IP Commerce's Platform Evangelist, Tyler Hannan, answers five burning questions on cloud computing and its impact on the payments industry.
Hannan is an experienced technologist with a passion for human interaction. As the IP Commerce Platform Evangelist, he delivers unique value to the organization by collaborating and coordinating with companies within the payment processing and technology market to drive innovation and deliver understanding of the IP Commerce Platform and Network. His blog, Reflections on Emergent Commerce and Technology, serves as a compass for industry leaders looking to break down technology silos and deliver on-demand commerce services.
Why is the payments industry now so focused on the notion of cloud computing and "payments in the cloud?" What is it and how does it change the industry's ecosystem?
To begin with, putting "payments in the cloud" in quotes is an important concept. The current deployments of cloud computing that most are familiar with are, necessarily, different in terms of deployment and (often) security than is required for payments capabilities. The question, then, becomes can the concepts that are useful in cloud computing be applied to the payments industry. The answer, simply, is "yes."
Without becoming painfully technical, cloud-based platforms for payments provide Application Programming Interface (APIs) based integration capabilities for payment services. This includes not only card acceptance, and store value systems (ala PayPal), but also access to ACH, Gift, Electronic Check workflows, etc.
It is important to note that the concept of "payments in the cloud" must be supplemented with key platform components that allow these new workflows to be properly deployed and managed. Items such as ...
- Multi-Channel Support
- Support, and enable, adherence to PCI/PA-DSS requirements
- Dynamic/interactive online help for the Software Company
- SLAs that reflect the importance of commerce to the merchant customer if not taken into account, and addressed holistically through the cloud-based solution, the utility (and potential for adoption) of the service is drastically decreased.
The ecosystem change is felt, primarily, in the ability of the Software Company to innovate on behalf of the Payment Service Provider and merchant customer. This enables truly innovative workflows to be developed and brought to market in a matter of weeks.
The launch of the PayPal X platform in 2009, really seemed to "dial up" the conversation about the significance of cloud computing and payments, even though Amazon really introduced the industry to that concept in 2006. Why didn't Amazon's web payments platform ignite, in your opinion, and could it still?
Amazon Web Services (AWS) is, far and away, the cloud solution that provides the most utility and benefit for the developer searching to adopt cloud computing solutions. Amazon has continued to add capabilities (Amazon PayPhrase, Amazon Prime authentication, etc) somewhat quietly to the subset of AWS capabilities known as Amazon Flexible Payments (FPS). With this inbuilt network of developers already leveraging their cloud-computing solution, the ability to cross-market payments capabilities to those developers is incredibly compelling. In addition, the number of registered users on Amazon.com itself is staggering...if you consider that each of these users represents an "Amazon Payments" user with their credentials pre-configured they are all well positioned to make a substantial play in the payments, specifically e-commerce (at least initially), market.
Do you think that platforms that make it easy to payment-enable applications will change the industry's business model in any way? If so, how. If not, why not?
The primary shift will be from selling service based on discount points and rate (at least to down-market customers) and to focus on quality of service and integration into necessary software solutions. Ultimately, simplicity of payment-enablement of applications results in breadth of offering into verticals, and merchant sizes, not previously considered possible. It is the nimble who will be able to recognize, and capture, this opportunity quickly.
Who stands to benefit the most from a payments platform ecosystem that is cloud-enabled and why?
A better question would be to ask who doesn't benefit.
If you consider the core constituents of the payments ecosystem there are Merchants, Software Companies, Sales Channels, and Service Providers. Any well-implemented payments platform must take into account the unique needs and requirements of each of these audiences that comprise the ecosystem.
Merchants: Ultimately, the end-user of the output of payment-enabled software is the merchant customer. Meeting their needs through highly-integrated solutions that provide the workflow, and services, that their business demands will result in a stickier, longer-life customer.
Software Companies: In 2005 PayPal performed a study that indicated that 45% of all merchants rely upon on their software company for payments acceptance decisioning. The study, while dated, was positive indication that even 4 years ago the importance of the Software Company was recognized. As "hardware" continue to translate into software (be it installed, on a device, embedded, etc) the need for the expertise of the Software Company will continue to increase. Similarly the Software Company is able to meet their customers demand much more quickly, securely, and completely than ever before.
Sales Channels: Those who sell professionally are a relatively simple component of a payments platform ecosystem to understand. More products will yield more customers and more opportunities to sell...thereby resulting in more revenue.
Payment Service Providers: At the risk of being overly blunt, gone are the days of assuming that proprietary specification yields customer longevity. When competing in a commoditized world, those who have a methodology for providing what their merchant customers demand...both services and software...will retain that customer. Service and offering is a competitive differentiation.
A brief diatribe to say...the only one who does not benefit is the organization (of any audience) that does not participate.
Do payments platforms have to be in the cloud? Do you think that there will be payments platforms that will be tied to existing private networks? Why or why not?
In my opinion, cloud-based does not (necessarily) mean "public." In the technology sector, you often hear of private cloud development with the caveat that there is a greatly decreased utility in adoption of the private cloud vs. the public.
Considering the concept of public vs. private is to place the focus on the wrong issue. The challenge is, ultimately, utility. The Internet ("public") simply functions as infrastructure in the enablement of developing new, or supplementing existing, points of acceptance. When this is realized, the focus becomes instead on authentication and security of a cloud solution and the determination of whether connection to a "private" network provides any utility above and beyond those offerings that are "in the cloud."
More on Tyler Hannan: Hannan travels the country and is a popular software and payments industry panelist and presenter, where he speaks at on the evolution of the commerce industry. He has demonstrated IP Commerce technology at industry events including Electronic Transaction Association, BAI TransPay, and FinovateStartup 2008. Prior to joining IP Commerce, Hannan worked for diverse Denver-area software companies including StorePerform Technologies with responsibilities ranging from production database support and implementation, data-warehouse design, technical consultant, corporate trainer, and network administrator.
To contact Hannan, read his blog, and more — go here.