What Does Payments as a Service (PaaS) Mean to You?

by Erin McCune on April 2, 2009

in B2B Payments, Bill Payment & Presentment, Card Payments, ECommerce, Erin McCune, Global Payments

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Recently a number of ecommerce merchants and traditional companies have asked us, “Can I just outsource ALL of my payment processing? I’ve had it!”

At first we suspected that these requests were driven by PCI compliance concerns. As it turns out that’s only a small part of the motivation.

Companies are reacting to ever increasing payment complexity – multiple gateways, interfaces to numerous internal systems, complications due to new payment types/methods in order to transact internationally, a proliferation of data standards, and new regulations (e.g. IAT). The on-going IT maintenance costs are motivation enough, let alone the business process confusion.

My colleague Allen Weinberg has coined the phrase PaaS – “Payments as a Service” to describe this.

Here at Glenbrook we’re debating what exactly it means – hosted order pages have been around since Day 1 of ecommerce, and are still being used by smaller merchants – but is PaaS more than that? After all, the payment itself is just one small component of the order-to- cash or purchase-to-pay process. What about fraud analysis, subscription support, chargebacks and ACH administrative return exception processing?

If you were to buy Payments as a Service – which processes, services, and/or functions would be included in your dream solution? Let us know in the comments.

7 Responses to “What Does Payments as a Service (PaaS) Mean to You?”

  1. Alex says:

    I like the term. It’s much better than infamous ‘aggregator’ coined in the late 90-s by card associations. I’m adopting this one. 🙂

  2. Allen Weinberg says:


    Glad you like it — it’s all I was able to come up with to describe the kinds of requests we’re getting.

    At Glenbrook, we’re seeing a real trend towards outsourcing the payments back office — subscription management, turnkey fraud management, chargebacks and representments, and of course on the front-end hosted order pages.

    So a question for you (or anyone else reading this) — what does the term mean to you? I have a feeling that larger merchants yearn for an opportunity for something that isn’t quite hosted order pages, but something that goes a bit further up in the order pipeline and deeper into the merchant’s other systems.



  3. Alex says:


    You’ve just said it all right. I’m in online payments business, so the following list will be only about the online commerce.

    These services will be providing a very simple (looking) ‘payment cart’ that will be embeddable into any and every web-site (even on a completely insecure hosting plan, as blog or a social networking profile).

    Let’s listen to the end-users as well, they want: all possible types of pre-paid cards (which are many), they want a branded gift/pre-paid card of the merchant distributed through the retail, they want PayPal, Amazon, Google Checkout (because it processes pre-paid VISA cards, other’s don’t), they want international systems as Moneybookers… the list goes on and on.
    We also know what they DON’T WANT. They don’t want their ‘sporadic’ online life be connected in any way with their ‘orderly’ real life, so – NO derivatives of the ACH and check payments! In Europe it’s a bit different, people are ready to pay from their bank account online…

    I built this type of service once (in 2001) and it was aggregating all payment options in the russian market for the merchants and charging several percent on top of the payment provider’s fees. It was and still is a tremendous success there. Right now, when the number of payment options here in the US has grown to a certain level there’s a demand in it here too. 🙂 I’m going to try this approach again, but modify it considerably because times have changed.

    Accepting payments for the customer and doing it all RIGHT – is a challenge. It requires resources, IT base, well built technology that has all necessary capabilities… It costs A LOT. The overall financial risks can be considerable, so, for this scheme of outsourcing the pricing is essential. My estimates and models show that this type of business will be profitable and will be able to grow in a healthy way if the fees for the company outsourcing payments will be between 5 and 10% (depending on the type of a business and the types of risks).

    By the way, you are a member of my group on LinkedIn created for the specific type of businesses – online games. These companies in my opinion will embrace this model first, just because they need it BADLY. In a sense they’ve done that already, there are several successful aggregators… pardon!… PaaS businesses 🙂 in this domain.



  4. Matt Harris says:

    unfortunately the term PaaS is already relatively commonly used to refer to Platform as a Service in the payments world. the second google result is:


  5. Erin, thanks for a great post!

    I have to agree with Alex’s comment — to me payments as a service is both a technical solution and a simplification/streamlining of the complexities of payments. Ideally, I think it should be as simple for a merchant as asking the “payment service” whether or not I got paid on a particular order/transaction — that simple question is often difficult to answer but it is certainly the way I try and work. Offering just a technical solution doesn’t always help the merchant with the global complexities, and likewise, without a sound technical solution having payment methods anywhere and everywhere is more costly than it could be worth!

  6. John BaRoss says:

    PaaS – Good idea Allen (pronounce it “Pace”[?] – a potential double entendre!) My opinion is that players in this space could range from niche specialists to complex turnkey solution providers – either directly or via an ecosystem of partners that provide all of the suggestions Erin made along with pioneering alternative payment solutions, identity theft protection services, risk management consultation, legal and regulatory guidance, multi-channel management, IT development that enables device and network agnostic solutions and KPO/BPO (on or off shore) to manage any aspect of PaaS from check out flow design (cart or one-off) analysis and refinement to even call center support for payment related issues from eRetailers &/or consumers. Business models for the breadth of these offerings could vary from premium offerings to differentiated bundle bonuses for longer term contracts.

  7. Greg McGraw says:


    I agree with your comment about hosted order pages being around since Day 1. Especially for ecommerce payments, gateways began with hosted payment pages then merchants wanted more control, more styling freedom and the shift to distributing gateway functionality like accepting payments on your site began. Now it is the norm that only a small percentage of gateway merchants use their legacy hosted pages and instead have opted for the ‘advanced integration methods.’ Result: Good for ‘look and feel, Bad for credit card security since websites are generally on insecure servers, based on PCI standards.
    I am seeing many larger merchants now desparately seeking outsourced payment acceptance solutions even when they know they can afford to go the entire PCI compliance route themselves. Outsourcing is not new, it’s just taken on a renewed push in payment security. I like the PaaS, but I’ve been using SaaS or Security-as-a-Service in my business to describe the process of extracting payment acceptance security from payment processing. I also agree that it’s not just about PCI. It’s about ease of integration, access to more gateway features, and the flexibility to change gateways without starting from scratch.

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