What is Cloudwashing? How to Identify a True SaaS Payment Solution

As cloud-based software continues to mature, the practice of cloudwashing persists – a misbranding exercise where vendors market traditional hosted or on-premises software as true SaaS. The problem is particularly acute in financial services, where cloudwashing can undermine security, regulatory compliance, and operational efficiency—posing risks to both providers and their clients.

**What is Cloudwashing? **

Cloudwashing involves taking traditional software and running it on a cloud instance, while still marketing it as ‘true cloud’ or ‘true SaaS’.  Its ongoing misuse means your organization needs to be able to tell the difference between a true SaaS vendor versus one that is cloudwashing to avoid issues. The practice also continues to overall cloud dissatisfaction, which Gartner believes will affect 25% of all organizations by 2028. With more enterprises reporting hidden operational costs and delayed innovation due to cloudwashed platforms, the stakes have never been higher.

**Defining True SaaS, On-Premises and Hosted Solutions **

_True SaaS _

A true SaaS platform, such as InvoiceCloud, is a single instance, multi-tenant platform. This means that all clients are on the same base software code and platform (single instance), but many others are simultaneously using the same code (multi-tenancy). Well-architected SaaS platforms can be uniquely configured, not customized, to accommodate a client’s unique needs, leaving the underlying codebase unchanged. In 2026, the most successful payment solutions are built on this architecture, ensuring that clients experience seamless updates and robust security enhancements. Financial organizations leveraging genuine SaaS platforms benefit from continuous compliance updates and rapid adaptation to regulatory changes.

With true SaaS, all clients have the latest and greatest user interface (UI), user experience (UX), security enhancements, and updates without the need for updates, downloads, or patches. This continuous improvement model is a hallmark of authentic SaaS.

_On-Premises Software _

On-premises software is something that resides on your computer or is accessible from your organization’s network. These software platforms provide “updates” to enable bug fixes, enhance security against new threats, and enhance the UI or UX.

_Hosted Software _

Hosted Software is like on-premises software, except the hardware, or servers, that it runs on are not located on company premises. Company IT departments still have to manage updates, patches, upgrades and downloads. Many software providers who provide “hosted” software create web-based tools for users and company administrators and then call their software “cloud,” “cloud-based,” or “SaaS-based.”

On-premises and hosted solutions are not true SaaS because they are tailored for each client. This creates a unique set of software that needs to be maintained and secured – creating extra work for your organization’s internal IT department as well as delays when it comes to enabling new features or functionality.

Here are a few questions you can ask to determine whether a provider is offering a true SaaS solution.

• Are all your clients on the exact same codebase or are they on variations of a common codebase? A true SaaS solution has a single codebase for all clients.

• Is the platform single instance multi-tenant or is it multi-instance? A single instance, multi-tenant solution is a configurable SaaS platform with a single codebase. This is the only true SaaS model. Multi-instance implies multiple instances of code that are unique to each client.

• Does your website accurately depict what you provide? Many providers realize that stating that they are SaaS when they aren’t will get them in trouble once organizations realize it is a false claim. If a provider’s web site promotes “SaaS-based” solutions instead of true SaaS, it’s most likely cloudwashing.

True SaaS software offers scalable, highly configurable and innovative solutions that continuously deliver value. And in the constantly evolving payments industry, it is the only delivery model that can drive positive business results for your organization.