Voice of the Industry

The PaaS revolution: transforming payment systems worldwide

Friday 29 September 2023 14:04 CET | Editor: Claudia Pincovski | Voice of the industry

Jagdish Udayakumar, Head of New Business at FIS UK, explains why PaaS solutions have the power to revolutionise payment processing by offering efficiency, scalability, and security.

Payments services are undergoing key changes around the world. The payment services market is in constant evolution and recent years have shown major changes close to Revolution.

Some of the macroeconomic factors are:

  1. Post COVID-19 reverberations

  2. Russia/Ukraine sanctions

  3. Inflationary Pressures

  4. Macroeconomics of ESG

Increased focus on financial stability Instant Payment

Geopolitical and macroeconomic factors have contributed toward demand for real-time payments, innovations of value-added services, and the adoption of the common payments’ language standard of ISO20022.

In October 2022, the European Commission published the Instant Payments Regulations (IPR) proposal to make instant payments in EUR available 24x7 to every citizen with a bank account in the EU or EEA.

With the IPR proposal, banks and PSP will need to transform their payment offering to provide the pan-European SEPA instant services to all their clients.

The regulation also may provide the right ecosystem for the development of innovative products to differentiate the payment services offering and improve competition between banks and non-bank providers. This may include proxy services, account access, and Request-to-Pay (RtP) as examples of these value-added services considered as enablers of the instant payment scheme. This may also include new requirements for IBAN/Name checking services.

Although timelines for implementation of the IPR are yet to be agreed upon, the legislation is likely to come into force in mid-2024, with staggered timelines for implementation.

Legislative background

Electronic payments in the EU have been constantly growing, reaching EUR 240 trillion in value in 2021 (compared with EUR 184.2 trillion in 2017). In parallel more sophisticated types of fraud have also emerged, putting consumers at risk, and affecting trust. This has led the European Commission to review the existing legislative and regulatory framework for payments in the EU, in line with its digital finance and retail payment strategy.


The European Commission has put forward proposals for the Payment Services Directive 3 (PSD3) to adapt the existing framework under PSD2 and bring payments and the wider financial sector into the digital age, as well as proposals for a framework for financial data access (FIDA), setting out new rules for how customers’ financial data may be accessed, shared, and used. The proposals will further improve consumer protection and competition in electronic payments. They will also empower consumers to share their data in a secure way so that consumers can get a wider range of better, secure, affordable financial products and services. These proposals place consumers' interests, competition, security, and trust at their centre.

Exact timelines for PSD3 and FIDA are unknown, but they are likely to come into force at the end of 2024 and will likely start to apply in 2026.


The Digital Operational Resilience Act DORA, formally adopted in early 2023, will come into effect in 2025. The legislation will apply to a plethora of financial institutions such as payment services providers, credit unions, investment firms, asset managers, market infrastructures, insurance firms, and crypto-assets providers and sets out requirements to strengthen and harmonise the financial sector’s resilience to ICT-related incidents. In addition to this, it gives powers to financial regulators to oversee third-party ICT providers deemed as ‘critical’, potentially such as cloud service providers or data platforms.

The UK’s HM Treasury has also proposed its own Critical-Third Party (CTP) regime, giving regulators oversight over designated critical third-party firms, in order to manage operational disruptions to the financial services sector.

Key growth segments

Since the pandemic started, many customers have been opting for mobile wallets or contactless cards to pay for goods and services. Having a seamless payment experience is now considered an important factor in customer retention for many players within the payment ecosystem. Some major financial institutions had already begun scaling down their branches before the pandemic hit, which spurred many banks to revamp their online or digital presence.

Account-to-account payment and the alternative eccomerce payment continue to grow as per the Global Payments Report – 2023 by FIS.

Account-to-account flourish across Europe

Account-to-account (A2A) payments represented 18% of Europe’s ecommerce transaction value in 2022.Account-to-account (A2A) payments represented 18% of Europe’s ecommerce transaction value in 2022, but there are huge differences in adoption rates by country. In Poland, Finland, and the Netherlands, A2A is the dominant online payment method. Cards and digital wallets dominate in Denmark and the UK, with A2A representing only single-digit shares.










Alternative ecommmerce payments continue to grow

European consumers continue to shift away from paying with cards and cash towards alternative payment methods.European consumers continue to shift away from paying with cards and cash towards alternative payment methods (APMs) such as digital wallets, account-to-account (A2A) and Buy Now, Pay Later (BNPL).

Credit and debit cards’ combined share of regional ecommerce transaction value is forecast to decline from 40% in 2022 to 35% in 2026. 






Best way forward for payment processing

Banks and PSP’s have understood that in-house payment applications are unviable due to the high costs of development, high maintenance, and continuously evolving standards of regulatory-driven requirements associated with a compliant payment processing architecture. The increased demand for faster and more efficient payment processing, the need for digital payment systems, and mandatory compliance towards current and future regulations have led to the fostering of Payments-as-a-Service (PaaS).

Payments-as-a-Service (PaaS) providers host payment processing and data components on their own servers, databases, and cloud using their own technology stack, networking, and computing resources. Payments-as-a-Service (PaaS) offers payment services such as instant and non-instant, domestic and cross-border, mass payments or high-value transactions based on a single API.

The APIs connect with multiple banking channels and ecommerce gateways, EPR, and TRM within the bank’s payment architecture. This combination of payment processing, connectivity, and newer faster product propositioning has made it easier than ever for banks to not just reduce costs and modernise payments but also to improve workloads, prevent fraud, and get a clearer insight into their payment process.


PaaS is a cloud-native payment system; built on cloud infrastructure and designed to be flexible, scalable, and secure. PaaS uses microservices architecture which breaks down complex applications into smaller, more manageable components that can be deployed and updated independently. This approach allows businesses to innovate faster, respond to fast-changing customer needs and improve the user experience. PaaS platforms have disrupted the financial industry to enable banks to offer personalised and innovative products to end consumers.

Building cloud-native payment systems requires a well-designed and scalable architecture that can handle high volumes of transactions while maintaining security and reliability. PaaS services balance both seamlessly.


PaaS platform built on private cloud provides flexible computer storage and database services that allow businesses to scale their payment systems up or down based on demand. This means that businesses can easily handle increased traffic during peak periods without having to invest in additional infrastructure.


PaaS provides a range of security services, including encryption, access management, and GDPR compliance certifications that help businesses protect sensitive payment data. It securely integrates with both Prem and cloud-native components to deliver a truly modernised and secure payment architecture.

The cloud-native payment infrastructure experiences 60% fewer security incidents than data centres. Cloud-stored data and tech are also not reliant on hardware, meaning it is far less likely to lose your data. Computers and hard drives can malfunction for numerous reasons, from viral infections to age-related hardware deterioration, to user error and are also prone to being lost or stolen.

Cost savings

The on-prem needs investments towards infrastructure considering peak volumes occurrences once or twice a year; however mostly for a normal business day, the dimensions are unutilised. PaaS provides a pay-as-you-go pricing model, which means businesses only pay for the resources utilised. This can result in significant cost savings compared to traditional on-premises infrastructure. One of the key benefits of a cloud-native PaaS solution is to ‘spin up’ multiple environments on a low code base to manage the CI/CD pipeline bringing cost-effective valued added features to the end customers.

The future of payments is likely to be dominated by cloud-native payment systems like PaaS. PaaS platforms offer greater flexibility, scalability, and security than traditional on-premises infrastructure, making them ideal for banks, FI, and PSP’s looking to innovate, modernise, and stay ahead of the competition. As more and more consumers choose to make purchases online or via mobile devices, PSP’s will need to adapt and embrace cloud-native payment systems to remain competitive.

About Jagdish Udayakumar

Jagdish Udayakumar is a payments professional with 20+ years of experience, working on the payments and cash management domain for global banks and fintech. Jagdish Udayakumar is a payments professional with 20+ years of experience, working on the payments and cash management domain for global banks and fintech. Jagdish, as Head of New Business at FIS UK, specialises in next-generation products, partnerships and growth initiatives in the UK, EU, and global markets. In the past, Jagdish has led many transformational payment products by promoting collaboration, reducing friction, and promoting consumer confidence in payment processing. Jagdish holds a master’s degree in business administration from Kingston University.

About FIS

FIS is at the heart of the commerce and financial transactions that power the world’s economy.FIS is at the heart of the commerce and financial transactions that power the world’s economy. We are passionate about helping businesses and communities thrive by advancing the way the world pays, banks, and invests, serving more than 20,000 clients and more than one million merchant locations in over 130 countries.

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Keywords: payments , COVID-19, Russia Ukraine War, ESG, instant payments, real-time payments, ISO 20022, banks, PSP, SEPA
Categories: Payments & Commerce
Companies: FIS
Countries: World
This article is part of category

Payments & Commerce


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