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Guide to SaaS payment processing

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The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedApr 20232 min read

From recurring billing to subscription upgrades, Software as a Service or SaaS businesses have unique payment processing needs. This means that one-size-fits-all ecommerce platforms aren’t always the optimal choice. Instead, a dedicated platform will make it easy to comply with local tax regulations and reduce customer churn from one central location. What are some SaaS payment solutions, and how do they work? We’ll cover your most suitable SaaS payment processing options in this guide.

What is SaaS payment processing?

To get started, it’s helpful to look at the difference between a payment processor and payment gateway. A payment gateway is the customer-facing portal that approves or declines transactions, transmitting data to the processor. The payment processor sits in between the business and customer. It works behind the scenes relaying data to the issuing bank and acquiring bank, to clear revenue and deposit funds.

Any business accepting payments will need a payment processor. SaaS payment processing focuses on the unique needs of the SaaS business model. This involves recurring billing, subscription management, and tiered pricing.

How do SaaS payments work?

SaaS payments follow the subscription life cycle. Customers are sent invoices according to their plan or package, which they then pay with their method of choice. A good SaaS payment solution lets customers make payment while helping to manage the ebb and flow of the subscription life cycle. Customers should be able to pause, renew, cancel, upgrade, or downgrade plans. Each of these actions will impact billing and invoicing. A unified payment processor will manage subscriptions and invoices for you, while handling payment data.

What are the benefits of SaaS payment processing?

There are numerous benefits associated with using a payment processor designed for SaaS businesses.

Improved customer experience: Subscriptions come with high churn rates – nearly 40% by some accounts. Improving your customer experience is vital to boost retention rates and reduce churn. Providing a slick, user-friendly payment experience builds trust and encourages customers to upgrade and renew their subscriptions.
More efficient billing: The best SaaS payment solutions are scalable, allowing them to grow along with your business. Otherwise, it gets difficult to track tiered subscription rates and product add-ons. Payment collection is easy as well with solutions like GoCardless, which pulls recurring payments from customer bank accounts on the day they’re due.
Easier accounting and reconciliation: Accounting can get tricky when you’re collecting recurring payments. It takes 12 months for a service to be provided if you’re selling an annual subscription. In many cases, you can’t recognize the revenue until this point. Automated software works with payment processors to automatically reconcile revenue even across thousands of accounts.
Fraud protection and security: Using a PCI-compliant SaaS payment processor means you’ll be able to keep your customer data safe. The best solutions use best security practices like tokenization and end-to-end encryption, so you don’t have to deal with storing credit card information in-house.

How to choose a SaaS payment gateway

SaaS payment processing systems include all-in-one solutions that provide the best of both worlds – gateway and processor. These should integrate easily with your existing accounting and invoicing software for the best results. Look for a unified solution that combines billing, payments, revenue management, and subscription management.

Here are just a few features to look for when you’re comparing your options:

Flexible, automated billing
Variety of payment methods
Subscription management tools
Revenue management tools
Local and global tax compliance
Localization capabilities for global expansion
Security and PCI compliance
Customization capabilities

The goal is to provide a frictionless payment process for your subscription customers. With GoCardless, you can eliminate barriers to payment with a fast, seamless experience. Take recurring payments on the day they’re due with ACH debits. Our intelligent retries feature, Success+, helps cut down on subscription-killing involuntary churn. We also integrate with over 350 partners including Xero and Salesforce for a streamlined workflow.

We can help

GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.