6 SaaS Payment Obstacles (and how to overcome them)
There’s little doubt that SaaS is an ever-expanding industry, with thousands of new startups appearing around the world annually and a global market valued in 2018 at $72.2 billion. Yet despite the increasing growth, how many of these SaaS startups take their organization's payment processing for granted?
When it comes to payments, there are common pitfalls which companies operating in the SaaS space need to be aware of. Failure to address these issues can result in unnecessary churn, potentially hurting the organization in an already fragile and competitive marketplace.
Typically, SaaS providers will offer customers a way to pay for their service through a recurring or subscription billing arrangement. It is vital that the payment process is as optimized as possible. On the one hand, the process needs to be seamless and unobtrusive for the end user; on the other, it needs to ensure the business itself is collecting its expected payments and maintaining steady revenue.
In this article, we’ll take a look at some of the common payments obstacles faced by SaaS companies and how they can be resolved.
1. User experience
In a competitive market, SaaS organizations need to do everything in their power to attract and retain customers. From a customer’s perspective, a thoughtless user interface or a lack of convenient payment options is frustrating.
It is important to tailor the payment process to meet a customer’s expectations, taking into account all aspects of their journey. Consider the diversity across the customer base, from the range of devices at their disposal to the availability of varying payment methods in their location. Offering a wider choice of payment options, such as allowing users to add multiple credit cards when subscribing (also reducing the potential for failed transactions) or ACH/Direct Debit transfers, also creates a frictionless experience for the end user which will help customer retention in the long-term.
2. Failed transactions management
According to Jessie Hagen of U.S. Bank, 82% of small businesses fail due to poor cashflow management skills. In the SaaS industry, one potential barrier to reliable cashflow is the number of unsuccessful transactions, which can cost time and money to resolve - if they’re noticed at all.
When trying to grow a SaaS organization at scale, the idea of manually checking every single transaction is impractical. The best solution is to implement a system which provides a complete overview of all your transactions, and allows for easy identification of any failed transactions which may have taken place - a solution such as the CardPointe platform provides this to businesses.
3. Collecting electronic payments across borders
With SaaS companies offering their products to customers stationed around the world, finding a payment processing service which handles the regulations and preferences of different countries is an obvious challenge.
A 2017 U.S. consumer study found that credit and debit cards were increasing in popularity for all online purchases, occupying 76% of U.S. purchases made. By contrast, only 12% of online purchasers in Germany stated that a debit or credit card was their preferred payment method, with customers opting for alternatives such as invoices or PayPal. The importance of understanding local preferences but also offering a range of currency options for SaaS payments is vital. CardConnect now supports over 150 currencies in 37 countries, and integrates with hundreds of third-party apps.
4. Encryption and secure payments
Despite surveys indicating that data stored in the cloud is safer than physical infrastructure, SaaS organizations continue to face a battle to ensure their products and customer data remain secure. This challenge also extends to the payment process for users.
Ensuring online payment processing is secure and encrypted should be a top priority for any organization. A leading example of secure payment processing, CardSecure, is backed by PCI-certified Point-to-Point Encryption (P2PE) and patented tokenization to replace sensitive information. This provides peace of mind for end users and businesses alike, bringing a level of confidence to the payment process and removing the risk of sensitive information being lost or stolen.
5. Churn reduction
Although it varies from company to company, the average churn rate for a SaaS organization is between five and ten percent. The main problem from a payment perspective is involuntary churn, where customers are lost because card details have expired or the payment process fails.
Considering the higher cost of acquiring new customers for SaaS businesses compared to keeping existing ones, creating a payment process which reduces the likelihood of losing existing customers is extremely beneficial. By tailoring the user experience, in addition to adopting a platform which is both secure and easily manages the payment process, SaaS organizations can mitigate any risk and provide customers with a simple way of making payments.
When a startup is in its infancy, a founder may not be able to forecast exactly where the business will be in a year’s time. When it comes to payment processing, it is vital to keep options open and explore the possibilities for the future growth and size of the business.
Choosing a solution which integrates seamlessly with third-party applications will be hugely beneficial as the organization grows. Whether it is useful add-ons like analytics tools or integrating accounting software, CardPointe can integrate with third-party apps to simplify the day-to-day running of a business.
How to overcome SaaS payment obstacles
When it comes to payments, the obstacles - particularly in the SaaS industry - mean the process is always likely to be somewhat complex.
The best way to overcome the challenges is by choosing a trusted payment processing provider with cutting-edge security, straightforward solutions, and compatibility with third-party apps. An ideal way forward is with a payment processing solution that will integrate and grow with your organization.