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What are SaaS payments?

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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 editedMar 20233 min read

If you run a software as a service (SaaS) company, you’ll need a suitable payments strategy to remain competitive in today’s market. Because software is provided on an ongoing basis, many SaaS payments use a subscription billing model. Rather than taking a one-off payment to access software, SaaS payments are taken on a regular, recurring schedule. This not only provides stability to your customers but ensures a predictable source of income for your business. Yet there are several factors to consider when determining the best way to collect SaaS payments from your customers. Find out more about SaaS payment processing and how it all works below.

How do SaaS payments work?

To get started with taking SaaS payments, your business will need to put some basic infrastructure in place. This includes a secure payment gateway, merchant account, and subscription management tools.

Payment gateway

A SaaS payment gateway describes the customer-facing portal or checkout page that your customer sees. It includes all the required fields that they fill in for payment, whether it’s credit card or banking details. One difference between a SaaS payment gateway and a typical ecommerce retail gateway is that your customers will also be able to choose from a series of payment plans. These depend on the pricing model you choose whether it’s tiered levels of service or a per-user pricing system. If you choose a hosted gateway, the provider is responsible for secure storage and transmission of all payment details to the payment processor. This takes away some of the burden from your business.

Merchant account

The second piece of the puzzle is a merchant account. This is a dedicated account where customer payments are sent for clearance and settlement. Many all-in-one payment processors offer merchant account services as part of the platform.

Subscription management

Finally, SaaS payment collection requires the use of a subscription management system. Customers sign up and submit payment details to the payment gateway for processing. Once their payments are authorized, funds go to your merchant account. Yet you’ll also need accounting software for SaaS companies as well as subscription management software to store customer data. It should track scheduled recurring payments, customer interactions, and retention figures. You can use this tool to find out more about how your customers are using your services with an eye for improvement.

How to collect ACH Debit payments with GoCardless

1.

Create your free GoCardless account, access your user-friendly payments dashboard & connect your accounting software (if you use one).

2.

Easily set up & schedule ACH Debit payments via payment pages on your website checkout or secure payment links.

3.

From now on you'll get paid on time, every time, as GoCardless automatically collects payment on the scheduled date. Simple.

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The benefits of a subscription-based payment model

Not all SaaS businesses follow a subscription-based payment model, however there are multiple benefits to doing so. Setting up recurring payments ensures a predictable revenue stream to improve your cash flow. Predictable streams of recurring income also allow your business to generate more accurate financial forecasts. This is useful not only for attracting investment, but also for creating a growth strategy.

Using a subscription management system as part of SaaS payment collection gives your business access to detailed customer data. Looking at data over the long term yields valuable insight into customer satisfaction, churn, and other key performance indicators. You can use these as the jumping-off point for improving long-term customer relationships while attracting new business at the same time. All this cuts the cost of customer acquisition.

From more detailed customer data to improved customer satisfaction, a subscription business model is a win-win for any SaaS business and its clients.

Subscription payments and customer churn

SaaS business bank on receiving predictable subscription payments. These SaaS payments benefit the company in the long term, as described above. But what happens when customers cancel their subscriptions? This is called customer churn, and it can quickly derail your plans for growth.

Voluntary churn happens when a customer cancels their software subscription for any reason. They might decide to switch over to a competitor or decide they have no more use for the service.
Involuntary churn happens when a customer’s subscription is unintentionally canceled. Sometimes, the customer simply forgets to renew the subscription. Other times, their payment details expire without update, causing the payment to fail.

While voluntary churn can be addressed through customer service, involuntary churn is often directly related to SaaS payment collection. Whether it’s due to expired payment details or processing errors, this type of churn is just as costly to your business. Both require active management to retain your customers and facilitate a steady stream of income.

Using a secure recurring payments solution like GoCardless can help reduce involuntary churn. It’s estimated that 30% of churn is involuntary, caused by preventable failed payments. Switching over to GoCardless lets you collect 97.3% of automated, recurring payments on the first try. Our Success+ tool automatically retries the small percentage that fail by automatically retrying them on the most optimal date and time.

How can GoCardless help with successfully taking SaaS payments?

It’s clear that GoCardless can help take SaaS payments by reducing churn, but there are additional benefits to consider. Reduce the cost of collecting recurring payments by up to 56% in comparison to other SaaS payment gateways. While card payments are costly and prone to failure, GoCardless’s bank payment solution cuts unnecessary fees. Take international subscription payments from customers in over 30 countries, including Canada, the UK, Eurozone countries, Australia, New Zealand and Canada, all at market rates.

GoCardless is easy to integrate directly into your website with an out-of-the-box payment page. If you prefer a customized checkout, you can use our API to create a page that best fits into your existing website. SaaS businesses retain full control by pulling payments directly from customer bank accounts on the day they’re due, at intervals of your choosing. Customers only need to provide payment details the first time. Set it and forget with our secure, online form. This significantly reduces the chance of late payment, improving cash flow while maintaining those all-important customer relationships.