Finding the right SaaS Payment Processing for your business can be a big advantage. Learn what to look for in a payment processing partner.
The software as a service (SaaS) industry continues to grow as individuals and organizations use this convenient method of accessing programs and applications.
A report from Fortune Business Insights projects the total value of the SaaS industry will reach about $717 billion by 2028. That’s good news for established enterprises and newly opened SaaS businesses alike.
That growth in value also shines a light on a challenge facing many SaaS businesses, especially smaller ones. Where can organizations that specialize in SaaS find dependable and secure credit card processing that delivers value? What qualities are most important in credit card processing companies for SaaS?
An efficient billing system is crucial for managing subscriptions and payments, streamlining user experiences, reducing involuntary churn, and consolidating essential functions such as invoicing, payments, and revenue management.
Let’s take a closer look at this type of small business credit card processing, focusing on needs specific to smaller SaaS companies.
SaaS payment processing refers to the specialized system of managing and processing payments for Software as a Service (SaaS) companies. This process is crucial for handling recurring payments, subscription management, and overall payment processing for SaaS businesses. By efficiently managing these aspects, SaaS payment processing ensures that companies can maintain a steady revenue stream and provide a seamless payment experience for their customers. Whether it’s a small startup or a large enterprise, effective SaaS payment processing is a cornerstone for the financial health and operational efficiency of any SaaS business.
SaaS payment processing offers a multitude of benefits that can significantly enhance the operations of SaaS businesses:
These benefits collectively contribute to a more efficient, secure, and customer-friendly payment processing system for SaaS businesses.
While SaaS payment processing offers numerous advantages, it also presents several challenges that businesses must navigate:
Understanding these challenges is essential for SaaS businesses to choose the right payment processing solution and implement strategies to mitigate these issues.
Security and compliance should be a top concern for every business when it comes to payment processing. That's true whether they're in the SaaS industry or not. The benefits are wide-ranging, from avoiding liability and developing a negative reputation with customers, and crucial for continued success.
Security for recurring payments can be seen as even more vital than normal by some customers. The payment processor will store their credit card information and use it repeatedly, as opposed to a more common one-off purchase. That can increase a customer's focus on security and compliance, at least in terms of how it affects their credit card.
Security and compliance are one of the few concepts that are not negotiable. Any credit card processing company your SaaS business works with must have the proper security measures in place. That service provider also needs to demonstrate compliance with the Payment Card Industry Data Security Standard (PCI DSS).
We maintain a list of top payment processing companies for SaaS businesses. All of them prioritize and demonstrate compliance with PCI DSS and other relevant industry standards.
If you're reviewing credit card processors on your own, make sure to ask specific and detailed questions about security and compliance. A reputable company won't have their representatives try to change the subject or hurry you along. They'll offer detailed responses and supporting documentation (like validation of compliance).
The rise of businesses like subscription boxes has made even non-tech-savvy consumers familiar with recurring payment and automatic payment models. Many credit card processing companies now have experience with subscription management for online payments.
If your SaaS products use simple pricing structures, a wide range of processors can effectively support them. A flat fee charged on a per-license basis shouldn’t be an issue. Nor should tiered pricing models, depending on the SaaS features users need access to.
Establishing a merchant account in tandem with payment gateways and subscription management systems is crucial for efficient payment processing. Providers like Authorize.Net and PayPal facilitate access to these accounts, impacting transaction costs and payment method options.
However, it’s important to ask about support for more complex pricing models. What if the monthly fee changes for each subscriber based on data usage or other factors? Can your credit card processor support this kind of dynamic billing? Or could the need to use e-invoicing combined with automatic but variable payments cause trouble and delays on the processor’s side?
SaaS businesses have a unique advantage over companies that provide a physical good or service. Their fully digital model of distribution and service for B2B and B2C clients means that a much larger potential customer base exists.
Some limitations will always exist. That includes languages the software is available in, a potential customer’s computer processing power, and the scope of the software’s intent and use cases.
But SaaS companies can more effectively target a broader and more international market through eCommerce than businesses in many other industries. Ensure that any credit card processor you partner with accepts payments from many countries and credit card issuers, and in a broad range of currencies.
This next point goes beyond the bounds of a conversation focused only on credit card processing. However, a good SaaS payment processor should also accept other forms of payment that are regularly used in certain parts of the world. That could mean ACH payments, direct debits, and other options, depending on where your customer base is located. Additionally, choosing payment gateways with low transaction fees and seamless integration with subscription payment solutions is crucial for managing recurring billing and compliance with accounting regulations.
Bringing a customer to the top of the sales funnel and successfully converting them into a regularly paying customer is a complex task. The last thing your organization wants is to lose a customer who is otherwise satisfied due to a negative experience with credit card payments.
Localizing the experience — language, currency, applicable taxes, and more — is crucial to consider in this regard. So is the overall user experience of initially inputting payment information and then occasionally reviewing or updating that data.
A dedicated SaaS payment gateway enhances billing flexibility and reporting capabilities, making it essential for SaaS companies as they scale and diversify their offerings.
Customers should have a simple experience that quickly delivers what they want: access to your SaaS solution. That should be a priority for new customers inputting payment information for the first time. And for existing ones who are updating their credit card data or changing their subscriptions.
Visibility into failed payments and similar issues can help your business reduce churn. If a customer’s card is declined because it’s expired, there is a good chance they genuinely want to continue working with your organization.
A comprehensive SaaS payment solution is vital for managing subscriptions and reducing churn rates by integrating payment processing, subscription management, and customer support.
A credit card processor that effectively works to notify customers about a missed payment and encourages them to share new payment info is valuable. So is reporting that identifies issues related to churn.
In general, keeping existing customers is easier than attracting new ones. When the technical details of a payment are the only thing preventing a continuing relationship, that’s a loss for your company and, likely, the customer themselves.
Several top-tier SaaS payment processing solutions can help businesses manage their payment needs effectively:
These solutions provide a range of features that can cater to the diverse needs of SaaS businesses, ensuring efficient and reliable payment processing.
Selecting the right SaaS payment processor is a critical decision that involves several key considerations:
By carefully evaluating these factors, SaaS businesses can choose a payment processor that aligns with their needs and supports their long-term success.
Swipesum is an unbiased consultancy with experts focused on finding the best solutions for your business. We take payment industry standards, your business needs, and the diverse offerings on the market into account. We know how to craft solutions for eCommerce, including the SaaS industry.
We focus on effective payment processing and lowering the cost of credit card payments without sacrificing things like quality or security. That means we can help you position your business for success.
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Michael Seaman
Michael Seaman is the co-founder and CEO of Swipesum. A veteran of the payments industry and former employee at one of the largest payments companies, Michael, along with his brother Stephen, has led Swipesum since its inception in 2016. Swipesum is committed to providing innovative payment solutions and exceptional service to its diverse clientele. In his free time, Michael enjoys traveling with his wife Kelsey and their three children, pole vaulting, and engaging in typical Midwestern dad activities.
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