How do banks and processors leverage dedicated SaaS to accelerate payment innovations?

Did you know that a third of all software in the world today is Software-as-a-Service? McKinsey predicts that this figure will rise to 80% by the end of the decade, affecting almost every industry, and the world of payments is no exception. SaaS is a particularly attractive proposition for the volatile and unpredictable payments industry. New, digital-native fintech are often the first to jump at a SaaS option for card issuing, merchant acquiring, transaction switching, and digital wallets, since they can quickly launch new products and services without major investment upfront in the infrastructure or delays related to compliance issues. And with increasing uncertainty in the market, established players are also finding the flexibility of SaaS attractive. Banks and processors need a way to quickly launch new products and services without disrupting their existing operations. Outsourcing part of their business to an innovative, vendor-maintained payments platform is seen as good resource allocation strategy.

However, despite the attractiveness of SaaS, there is a big catch: no company wants convenience and savings at the expense of the freedom to create differentiated offerings unique to the market. Many payment-related as-a-service models achieve their ability to manage and host by presenting a hotel-like set of infrastructure and services that can be rented. But whereas people can live quite comfortably in unoriginal hotel rooms, companies will find their business vision stifled if their SaaS vendor ties them down to a standard set of functionality and services. Or even if the hotel room is quite original, it might not suit your particular needs – meaning it does not accommodate your business strategy.

This is where dedicated SaaS solutions shine for payment companies. At OpenWay, we give clients the option of running their payment infrastructure on our top-rated Way4 digital payments platform in a dedicated SaaS model. While enjoying the benefits of SaaS, they gain the control and creative freedom to take advantage of new openings in the market and realize their unique business vision. How does that work?

What is dedicated SaaS?

First, how does dedicated SaaS differ from shared SaaS? Shared SaaS refers to a shared payment platform provided by the SaaS vendor with a typically standardized offering. Service costs are lower because customers are onboarded by partitioning within a single payment software instance. Customization, however, is limited as the shared platform means that configurations adjusted for one customer could impact the others running on the same platform. Due to the natural limits of this SaaS model, providers tend to limit the variety of configurations available.

In dedicated SaaS, product configuration, the software, all the underlying environments, services, and compliance are taken care of in a hosting infrastructure specially reserved for the client. Service costs for this model are typically higher than shared SaaS, but it allows for a high level of service individualization and higher ROI. Not only the functionality of the system can be tailored, but also the underlying technologies.

Why not just go for a standardized offering? Shared SaaS works well in payment areas where service differentiation is less important, such as, for example, connections to payment schemes or token vaults. However, if you need to create a unique product or service that will let you seize an opening in the market and differentiate yourself competitively, dedicated SaaS software and infrastructure can be tailored to better align with specific business requirements. Perhaps your company is looking to launch a specific type of multicurrency credit card, a completely new kind of BNPL service, or a unique value-added acquiring service. Or perhaps you want your digital wallet to become a super app. Maybe your region needs a payment processor and your company could meet this need. Dedicated SaaS will alow you to customize the business logic, user interface, add or modify features, and implement your unique business workflows in the shortest timeframe and without a huge upfront investment. API integration with other software systems gives SaaS users the freedom of choosing preferred providers for each component of a new service offering, allowing them to differentiate themselves quickly and take advantage of new partnerships.

How dedicated SaaS gives the flexibility to grow quickly in new payment areas

First, dedicated SaaS platforms can be used by large and mid-sized banks, processors, and fintech startups to transition from capital expenditure (CapEx) to operational expenses (OpEx). This shift offers financial flexibility, predictable expenses, and a more efficient allocation of resources, making it an attractive option for businesses of all sizes. Companies welcome the freedom to focus on core compencies that SaaS providers give, as they take on the burden of infrastructure management, maintenance and support. They can optimize their expenses, aligning costs with actual usage. Decreased reliance on expertise can also reduce cost.

Second, dedicated SaaS platforms can be used by companies aiming to explore new payment areas where there needs a smooth merging of card issuing and merchant acquiring technologies. Perhaps their current platform is not able to cope quickly and efficiently with this new direction without large-scale migration, and the company does not want to invest heavily in this new payment area without seeing how well the new business model does in the market. Launching a new project in Way4 Dedicated SaaS simplifies the process of entering new markets and lets you branch out quickly into new payment offerings.

Over time and with business growth, companies might start thinking of moving some of the payment processing operations in-house. Will you able to do so with your SaaS provider? What will you want to move on-prem, and to what extent? Some may find it advantageous to bring acquiring or issuing in-house for stronger control, but still wish to have Visa and Mastercard contact points, risk management, or commodity modules to be run in SaaS. A vendor who offers flexibility of implementation will work with you to make a full or partial implementation possible. They can also help you develop the expertise to take over the reins when going on-prem. OpenWay offers a Bring-Your-Own-License model, which allows customers with a pre-purchased Way4 license to benefit from a reduced recurring fee and covers migration from SaaS to in-house if and when needed. This is an exceptionally flexible model to the advantage of SaaS customers who plan on eventually managing their own system on-premise. With Way4 BYOL, one innovative healthcare provider became an acquiring processor. They are now able to offer cross-border POS and e-commerce acquiring, as well as QR payments.

Like all Way4 solutions, Way4 Dedicated SaaS can be run both in the cloud and in hybrid mode. Clients can decide which Way4 solutions will be implemented via SaaS and which will be run as an on-premise installation. Many companies will benefit from a combined approach to increase their speed and scalability when starting their business or in entering new markets. Dedicated SaaS can be the component that, combined with your other advantages, will reduce the burden of maintenance and support while maximizing the resources you already have. Once you’ve gotten started, new services can be delivered in a scalable and repeatable manner, accelerating speed-to-market while maintaining cost effectiveness. New payment products such as BNPL, multi-channel acquiring, embedded finance, Card-as-a-Service, A2A, digital wallets, and instant payments can increase transaction volumes and require seamless operations with other business systems and partner organizations. Way4 anticipates this through fully online and available data exchange through rich APIs and streaming technology.

How the right dedicated SaaS vendor supports your organization

Since the market for dedicated SaaS in payments is so new, it can be a challenge for businesses to evaluate SaaS providers. Here are some factors to consider:

Flexibility and platform quality. To give maximum flexibility, first, a dedicated SaaS platform must be rule-driven and highly configurable. This allows banks and processors to quickly configure unique products and services and release them to the market. The range of functionalities available must also be rich enough for maximum creativity and innovation. Logically, the vendor who fulfills these criteria must also itself have a proven track record of speedily implementing innovations.

Cost reduction. Are you unsure whether moving from CapEx to OpEx really means savings? Compare it with what the on-premise cost structure would be, taking into account dedicated hardware, cost of establishing and managing a data center, required technical, development, and support resources, plus license fees. You may want to ask the vendor whether there is a minimum commitment on volumes. Depending on the pricing scheme being offered, this could be in cards, transactions, or both. The most advantageous volume commitment will vary depending on your business. Check with your provider how will the per transaction cost add up in terms of the projected growth of your volumes. Ask them about fees for extended services, and whether SaaS provider can enable more functions and products without additional development.

Then compare it with what the dedicated SaaS solution covers for the monthly subscription fees, one-off implementation fee, and other costs. For Way4 Dedicated SaaS clients, system administrators take care of the environment, platform and database: everything that the client would take care of in a typical in-house setup. For example, OpenWay’s certified SaaS operational partners provide application engineers, QA and testing, a security operating center providing incident responses 24x7, key administration staff, also change and compliance management. The client handles accounting, customer service, fraud management, and support for the client's own on-premise systems.

Talent and skills. This is an increasing challenge for all organizations, and partnership with an experienced SaaS vendor could fill in the gaps. Since dedicated SaaS is implemented with the needs of each specific company in mind, a good vendor will be able to train your team to manage as much of the system as you both agree on, and save you from having to hiring staff for administrative and operational support.

Security. Dedicated SaaS significantly reduces the risk of data leakages and unauthorized access. In SaaS, data is always periodically saved in the cloud and data continuity is maintained seamlessly throughout a user’s workflow, regardless of how often they transition across devices. But with dedicated SaaS, each customer has their own dedicated instance of the software and infrastructure, ensuring that their data, configurations, and customizations are isolated from other customers. Professional management by the SaaS provider team is also essential. OpenWay, together with an operational partner, provides continuous updates, data redundancy and backups, secure data transmission, compliance and certifications, which are crucial to meet the strict security and compliance requirements in highly regulated industries.

Compliance. Financial institutions come under specific guidelines on open banking, data access and protection, and payment standards. Where is the vendor in terms of GDPR compliance? What about PCI DSS and PCI SSF, and other applicable PCI standards like PCI PIN and PCI 3DS? Cross-border payment transactions especially require compliance with a number of regulations. The right dedicated SaaS provider will be aware of requirements in your current geography and regulations that will become relevant as you plan for expansion. For example, OpenWay leverages on partnership with major cloud providers, who offer a large network of data centers with direct geographical presence on all major markets, as well as tailored options such as Cloud On-Premises. This flexibility caters to customers with large-scale requirements who need their data and applications to remain within their country's borders.

Maximize the advantages and reduce the burdens

Ultimately, many companies will benefit from a combined approach of on-premise and SaaS to increase their speed and scalability, both when migrating to dedicated SaaS or launching new business models in dedicated SaaS. Dedicated SaaS will allow them to reduce the burden of maintenance and support, while maximizing their existing advantages in expertise, time, and resources, which can be channeled to product and service development. The right dedicated SaaS vendor will provide benefits of both standard and non-standard offerings while allowing great freedom in implementation, support, and personalization on both business and technological levels. Your organization should be able to keep as much on legacy and in-house as you like, and integrate the part of your business on dedicated SaaS with the rest of your system so that the customer notices nothing.

Dedicated SaaS can usher in a new phase of your company’s growth, where horizons are broadened, ambitious and creative business ideas are brought to life, and the sky is no longer the limit! Contact OpenWay to see how dedicated SaaS can be the cornerstone of your payment organization’s new business strategy.

OpenWay is the only best-in-class provider of digital payment software solutions for card issuing, digital wallets, merchant acquiring, BNPL, transaction switching, tokenization, and fleet payments, and the best cloud payment systems provider as rated by Aite and PayTech. Top-tier banks and processors, as well as ambitious fintech startups, have chosen OpenWay as their strategic partner. With its unique capabilities in rich functionality, fast-to-market, high availability and better ROI, the Way4 software platform guarantees an unparalleled customer payment experience.