Transforming payments via Payments as a Service

Traditionally businesses primarily conducted their payment activity via banking digital channels but are now accessing bank payment technology via APIs (software mechanisms allowing components to communicate with each other) to make, receive and secure payments.

Known as Payments as a Service (PaaS), the burgeoning sector enables a higher degree of customisability and supports a range of use cases that haven't been possible in the past, leading to the ability to build payment experiences and capabilities based on customer and business needs.

PaaS provides businesses seamless, secure and various flexible payment options and experiences within their own channels.
- Alison Chang, General Manager, Payments, CommBank.

“Businesses are reimagining their customer experiences to reduce drop-out from sales flows, increase conversion rates and receive payments faster.”

Driving innovation and industry adoption

Any industry which sends and receives payments can harness this capability by designing their payments software solutions to address specific problems or enhance particular business vertical performance. The retail, software and government sectors are among the first industry adopters.

PaaS will assist businesses in managing regulatory changes, such as next year’s introduction of Payday Super, which will require employers to pay their employees' super around the same time¹ as their salary and wages rather than once a quarter.

Businesses will need to update their frontend and backend systems and processes in how they bill, reconcile and recover funds. They will also be required to automate and streamline superannuation contributions in line with requirement for contributions to be received within seven days of payday.

The increased control and visibility over payments provided by PaaS, along with its scalability, will make it a key enabler of the transition. It will make for faster and more secure payments through the value chain.

Chang says that as PaaS develops, industry-tailored solutions will emerge to solve specific, key problems different segments are faced with. We will see an expanding range of applications like CommBank’s Smart Real Estate Payments solution, dynamic PayID®, and improved customer checkout experiences.

Real-time payments and the PayTo® API

Importantly, innovative APIs empower businesses to offer customers a range of flexible payment options and experiences within their own channels.

The PayTo® API is a key innovation in real-time payments. It allows businesses to securely obtain consent for recurring or one-off payments directly from customers’ bank accounts via the customers’ banking apps or online banking.

Dymocks Tutoring, one of Sydney’s leading providers of inperson and online tutoring to school students, plans to use PayTo® to collect fees for recurrent term-based and weekly tuition as well as for one-off payments for self-paced courses or holiday programs. Its current bank transfer payment collection method takes up to one week to clear before Dymocks Tutoring knows whether or not there has been an issue with the payment.

“This makes it difficult to onboard the customer effectively and without delay,” says Mark Buckland, CEO. 

As PayTo® is a near real-time payment solution, it dramatically reduces the delays caused by our current bank direct debit solution.
- Mark Buckland, CEO Dymocks Tutoring

Buckland says PayTo® allows the business to set up a payment arrangement on the spot and know that it is accepted. Through APIs, a set of routines, protocols, and tools for building software applications, this provides visibility agreement has been suspended or cancelled, or when a payment has failed.

“Traditional direct debits are unclear. Customers sign agreements but are then beholden to the business to enact the direct debit and cancel it on request,” Buckland says.

PayTo® puts the customer front and centre. The customer accepts all agreements and can manage, suspend and cancel those arrangements all from within the trusted environment of their CommBank app.

PayTo’s real-time payment also provides a better experience for Dymocks Tutoring customers — no delay with enrolment once they have paid, immediate debit of funds so they have certainty the payment has been made, and the ability to make PayTo® agreements and manage them from the convenience of their trusted bank app.

Strengthening security

Security and scam prevention is enhanced with PaaS, particularly when using the NameCheck API, which ensures that payment account details are accurate.

The NameCheck API uses an algorithm that scans a vast database of past payments to and from CommBank accounts. It checks how likely it is that a BSB and account number match a business’ intended payee.

“NameCheck gives you an indication whether an Australian BSB and account number belong to the account holder you want to pay. Integrated via API. It strengthens your systems and helps prevent fraud and mistaken payments,” Chang says.

It can be used to verify a payee database in an Enterprise Resource Planning (ERP) or to check for typos in customer- entered payment details.

Reducing risk for the financial ecosystem

“Businesses are always on the lookout for ways to reduce payment and fraud risk, improve efficiency, and save money. PaaS is giving them ways to do this, particularly in their management of accounts payable and receivable,” Chang says.

Taken together, these innovations in PaaS are contributing to a stronger and more resilient financial system.

They are enabling greater innovation by creating the ability for banks to offer new types of products and by extension, businesses to use these solutions to enhance their own products and services. The scalability of these solutions and the ecosystem in which they operate allows businesses to quickly adopt them across the enterprise.

Future-proofing payments

Businesses looking to future-proof their payment systems and take advantage of the enhanced capabilities offered by PaaS should start by thinking big, Chang says.

They should ask some high-level questions:

• What is our customer experience today and how could we improve it?
• How do we accept payments today?
• How could we improve our business processes to save time, money or reduce risk?

“Business leaders should also ask themselves what the future could look like and how they could create competitive advantages for the business,” Chang says. “After starting here, it’s possible to work back and see how the range of PaaS capabilities – either individually or in conjunction with each other - could help to get you there.”