Presented by Stripe
Shockingly, according to the IMF and other sources, only 3 percent of GDP is online today. This metric shows the enormous opportunity ahead in the online payments space. Payments vendors like Adyen, Worldpay, Braintree, and Stripe have all found some degree of success enabling traditional retailers’ ecommerce efforts, while helping new, high-growth businesses get online and up-and-running quickly.
The early days of payment processors centered around payments being a necessary, but frustrating headache — commodity gateways that cut into potential profits. However, the situation today is changing. The transition of newer payment providers using public cloud infrastructures like Amazon Web Services (AWS), Google Cloud, and Microsoft Azure gives these vendors, and the enterprises who adopt them, new strategic options… and more secure and scalable payments to boot.
According to 451 Research’s 2017 Cloud Transformation Organizational Dynamics study, the top two reasons respondents adopt public cloud infrastructures are cost savings (38.8 percent) and resource scalability based on application and workload demands (32.2 percent). These same advantages are also applicable to payment vendors, and underscore how forward-looking businesses are evaluating those payment firms who use the public cloud to help them gain strategic advantages.
Historically, payments weren’t viewed as an area where enterprises could differentiate themselves strategically. But now, with a handful of modern payment platforms using a public cloud infrastructure — coupled with external factors such as new government rules (PSD2, GDPR) and new possibilities from an internet-enabled global marketplace — the ability for businesses to ensure uptime and manage regulatory complexity transforms the equation. Infrastructure choice matters, and it’s a decision that shouldn’t be made lightly.
These newer commercial payment services include Braintree, Square, and Stripe, all of whom have built their infrastructures on top of public cloud services like AWS, Google Cloud, and Microsoft Azure. Older service providers, like Adyen and Worldpay, instead use their own private cloud services to underpin their payment operations. The advantage of these newer services using the public cloud include enhanced security, increased scalability, comprehensive audit trails, decreased downtime, and more potential innovation.
Extra security resources
Because of the sheer number of clients working with AWS, Google Cloud, and Microsoft Azure, all three (as well as smaller public cloud competitors) generally have dedicated security teams with resources to quickly fix vulnerabilities and offer automated patching products. Recent security crises, such as Meltdown and Spectre, were quickly handled by their respective cloud operators; smaller, proprietary cloud operators can sometimes struggle with response time. And they’re not as battle-hardened as the larger players, who also host consumer-facing services used by millions of end users.
Public cloud-hosted services scale more easily than private cloud-hosted services for handling payments. 451 Research’s report found that transaction volumes can shift dramatically during peak periods like major sales or the holiday shopping season. Public cloud services are largely able to scale in real time to accommodate these changes, while private cloud providers need to predict growth periods in advance. Cloud hosting offers significant advantages for scaling everything from checkout conversion to complex fund flows.
Less downtime (and less money lost)
Despite occasional outages, AWS, Microsoft Azure, and Google Cloud generally have more uptime than private clouds. According to 451 Research, nearly 1 in 3 consumers say they are unlikely to return to an online business if an issue prevents their payment from processing. The large commercial cloud providers skew towards extremely minimal downtime.
This equates to big differences in unprocessed payments and lost revenue. According to the Ponemon Institute, each minute of cloud downtime costs companies approximately $9,000. Even if a private cloud provider offers 99.9 percent reliability, this means more than eight hours of downtime a year and more than $4 million in losses. Comparatively, The Information reported that the public cloud leader AWS had approximately 7.5 hours of total downtime over three years (between 2015 and 2017).
Better for global customers
Payment processing is subject to a wide range of governmental and institutional inspection. AWS and other public cloud options are designed — by the nature of their large enterprise clients — to have more robust auditing capabilities than many private clouds because they offer a massive international footprint. Payment vendors using a private cloud infrastructure simply cannot compete with AWS’ scope — and, in turn, they put their customers at a disadvantage for scaling payments internationally in countries with unique requirements.
“Any business accepting payments across different geographic markets needs to review the infrastructure of their payment vendor, or they risk losing money, facing increased downtime, and confronting heightened security risk,” said Jordan McKee, Research Director at 451 Research. “Private cloud-based payment providers have to weigh the value of geographic reach against the costs of owning and operating data centers around the globe.”
When enterprise customers use public cloud-based payment processors, they get access to a modern reference architecture that allows them to easily integrate new services and also provides the flexibility to create entirely new business models, such as building a subscription or marketplace business. And, like other PaaS (Platform as a Service) and SaaS (Software as a Service) companies — think Salesforce or Box –public cloud-based payment processors tend to have third-party integration ecosystems for services like Xero, Slack, and others that build upon their core payments capabilities. Comparatively, private cloud-based payment services are limited by scale and capability — so they typically don’t offer these easily integratable third-party solutions, as each integration requires extensive customization.
In this era of mobile apps, pervasive AI, and numerous other technologies, it may seem like a foregone conclusion that your payments vendor is built on the public cloud. After all, it’s rare to find any enterprise application that hasn’t moved to this kind of modern infrastructure in recent years. But there are still a small set of holdouts with private clouds who may not be able to grow and scale with your business. Based on 451 Research’s report, this presumption could impact you in the place where it matters most: converting a sale.
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