Leverage in-app payments to succeed in subscription management and recurring billing

SaaS vendors in the subscription management and recurring billing industry recognize that a well-managed customer experience reduces churn and promotes a steady stream of predictable revenue. In addition to establishing a mutually beneficial customer relationship for both parties, subscription management professionals also understand the importance of optimizing efficiency and maximizing revenue opportunities, all of which are critical to success.

However, a barrier to this success is the disparate structuring of payment processing networks and the cost of payments, especially in the B2B space. SaaS vendors in the subscription management and billing industry often implement a slew of payment integrations based on customer preferences, resulting in a fragmented network of payment gateways, banks, and carriers. other suppliers. This network is expensive to maintain and results in higher processing fees for customers. A rebuilt payment stack may work in the short term, but over time cracks in the infrastructure will emerge, including higher than average fees for B2B payments, outdated integrations, limited scalability, customer service issues for the end user and inefficient integration processes.

The case of embedded payments

Many SaaS providers fail to realize the potential of integrated payments when operated as part of a cohesive business strategy. Integrated payments connect payment functions with back-office systems and software so that payments are processed within the SaaS solution, opening the door to untapped opportunities for SaaS providers.

According to an S&P Global Market Intelligence survey of global payments decision makers, more than one in 10 merchants now use an integrated payment processing service from one of its major software vendors. Long-term opportunities are also promising, with three out of four businesses that are not using payment processing saying they are “very interested” in doing so, and a further 21% say they are “somewhat interested”.

By partnering with an integrated payment provider offering a payment strategy, SaaS providers can reap many benefits, including an additional revenue stream, lower processing fees, and improved user experience.

Maximized revenue

In an integrated payment partner relationship, the payment processor shares all processing revenue collected on the subscription management or recurring billing company’s SaaS platform. Given the volume of transactions these companies typically process, SaaS vendors stand to gain a considerable revenue stream. For example, a SaaS provider that serves 200 users, each averaging $1 million in online transactions per year, could generate an additional $1 million in transactional revenue from a base fee of 0.5%. Assuming a 50/50 revenue split, the SaaS provider can potentially add up to $500,000 or more to their bottom line. Depending on the type of integrated payment model chosen by the SaaS and the interchange rate optimization services that the integrated payment partner can provide, this revenue distribution has the potential to increase further.

Reduced B2B processing fees

B2B credit card payments are expensive, with high processing fees that often affect subscription providers’ profits. The rules that govern pricing are complex and vary widely depending on many factors, including type of business, industry, method of processing, and more. Integrated payment providers can offer subscription management companies a technology known as exchange optimization, in which the provider obtains the data required by the card issuer to receive the cheapest rate. Generally, interchange fees will be lower when the card issuer determines that a transaction is lower risk – for the card issuer, more data means less risk. As a subscription management or recurring billing provider, reducing these fees provides a competitive differentiator in a crowded market.

Improved user experience

Integrated payments give SaaS providers greater control of the overall user experience, from account onboarding and approval to processing speed and the latest payment technologies. Instead of relying on a disparate payment network, a single integrated payments provider can offer a standardized procedure for account setup, resulting in more efficient onboarding. Integrated payment providers can also reduce development time and infrastructure investment with integrated technology enhancements such as the ability to accept digital, mobile, and cryptocurrency wallet payments. And without multiple payment integrations to manage, ongoing maintenance costs are reduced. Additionally, a dedicated support team is available on call, providing subscription management companies and their subscribers with additional assistance.

The path to integrated payments

Integrated payments can be implemented using multiple payment models. The most common models include Independent Sales Organization (ISO), Payment Facilitator (PayFac), or PayFac-as-a-Service (PFaaS). The main differences between these three are the level of investment and risk a SaaS company is willing to accept in proportion to the revenue potential. However, each model offers the benefits of a profitable revenue stream, lower B2B processing fees, and improved user experience. Instead of being a cost center, payments have become an integral part of the business strategy of many SaaS players in the subscription management and recurring billing industry.