How Payment-as-a-Service Platforms Shape the Future of Online Payments

The payments industry is experiencing exceptional growth, but it is changing rapidly and becoming more complex. There are many factors that have led to the transformation of the payments sector.
COVID-19 has accelerated the growth of Pay as a Service. There are also new technologies like blockchain and artificial intelligence, new players, and global macroeconomic factors. The advent of large technology companies in the payments market and new antidotes to fintech technology have accelerated this change.
Given the complexity of regulatory requirements and ever-increasing customer expectations, PaaS seems to be a wise choice. Renting what you need instead of buying it or building it yourself can save time and money. However, if there is no clear plan, there will be “payment problems“.

Global market trends drive the adoption of PPaaS platforms

In recent years, interest rates on traditional banks’loans have declined and payment processing income has remained stable. This is actually one of the factors that pushed banks to develop and implement the Payment Platform as a Service (PPaaS) model. The other drivers are more general in nature, but play a small role in disrupting the entire industry.

Digitization

Today most banks are facing difficulties. On the one hand, their world is still mostly physical. The system consists of a multi-level infrastructure developed over time, which is currently increasing costs and complexity.
On the other hand, they have no choice but to innovate to meet their customers rapidly changing needs, thereby ensuring revenue and market share. However, the ability to transform its traditional infrastructure into a digital ecosystem is compromised by its complex legacy banking system.
Complete IT modernization requires high upfront costs and the traditional infrastructure that supports existing processes and the whole business must remain operational, which complicates the situation. These situations will only increase the adoption of payment platforms by increasing the number of ammunition, as this has three advantages:

● Reduce operating costs;
● Management, hosting and support of outsourcing software;
● Capital barriers to bank entry are reduced, because the bank invests only nominal funds, starts working and conducts transactions through the service.

All these factors allow financial institutions to initiate the digital transformation process and free up resources to cultivate future-oriented infrastructure to promote digitalization.

Regulation

The financial services sector has the highest compliance costs. Overall annual spending on regulations and compliance is around the US $ 270 billion and some industry experts say these figures could double in the near future. For many companies, this burden has led to a dramatic increase in the cost structure. When implementing a digital strategy, it can lead to a reduction in
traditional resources and a heavy burden on business models and expansion becomes difficult. In contrast, banks that choose future payment solutions like PaaS rely on lower acquisition costs and better business agility to survive. Once the integrated payment platform is available, the supplier will make the necessary regulatory updates so that costs can be reduced by assigning costs to many consumers.
Now let’s define the payment platform and the basic operating concepts.

Payment platforms are shaping the future of payment processing

Payment is not the direct responsibility of most e-commerce platforms, travel agencies or on-demand markets and will not be in the near future. Likewise, as mentioned above, mature financial institutions still have a long way to go before entering a fully digital world. Therefore, payment platform providers will remain a key factor in non-banking activities. But who are they and how do they work? -We first define a service payment platform and how it will become one of the main payment technologies in the future.
Payment Platform as a Service or PPaaS is a cloud environment, it is not an all-inclusive solution consisting of limited customization options, but it is composed of many individual payment services that can be personalized and delivered to end-users, thus significantly reducing the plan quantity.
Internal management was a time-consuming and costly process but has now become an external service created and managed by the supplier.

The PaaS companies attracting FINTECH Institutions for payment
transactions

Modern payment platforms as a service should not be confused with common payment service products. The first represents the next generation of future-proof solutions — a comprehensive environment in which financial service providers can use a subscription/payment model to access all the steps they need to process payments safely and quickly.
There are many examples of Paas companies that are widely used such as PayScanner, Arival, and Module. At the same time, large financial institutions are investing heavily in the development of full-stack platforms to use the SaaS model.

How to start payment platforms as a service: advantages and implications to consider

Payments and financial technology innovations have never been more exciting. We are currently seeing future-oriented startups entering the market, revolutionary payment methods will be available on the Internet and new regulations will stop normal commercial operations. Financial institutions are gradually moving to outsourcing platforms to cope with and take full advantage of them, including:

● More efficient budgeting: The availability of pricing models increases flexibility and efficiency for companies of different sizes. Start-ups with fewer customers can choose a pay- per-use model, thus freeing up limited resources for innovation. Large companies can choose better predictability and transparency for their subscriptions.
● Higher STP rate: After implementation, direct management usually becomes a problem for most financial companies. The main point is the integration of all systems and the guarantee of uninterrupted data transmission. At the same time, digital payment platforms can simplify
problems and reduce manual coordination and maintenance work.
● Reduce processing costs: Eliminating the need to own and retain hardware and software and hiring and retaining technical teams can save a lot of time and money.
● Better reliability and scalability: The cloud-based global payment platform is designed to operate efficiently during busy hours and stagnation periods, responding perfectly to operational changes and 24/7 system availability.
● Compliance is faster: Compliance with many local and global standards is critical, but it takes time and money. Payment platform providers bear the technical burden of regulatory updates, allowing you to focus on business needs.

Conclusion

In summary, it is not surprising that financial institutions around the world have started to examine payment platforms that provide services. More and more early adopters are entering the future of fintech payments and are actively making money. If you have further questions about payment solutions as a service or need help developing a platform or integration, you can contact our experts to find out how we can help your business succeed.