According to Alexandre Maymat, head of GTPS at Société Générale, increased demand for faster and more efficient payments processing and the need for digital payments systems have led to the fostering of Payments-as-a-Service (PaaS). “PaaS platforms allow access to a wide range of payment rails from a single source and integrate with business ERPs. This combination has made it easier than ever for businesses to reduce costs, improve workloads, prevent fraud, and get a clearer insight into their payment process.

This is an excerpt from Future of Payments 2023.

“Businesses have understood that in-house payment applications appear unviable, due to the high costs of development and high standards of regulatory requirements. In addition, as banks have been perceived as costly, providing unreliable data, and sticking to paper-driven payment processes, PSPs have seized the opportunity to position themselves as alternative business partners.”

Maymat adds that “PSPs providing PaaS are facing challenges that make banks unavoidable partners to remain a relevant player in the market.” These four challenges are as below:
1. Regulatory compliance: increased complexity between local, federal, and international rules is an ongoing concern to providers expanding operations internationally, which banks are used to dealing with.

2. Security and fraud: onboarding users properly and monitoring activity for anomalies and suspicious transactions are both critical requirements part of the ‘bank as usual.’

3. Technology: fintech companies looking for equity face challenges in upgrading their payments stack to stay ahead of the competition. Banks have understood the need for increasing interoperability of their legacy infrastructure.

4. Cost: profitability is critical in payments, as investment to build a full payments stack (licensing, compliance, tech, and programme management) and keeping it up to date is too great.

It is evident that to enable the future of payments and keep pace with customer demand and requirements, banks and technology-savvy organisations need to collaborate to remedy these challenges and develop this PaaS approach.

In Cecabank’s view, payment processing has become a strategic component for the development of financial services, especially in an environment where payments are subject to constant changes and disruption. Traditional payment instruments and rails are subject to review, integration, and transformation.” Cecabank can act as a one-stop shop for payments, facilitating and processing various kinds of payments based on the evolution of the different infrastructures.

Exploring this further, Simon Eacott, head of payments, NatWest Group, adds: “Customers require high quality and accessible banking products such as payments, point-of-sale credit, and merchant cash advances that are end-to-end digital; PaaS is making this possible by enabling non-financial brands
to ‘embed’ services directly into their ecosystems to create seamless customer journeys that offer the next generation of financial services and experience.

“Additionally, PaaS can meet the evolving needs of business customers as they look to embed financial  products in their propositions and journeys. The transformation of retail banking technology means PSPs have 3 main strategic options i) develop PaaS in-house ii) purchase and integrate off the shelf PaaS solutions or iii) create strategic partnerships.”

But how can companies utilise PaaS to ensure it is utilised as a business opportunity, rather than a commodity? Firstly, payments processing must be considered of paramount importance to the e-commerce industry and how smoothly and securely payments are processed can enhance customer experience and in turn, increase consumer loyalty.

Customers also value flexibility and choice in their payment methods, for instance, contactless payments, which allow consumers to make payments without physical contact with a payment terminal. Automated billing that can be made available with subscription-based payments can also help to reduce administrative burdens and improve cash flows for organisations, and, of course, the customers.

Biometrics authentication is also becoming increasingly popular with the likes of Apple Pay taking off, also providing individuals with a contactless payment method, but with this, offering enhancing security and convenience, more so than traditional passwords and PIN numbers. In attempts to enhance security, some providers are also looking to AI to improve risk management and fraud detection by analysing large amounts of data to detect patterns and mitigate problems immediately.

However, for PaaS providers to deliver on these enhanced e-commerce gateways and leverage AI, they must operate on cloud-based platforms to efficiently offer personalised products to consumers.