[VIDEO INTERVIEW]: How To Run Digital Payments In the Cloud?

At OpenWay Club 2019 we interviewed the cloud payment experts Dmitry Yatskaer and Jason Nadal about why and when companies should consider running their payment services in the cloud infrastructure, what benefits may it bring as oppose to the on-premise model, and how companies can avoid common pitfalls when migrating to the cloud.

Jason Nadal, VP EMEA ISV & OEM,    Oracle

Jason Nadal, VP EMEA ISV & OEM, Oracle

Dmitry Yatskaer   , CTO, OpenWay

Dmitry Yatskaer, CTO, OpenWay

Why Should Digital Payments Be Run In the Cloud?

Dmitry: One of the reasons is that when you’re talking about digital payments, your network has to be really scalable. Everything gets and UI. Suddenly, rather than just servicing plastics that don’t communicate that much expect when they transact, you have to deal with apps and apps keep on communicating. So you have to make sure that your actual network is reliable enough, and this is what the cloud is bringing to you. And then you have to scale at an unpredictable pace, because you don’t really know, out of those guys who download your app, what will be the usage? When is it going to explode? Maybe when you have launched this nice UI/UX feature, and tomorrow you just witness your volume explode by a factor of ten. This is what cloud brings you, the scalability.

On the other hand, it is also the opportunity to cooperate, because when your digital services run in the cloud, there is a better chance that you can integrate partner services more easily. So that your apps can actually offer the partner’s services, as opposed to the on-premise model when you have to wait for a few months to bring partners into your own protected VPN perimeter. 

A great example is a company called Enfuce, who is our customer, and since they are one of the new processors in Europe, they made the decision to go for the cloud right away. So now, they are already at the stage when they consider the multicloud, how to optimize their cloud’s infrastructure, so they are already past the stage of launching the cloud. They have been on the cloud from day one. Now they think about how to get to the next level in the cloud.

What Are the Pitfalls Of Starting a Payments Business In the Cloud?

Dmitry: I believe that it is important when you move to the cloud to really know why you are moving to the cloud. Do I want to cut my costs? Then I need to see how and why I am cutting my costs. Is it because you would like to launch a new service? Then how do I launch a service most efficiently from the cloud? So how do I optimize my costs, my time to the cloud and get the most benefit out of the cloud?

If you take an average cloud transformation project, the heaviest costs are related to the migration of the on-premise services to the cloud. And the reason is because some of the apps that the some of the services that the banks are running are not necessarily fit to run in the cloud. So actually, on top of the actual cost of cloud migration you add the application migration cost which can suddenly take years. So that is why it is important to plan it carefully, and potentially you can first move those services that are cloud-ready. In this case, for our customers that is easier, because WAY4 is cloud-ready so you can basically choose how and when you want to move to the cloud.

Jason: I think it’s more about what the opportunity is. So when you’re looking at that you’re trying to design what it is that you’re looking at when you look at the cloud. It doesn’t have to be an all or nothing, a binary option. And so the pitfalls are typically when there is not really a true reason to go, when it is not well thought out, when it is not tested out. The other thing is back to what I just said, is, a lot of people think it has to be all or nothing. I think when you’re particularly working with software companies, as they experiment and transform from on-premises to the cloud, there are two key things for them. How am I going to do it and how am I going to sell it. A lot of times, when they are testing out, it is not going to be the core, number one product, the first thing to go to the market into the cloud. It is the fourth or fifth product line that is going to go into the cloud. And that is a great way to see what new business is that going to open up for you, the risks there are to customers to have that in the cloud. That is what we typically see, it is the third, fourth, or fifth most important product line of the ISV or software partner that goes first, and then they work their way back into their core servicing.

What Security Concerns Are Associated With the Cloud?

Jason: I think you have to see where cloud platforms are built. I mean, how they are built. And what was put in as the foundational layer. So for us at Oracle, when we built the second generation of our cloud called OCI, where there are seven different pillars of security for the entire platform, and from that each of them have a subset of different types of technology and certifications and user authentication processes that we use that go into our platform. And so one of the biggest things that we did was that we separated out the virtual machines, and encapsulated that into a security layer. We’ve found that most of the breaches and attacks are around the virtual machines themselves in other platforms. So by separating that out in the way that we built the infrastructure, that really helps.

Dmitry: As far as the payment industry is concerned, the good thing is that we have a standard called PCI DSS. So you pretty much what you have to do to achieve acceptable levels of security for payments. And the cloud is very helpful, because when the auditor, or the QSA asks, where are your services running? And they are running in the cloud. This is the certified cloud. Tick in the box. How do you encrypt your data? Oracle transparent data encryption. Tick in the box. How do you separate, ensure your multitenant access? We use Oracle World. Tick in the box. So the thing where the next stage is probably when the clouds will start offering the payment HSMs in the cloud, which is not something that currently exists, but hopefully will appear some day. Hopefully some day we will have Visa and Mastercard access points moving to the cloud, once again, the industry is not quite there, the industry is still on a hybrid cloud but sooner or later it will move entirely to the public cloud infrastructure.

Looking at WAY4, the total implementation time is already dramatically decreasing now, most of the time it takes to wait for the different regulatory authorities and third parties to allocate their respective slots, because there is no such thing as payment scheme certification services for the cloud, maybe one day it will appear. On the other hand this gives customers an opportunity to take more time to test their products and services and think of what else they can launch, while they are waiting for their certification slots. So ultimately, we can implement more things in a shorter time.

Why Should Someone Choose Oracle Cloud For Digital Payments?

Jason: If you take a look, Oracle is pretty late to the cloud platform game. And so there are a couple of advantages that we have as a result. One is that we saw all the pitfalls and mistakes that the others or first-generation cloud platform providers were making. The second is what we touched on earlier, the security aspect. I think there is a premise for us, that so many of the world’s mission critical software that is run off of Oracle and Oracle Database whether it is healthcare, or medical, or transportation, or government – all of that is rooted in the Oracle Database. And so for us, we are taking that mental aspect and that high availability – that is how the platform was built. And you take the Oracle Database and as you work through the stack from the chip set to the hardware to the software that was built upon it, all being Oracle, then you’re really optimizing the database, and then the third party software partners that use that database, you really have an optimized and really extremely reliable platform that you have built it on.

Dmitry: Indeed we tried different clouds, Oracle Cloud was the one where we just installed WAY4, the way we installed it, it just works, then we just started testing it the way we test it on premises and it showed one thousand transactions per second in with an Intel Linux stack. So what more can I say?

What Should You Consider When Migrating Your Payments To the Cloud?

Jason: I think it’s understanding what their needs are over the course of the next couple of years. And understanding what their goals are that they’re trying to achieve by going up into the cloud. Is it efficiency, is it scale, is it new customers, or the ability to go after new customers? Is it speed or volume of transactions? Is it the fact that they maybe realize that the transaction piece, that layer is not their core competency, but they need to have it, and that’s why they’re not building anything in-house. So you can take out that so if I am not building it in-house, and software is not the core of my company, of course software runs my company, but it is not the core of what my competencies are as a bank, so why am I running it, in a COLO or with my own IT infrastructure and people. Offload all of that to a trusted partner. And so those are the things you have to understand from the customer first, and then you back out. Where are the technologies that can help them to achieve that, then you back out of there, and then you see who are the partners that are going to wind up getting that done for you. So today, I think it really comes down to, it’s not about “Here’s the license, here’s the service, goodbye and good luck”, or “We’re here for you for X amount of hundreds of dollars per hour”. Not at all. It is about what you are trying to accomplish and then let’s work backwards from there and what makes sense in order to help you achieve it.

Dmitry: About WAY4, basically it is just like what Jason said, the principle applies that the bank first evaluates why and what will they move to the cloud. Is it that they are starting a totally new service from the ground up and they do not feel like investing into their own infrastructure for that? Is it that they are looking for a different disaster recovery strategy, high availability strategy, different testing DevOp strategy? Now WAY4 can run in the cloud and on-premises and in combination where it is completely open for all sorts of approaches and their combinations.

How Does Someone Start a Payments Business In the Cloud?

Dmitry: WAY4 Start is a perfect example because for instance you can have your acquiring services, for instance, up and running in almost no time, save the certification which is obviously required, but you’re on your own, you get your own dedicated WAY4 environment, you can play with it, you can get some of these services from OpenWay, if you would like to take more time to grow your operational capacity, so it is a completely elastic start-up acquiring solution. And with account growth in acquiring, particularly in Europe, thanks to PSD2 and thanks to the new Interchange regulations, I believe that it is quite an interesting and important new segment. The next step is that we are going to offer the same thing for issuing credit and issuing prepaid, and also subsequently for issuing debit where obviously we need to look at the most efficient bank integration model, how do they connect their core banking to the cloud-based environment, but this is doable because this is already happening. So we believe that this is important for the growth. Then obviously the thing with WAY4 Start is that it is exactly the same thing as WAY4 that you get, the same software, just pre-configured and optimized, it has a nice set of rules and parameters for you to ensure a quick start. But then later, you can build on top of that, and basically you can take it into any direction.

Jason: And that is such a great aspect of particularly the cloud, because of the modular approach that you can take. You can just start with one layer, one piece of a product, and easily adapt and add more in as you go. You can have a complete version one, two, three and four, but you can have four different products that you are bringing together really quickly. I like that you guys have that approach.