A Quick Untangling of the “-as-a-Service” Payments Universe

Cloud computing has introduced payments professionals to an entire universe of new possibilities. By enabling easy, affordable access to payments services and application development resources—without the need to invest heavily into infrastructure or homegrown software development—cloud computing is an area of growth for incumbent tech companies as well as startups in the payments space.

Rackspace explains that cloud computing is a “model for enabling convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction,” and is characterized by:

• On-demand self-service – ability for an end user to sign up and receive services without the long delays that have characterized traditional IT
• Broad network access – ability to access the service via standard platforms (desktop, laptop, mobile etc)
• Resource pooling – resources are pooled across multiple customers
• Rapid elasticity – capability can scale to cope with demand peaks
• Measured Service – billing is metered and delivered as a utility service

Let’s take a look at the various types of services—built one on top of the other—that make up the top two levels of the cloud computing stack:

Software as a Service (SaaS)

Now considered commonplace, SaaS is a software deployment model designed for end-users wherein a customer accesses software from a vendor’s hosted servers via a web browser—there’s no need to purchase new hardware or run any software on company systems. The value companies derive from SaaS solutions range from scalability, seamless integrations with existing systems, and the use of shared resources, and more that ultimately translates into lower costs. Examples of SaaS solutions in the payments space:

• MineralTree offers a SaaS invoice-to-pay solution
• Tipalti is a global supplier payments automation solution
• Billhighway Enterprise processes multi-channel payments for associations and nonprofits

Platform-as-a-Service (PaaS)

PaaS essentially takes SaaS to the next level. It’s accessed via web browsers primarily by a company’s software developers, designed to make the coding and deploying of applications convenient. Rackspace describes it as a “platform for the creation of software, delivered over the web…without the complexity of buying and maintaining the software and infrastructure underneath it.” Examples of PaaS solutions in the payments space:

• Carta Worldwide offers complete hosted technology solutions supporting Host Card Emulation (HCE), NFC proximity payments, and remote payments
• Novo Payment has a service model facilitating the creation of a range of payment and transactional services

According to a Forrester survey of 154 U.S. software developers, the rate of planned PaaS-based deployments is double the increase of planned SaaS-based deployments. Respondents cited the following among their top three reasons for developing B2B e-commerce and order management application software in a PaaS environment:

• More modern development and APIs, 45%
• Better support for mobile devices, 41%
• Improved data security, 30%
• Faster rollout of new capabilities, 39%
• Lower cost of maintaining application infrastructure, 31%
• Executive pressure to move into cloud-hosted systems, 31%
• Easier to customize, 28%
• Easier updates to new versions and product features, 27%
• Shifting capital expense to operating expense, 18%

Payments-as-a-Service (also PaaS)

While not an official part of the cloud computing stack, Payments-as-a-Service uses SaaS-based methodology to connect a disparate group of payment systems. Examples include prepaid debit cards, global bank transfers, and international and local eWallets.

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