Cash usage has plummeted globally as consumers and businesses turn to more efficient and user-friendly solutions to pay everyday expenses and transfer money. Thus, payments-as-a-service (PaaS) programs have emerged in recent years to meet the growing payment demands of fintech and non-fintech enterprises.
The model allows access to the latest technology, services, and program management with minimal overhead and investment. The ability to use this offering to boost the payment experience of their customers is available to banks, PSPs, and any company.
The Surge of Payments-as-a-Service
Providers of PaaS have developed comprehensive, end-to-end solutions that handle both tech and operations – all through a cloud-based system. With more capacity and resources, companies can now focus on their user experience, marketing, and expanding client base.
The following solutions can be tailored for fintechs and non-fintechs such as neobanks, as a white-label offering or directly integrated for any bank:
- Small / Mid-sized Credit Unions and Regional banks: These organizations lack the resources to build their own payment systems. Yet, it is still important to stay current with payment options, but using a PaaS reduces the resource requirements and upfront investment.
- Large national banks: Creating in-house payment infrastructure is more likely with larger institutions, though adapting it to their legacy banking core is equally challenging. A similar amount of work would go into developing something from scratch based on a PaaS platform. Using API connectivity, these builds can target specific functions and payment options, which eases implementation concerns.
- Fintechs and Neobanks: Known for their partnerships with agile tech providers, these types of startups are among the earliest to adopt PaaS. As capital is limited, it is best to focus on low (total) cost solutions whilst the critical need for plug-and-play APIs with compliance oversight is to provide plug-and-play APIs with developer-friendliness.
For all companies interested in modern payment systems, especially banks and FinTechs, Payment-as-a-Service platforms deliver compelling benefits. Here’s how:
- Faster implementation: Using PaaS’ built-in infrastructure, enterprises can sign up for and integrate compliant, full-service programs rapidly through a single integration. A shorter go-to-market process also reduces setup costs that result from a long implementation period.
- Reduced overall cost of ownership: As grouping most of the requirements of a payments solution under one provider can reduce costs for businesses, companies no longer need to outsource security, risk management, or engineering. Besides, incorporating multiple vendors into a single solution may appear economical on paper, the added staffing to manage the various relationships proves quite expensive.
- Flexible pricing: Depending on the product, transaction volumes, and company size, PaaS providers can adjust pricing structures. For low-volume, pay-as-you-go models may also be used instead of a monthly fixed fee or a transaction-based fee.
- Upgraded features/services: A modular platform allows payment-as-a-service platforms to easily add the latest transfer methods such as blockchain or real-time payments. If an organization has already constructed most of its payment architecture, then it may be prudent to maintain its proprietary systems. This choice can also translate to higher profits and margins on payment volume, especially as the number of transactions and users increase. However, with PaaS solutions, there are no maintenance or upgrade costs, which is quite the challenge.
With new functionality readily available, PaaS providers can add new features to their products efficiently. Banks with legacy processors can also leverage these partners to update their infrastructure such that it can be hybrid cloud-based and API accessible and be able to better address inquiries from third parties. During the development of new regulations, PaaS also provides guidance on how to meet standards such as PSD2.