service, Ready for Prime Time?
These days, with the emergence of the cloud, open banking and application programming interfaces (APIs, the moniker “as-a-Service” applies to pretty much any business function that is now able to be outsourced to a third party.
That includes Payments-as-a-Service (PaaS) in which providers help enterprises accept a range of transactions from their end customers — whether those end users (the ones actually paying and getting paid) are consumers or corporates. The advantages of outsourcing the back-end integrations and compliance issues tied to, say, international markets can accrue swiftly to corporates’ bottom lines, free up resources and streamline back-end processes.
As PYMNTS has reported, consumer expectations and retail commerce have both evolved quickly to meet the demand that everything from credit to debit cards to digital wallets be on offer as payments choice.
Flexibility Is Key
That flexibility is especially useful in B2B transactions where entering new markets means that suppliers and buyers may transact across borders and across currencies, where everything from compliance to tax collection issues must be considered. There is also no shortage of faster payments schemes coming online or already online, and know your customer/anti-money laundering (KYC/AML) screening activities must be refined (especially when regulations change).
The procure to payment cycle has been dominated by paper, friction and the pressures of a pandemic that has disrupted the way commerce is done.
For banks, leveraging technology to help corporate clients embrace end customers’ payment preferences — thus making sure top lines are not lost due to clunky checkout processes or outright shopping cart abandonment — can cement additional financial institution (FI) revenue streams.
In an interview with PYMNTS, Deepak Gupta, global head of PaaS at Volante Technologies, said the cloud is a key component of building resiliency for both FIs and the enterprises that depend on them for payments functionality. Technology brings the concept of flexible payments into reality.
“You cannot have business resiliency without resilient technology,” Gupta said, adding that scalability is important as B2B volumes have been growing.
In order to serve those clients and scale payments functions as those enterprises themselves grow, tapping into providers who offer PaaS (or Payments Platforms-as-a-Service) can help those B2B payments get up and running, without the heavy technical lifting that would be required on in-house efforts.
“I’m seeing that over 80 percent of our prospects are showing a strong preference for Payments-as-a-Service,” he told PYMNTS of FIs, adding that “two or three years from now, 99 percent, if not 100 percent, of all customers will go the ‘cloud way’ and embrace Payments-as-a-Service.”
PaaS could be worth as much as $16.7 billion in 2024, PYMNTS reported in The FI’s Guide to Modernizing Digital Payments.
In another PYMNTS discussion, Sairam Rangachari, head of platform payments at Onyx by J.P. Morgan (Onyx is a new J.P. Morgan unit dedicated to blockchain, digital currency and wholesale corporate payments), said FIs need to offer those firms payments functionality on demand, which in turn means offering PaaS.
Rangachari noted the continued emergence of the seeing the “API economy” take shape, where banks want to plug new functionality into existing systems on both the front end and back end.
Separately, in a virtual roundtable discussion with Karen Webster, Vincent Caldeira, chief technologist, FSI, APAC at Red Hat, and Mick Fennell, head of payments at Temenos, said modernizing those functions, in part through PaaS can result in significant returns on investment.
Caldeira noted the timeframe to get new integrations and new process flows in place has been drastically shortened, and cloud native integrations can help FIs get the agility they need.