The payments industry has seen a dramatic transformation over the last few years. Be it different modes of payment transactions or a constantly evolving payment services ecosystem or new payments technologies, the industry is being compelled to change to accommodate the evolving needs of the customer and their expectations.
As these changes take root, we may be on the cusp of a significant change of business models too. The payments industry today may be ripe for the as-a-service makeover.
The Payments-as-a-Service model has risen into prominence owing to the digital disruption in the payments ecosystem driven by demands of faster money transfer methods. As consumer sentiment begins to favor cashless modes of transaction, they now demand secure digital transaction processing systems.
Looking at the Payments-as-a-Service model also begins to make sense since the global economy has become irrefutably and inextricably connected. Complex compliance demands and changing customer behavior coupled with increasing instances of fraud are compelling business owners to relook at their payments infrastructure and make it more airtight and safer.
With the Payments-as-a-Service solution, businesses can easily integrate payments across channels and provide a frictionless and secure payment experience.
What is Payments-as-a-Service?
Much like Software-as-a-Service, the Payments-as-a-Service is a cloud-based platform-led approach that allows organizations to widen their service offerings to their customers using a single channel. Payments-as-a-Service allows organizations to keep up with payment modernization trends and address customer demands conveniently and without investing their resources.
Payments-as-a-Service moves cash, credit cards, e-wallets, and other payments to cloud-based third-party platforms and allows B2B and B2C organizations to accept payments globally using different methods and channels.
This model eliminates the need to invest in infrastructure and removes technical challenges and licensing issues away from the banks, merchants, and financial institutions leaving them with more time to focus on client and market innovation.
Why do we need to look at Payments-as-a-Service now?
While every business revolves around payments, fundamentally payments are not the core responsibility of any business. This means that while most organizations are forced to make the required investments into the payments side, they might not have the desired modern IT system expertise to deploy payment technologies quickly and inexpensively.
Digital disruption is exploding across businesses and enterprises, but legacy IT systems act as barriers towards delivering elevated payment experiences and processing higher volumes of transactions faster and securely. These old systems come with prohibitively high maintenance costs, security loopholes, and aging infrastructure.
With Payments-as-a-Service, organizations get the flexibility to expand to new markets, reach a wider base of customers, meet customer expectations, and manage high-volume transactions easily.
Powering growth potential
Global commerce is exploding. The regulatory landscape is also changing rapidly. That being so, powering growth potential demands greater flexibility and agility. Organizations need avenues to make off cross-border payments easy to reach global markets and enter new markets faster, more conveniently, and efficiently.
Payments-as-a-Service enables this and allows businesses to target new markets and customers while managing the regulatory boundaries. It gives businesses the capacity to grow their payments offerings and allows the business to scale without worrying about infrastructure costs or building their own infrastructure. These platforms also offer innovative pricing models that could deliver lower processing fees.
Payments-as-a-Service also allows easier integration with external accounting and management software. This ensures seamless and friction-free payment experiences. At the same time, the ease of data integration makes it easier to improve the speed to market new products, while also providing improvement opportunities for supply chain, inventory, and product management
The burden of regulations and compliance also shifts to the PaaS platform as a third-party service provider. Businesses can focus on the other aspects of their business and not have to bother about the checks and balances of the regulatory minefield.
Crossing the security chasm
Security is one of the topmost customer concerns when using internet-based payments. Ensuring compliance with Payment Card Industry Data Security Standard (PCI DSS) and maintaining complete data security have dominated discussions regarding payment systems.
Given that cloud-based systems are now more mature and secure, the Payments-as-a-Service model brings enhanced security to the business as compliance with PCI DSS is mandatory. Achieving this compliance also is harder for businesses to achieve on their own since it requires expertise and resources. All these challenges are mitigated by the Payments-as-a-Service model thereby addressing a key customer concern.
Ease of user management to drive personalization
People expect personalization everywhere, including, increasingly, in their payments experience. However, companies are still battling the challenge of managing multiple databases and log-ins. With the Payments-as-a-Service model, organizations can view users across all applications from one central location. Single sign-on improves the customer experience, increases security while reducing IT costs.
With better user management and a 360-degree view of the customer, organizations can offer greater personalization and identify opportunities to deliver exceptional customer experience.
Organizations must continuously work towards improving customer experience in the age of the “digital customer”. The factors listed above all contribute to the customer experience by improving the customer journey. By moving to the Payments-as-a-Service model businesses add more agility to the payment experience without compromising on security and compliance. There is really no wonder why this market is on an upward trend ready to grow from USD 5.7 billion in 2019 to USD 16.7 billion by 2024. We could be standing at the start of what could become the next wave of payments innovation.