A Guide to Cloud-based Payments
Clouds have had many connotations over the centuries. Not many of those have been related to technology.
But the growth of the cloud computing market is quickly changing this. In 2022, it was valued at $545.8 billion and is estimated to reach $1240.9 billion by 2025.
One sector that is making the most of the new technology is payments and the financial services industry.
In this article, we will explore cloud-based payments and why they matter.
What are cloud-based payments?
Cloud-based payments describes payments processing architecture that utilises or is built into [EU2] cloud computing systems.
"The cloud" itself refers to internet servers hosting data that is stored remotely. Leveraging cloud infrastructure enables users to rapidly access data from anywhere in the world with a good internet connection.
For payment systems, the cloud is used to process and accept payments through the internet without a physical device[EU3] server. This brings enormous benefits to both customer experience and security.
The benefits of using a cloud-based payment system
Below we have listed the main benefits of cloud-based payments.
1. Greater flexibility and scalability
Cloud-based payment systems provide growing businesses with a high level of flexibility and scalability.
Customers increasingly expect easy-to-use and responsive technology. They want a wide choice of in-person or internet-based payment methods.
As more people and businesses switch to cashless payments, banks and financial institutions will have to adapt to inevitable peaks in payment volumes.
Switching to a cloud-based payments platform can be a simple and effective solution to the need for scaling and meeting customer demand. This is often referred to as 'elastic', reflecting the ability of the technology to flex according to where it is needed.
2. Easy integration for cloud-based payments systems
Cloud-based payment systems should be able to seamlessly integrate with external accounting and management software.
Businesses that use a cloud-based solution often gain access to real-time payments sales and data reports, too.
3. Robust security
A cloud-based system is more secure than storing data in a physical system.
Many cloud-based systems have invested in security measures to achieve compliance with the PCI DSS (Payment Card Industry Data Security Standard).
PCI DSS consists of 12 requirements for merchants, such as using regularly updated anti- virus software, encrypting cardholder data on open or public networks, regularly testing security systems, and more.
These security standards that ensure digital payments companies maintain robust security measures and a secure environment when processing, accepting and storing credit card information.
Gaining PCI DSS compliance can be difficult for a company on its own. It takes a lot of knowledge and resources to implement some of the required measures.
4. Lower cost
Banks and financial institutions use cloud-based payment processing to save time and unnecessary infrastructure costs.
Buying and installing servers can take several months. Predicting peak capacity a year in advance is difficult and means you'll need to hope you don't need to scale faster than expected.
You might end up spending too much money upfront on physical servers where it could be better spent on other vital launch activities.
Legacy IT infrastructure also includes upfront costs for hardware. Business needs can change, which makes it difficult to predict what technologies to purchase before setup.
Pay-per-use pricing model
With cloud computing, businesses use the pay-per-use pricing model. It means they only pay for what server space they use, not excess space and hardware costs they don't.
It greatly benefits financial institutions looking to flexibly scale at a low-cost.
5. Efficiency and speed to market
Cloud-based systems' inherent flexibility enables them to rapidly deploy payment technologies.
By comparison, integrating traditional payment technologies into infrastructure is a slower and more costly process.
An integrated cloud payment system can also aid data integration, which helps businesses bring products to market faster. And it can work with cloud-based ERPs (Enterprise Resource Planning) such as NetSuite.
With everything organised in a centralised system, it is easier to manage supply chains, inventories and product details.
Why Cloud-based payments processing is relevant today
Between October 2021 and March 2022, there were 21.1 million open banking payments in the UK alone. This was an increase of 6.1 million from the same period a year before.
Banks and financial institutions must continue to adapt to increasing payment processing volumes.
They must be able to efficiently handle variation in transaction volumes. This variation occurs both daily - there are more payments during the day than night, for example - and over longer timescales.
Transaction volume can also increase based on occasions or events. Sales, salary payday or other events are are likely to see substantial increases in volume.
According to a report by Abode, on Black Friday, eCommerce sales in the US hit over $9 billion USD in one day . This is over 1% of all annual eCommerce sales , so over 3.5x higher than what is sold on the average day. And it looks set to double by 2027.
Utilising the flexibility of a cloud-based payments system gives you the capacity to process payments smoothly when it matters most.
The pandemic's impact on payment processing Many businesses and customers switched to cashless transactions during the global COVID pandemic.
The World Bank states that over 40% of adults in low and middle-income economies made their first cashless payments soon after the start of the pandemic.
And Global Payments reported that 74% of consumers stated they will continue using contactless post-pandemic.
What to look out for in a cloud-based payment solution
1. Cloud-native payment processing
It is crucial to pick a cloud native and cloud-agnostic payments platform. This allows you to make the most out of the cloud's benefits.
Cloud-native means technology that was built in the cloud - as opposed to being adapted to the cloud after being built. And cloud-agnostic means a cloud-based system not dependent on any specific provider.
Interoperability is the ability of different systems, software, apps or devices to seamlessly interact and exchange information.
Choosing a payment platform that offers interoperability helps avoid your business being tied to a specific cloud platform. It also increases the likelihood a platform will deliver fluid orchestration and real-time processing.
3. The right provider
As with most services, choosing the right provider is crucial.
A cloud payment processing provider should have proven cloud infrastructure knowledge and deployment experience. They should also have excellent integration expertise.
The result should lead to a friction-free transaction process for your customers.
4. Advanced security controls
For banking payments, implementing advanced security controls is key.
Major cloud players already have substantial cybersecurity features for their platforms.
However, organisations can further eliminate risks through further environmental hardening. They can also invest in security tools that will limit risks, lower costs, and avoid disruption.
CLOWD9's cloud-native payment processing
At CLOWD9, we deliver cloud-native payments technology that works seamlessly on any network or system across the world.
We can customise your payment processing solution to bring you the best results in efficiency, user experience and data collection.
As payment volumes (number of transactions) increase, it is vital for banks and financial institutions to adapt quickly. Flexibility and responsiveness will be key to success.
Cloud-based payment infrastructure is especially useful for those with legacy systems who struggle to maintain and scale their operations.
Cloud technology improves customer experience through better and more seamless payments experience. This helps with customer retention and can attract new and repeat customers.
Switching to a cloud-based payment system creates more flexible payment options while also being PCI DSS compliant.
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