Payments as a Service (PaaS) simplifies an organization’s payment operations as the broader payments ecosystem gets more complex with the rise of payment modernization and the proliferation of digital payments.
For many organizations, traditional payment systems can’t keep up with the payment solution demands of their customers. However, trying to manage several payment solutions and include the latest services and options consumers have come to expect can be costly and challenging.
As a result, organizations turn to Payments as a Service to handle financial transactions and take advantage of the latest innovations from the payments ecosystem. If your organization is interested in learning more about Payments as a Service, this blog will cover everything you need to know.
What Is Payments as a Service (Paas)?
Payments as a Service, or PaaS, should not be confused with Platform as a Service, which also uses the acronym PaaS. For the purposes of this post, all instances of PaaS will refer to Payments as a Service.
Payments as a Service is a type of Software as a Service (SaaS) that connects payment services and systems. In addition, Payment as a Service refers to the outsourcing of high-level payment management tasks that would be traditionally performed in-house by financial institutions or payment processors.
The majority of PaaS providers offer users cloud-based platforms and open APIs to easily integrate whatever payment system or payment platforms they use. Typically, PaaS providers offer the following payment services:
- Payment gateways
- Clearing and settlement
- Disbursement
- Cross-border payments
- Card issuance
The rise of open banking has fueled the rapid growth of PaaS as financial institutions are now legally required to share more of their data with FinTech companies and other financial institutions to enable the development of advanced payment products and consumer services.
The Business Benefits of PaaS
PaaS providers offer significant benefits to payment service providers, banks, FinTech companies, and all companies across the entire payment value chain. The payments industry has quickly embraced PaaS for the following reasons:
- Cost reduction
- Improved fraud prevention
- Simplified compliance management
- Scalability and reliability
- Faster innovation
Cost Reduction
PaaS reduces operational costs for businesses, payment providers, and even financial institutions like banks since ownership responsibilities of the underlying hardware and software are covered by the PaaS provider.
For example, banks no longer have to employ an in-house team of IT specialists to handle the immense responsibility of managing and maintaining financial hardware and software systems. In addition to the cost of managing technology, PaaS also reduces the cost of optimizing existing technology and investing in new technologies.
Organizations no longer need to scale their staff to develop new products or features. With PaaS, businesses don’t have to invest resources in creating new experiences and convenient features.
On top of all of these cost savings, PaaS, like most cloud services, can be billed on a per-use basis. Transparent, fixed costs give organizations a clear picture of their costs and financial health.
Improved Fraud Prevention
Fraud is a serious problem in the digital payments industry. As new payment rails are developed, and traditional payments hubs are abandoned in favor of PaaS solutions, there is a rise in new types of fraud.
Trying to handle and mitigate new types of fraud on your own can be difficult for organizations with little experience in these types of fraud cases. PaaS providers enhance your organization’s fraud protection by implementing anti-fraud technologies earlier in the payment process.
Risk management is something that every organization should take seriously since the majority of fraud costs are borne by merchants. Don’t let your merchant account suffer due to preventable fraud.
Simplified Compliance Management
There are a ton of regulations surrounding payment processing designed to protect consumer privacy, provide greater choice to consumers, and prevent fraud and cybercrimes. Maintaining regulatory compliance with every jurisdiction is time-consuming and challenging.
PaaS simplifies regulatory compliance. In addition to legal regulations, big payment network companies have their own standards that must be met. PaaS providers handle the regulatory concerns for your organization so it can focus on delivering a quality customer experience.
Scalability and Reliability
PaaS is the most scalable payment solution since it is based on cloud computing technologies. Cloud platforms typically auto-scale to meet user demand. In addition, this ensures that your service or website does not crash in times of heavy usage.
Cloud solutions have long been lauded for their scalability and reliability. As a result, cloud-based solutions have been successful everywhere, and in the last few years, thanks to PaaS, cloud technologies have transformed payment services.
In a highly connected and competitive business environment, your organization cannot afford to fall behind due to outages or service failures. PaaS is a great option because it scales on demand and is reliable.
Faster Innovation
PaaS enables organizations to access new technologies and innovations faster than traditional alternatives. In the past, to add new technologies and features to payment services, your organization would have to develop them on its own.
Now, thanks to PaaS, your business can access the latest payment innovations as they roll out without having to worry about how to integrate the latest payment rails or digital payment methods into your existing payment infrastructure.
In addition, adding or subtracting features or services is simple when your business partners with a PaaS provider.
Final Thoughts
Payments as a Service are changing the way financial institutions and businesses accept and process payments. PaaS solutions make operations simpler for organizations of all sizes across all industries.
If you’re unsure whether PaaS is the right option for your business, contact an experienced FinTech development partner like Koombea to learn more about how Payments as a Service can benefit your business.
