What SaaS Companies Should Look for in a Payments Platform

September 27, 2018
Moresby Media

It’s critical to have a payment solution that can support flexible licensing and billing options.

Selecting the right payments platform is a key decision for any ecommerce company, but it’s not always a straightforward one. After all, every business and product category comes with different payment requirements, and there is no shortage of providers out there with solutions tailored for a wide variety of specific needs.

The SaaS business model in particular is quite unique in the ecommerce world, which tends to be dominated by physical products. As a result, SaaS companies need to be especially selective when picking a payments platform, as generic payments solutions are not likely to be well-suited to their needs.

Specifically, here are four key elements that every SaaS business should look for in their payments platform:

Flexible Billing & Licensing Options

Unlike the average physical product, SaaS solutions are often offered in a variety of different membership plans and licensing options. That’s why it’s critical to have a payment solution that can support flexible licensing and billing options.

For starters, the system should be able to automate the collection of recurring payments, and allow you to easily make modifications to any ongoing plans. Ideally, it would also be able to automate common changes such as upgrades, downgrades or cancellations, so that your customers are able to make these changes without having to go through an employee.

In addition, the platform should have a robust license management system which supports a wide range of licensing models, such as multi-seat, feature-based, floating and subscription licenses. It should also offer e-mail and web-based fulfillment options, and automated license enforcement.

While it may be tempting to overlook these features if you don’t currently offer a wide range of licensing options, that would be a mistake. Change happens rapidly in the SaaS world, and many companies have found great success by experimenting with different subscription models and price points. A flexible licensing and billing system can allow you to easily change your model at the click of a button, thus enabling agile iterations over time.

For this reason, it pays to choose a solution that can scale with your needs as you grow.

Renewal Optimization

A high SaaS churn rate is one of the biggest obstacles to sustainable growth. And the remarkable thing is that for most companies, much of this churn is not due to customers actively leaving the service! Instead, research has found that as much as 20-40% of SaaS turnover is due to delinquent payments, not customer cancellations.

This is actually good news, because it means that reducing delinquencies can make a big dent in your churn rates – and this is something that a good payments platform can help with. In particular, you want to make sure that your chosen platform has three key features.

First, it should come with an automatic account updater. Expired and cancelled credit cards are a very common cause of delinquent payments, and are responsible for 40% of account charges every year. An account updater ensures that your database of credit card information is kept current, based on the latest data from issuing banks. This ensures that your customers will remain subscribed to your service, without having to manually update their credit card details over time.

Second, it should be armed with intelligent retry logic, which enables the system to attempt transactions multiple times according to a set of customized rules. This is because many transactions are declined for a

Companies that take full advantage of these features will find their payments platform paying for itself in no time.

number of unpredictable reasons, such as lack of funds, technical difficulties, or exceeding credit card limits. Often, simply trying again at a later time will result in a successful charge, and in-built retry systems will allow you to automate this process.

Third, it should offer dunning management capabilities, which will automatically email payment notices to customers when all other solutions have failed. This will relieve your staff of the need to manually pursue delinquent accounts, and also ensures a greater degree of consistency in your follow-up process.

A payments platform that offers all these features will greatly reduce your delinquent churn.

Cross-Selling Capabilities

The majority of SaaS revenue growth comes from selling more to customers you already have, not by acquiring completely new ones. In fact, the 2017 Pacific Crest SaaS Survey found that it took an average of $1.15 to acquire a dollar of revenue from new customers, but only $0.57 to acquire that same dollar from the existing customer base.

With that in mind, SaaS companies should look out for cross-selling capabilities when evaluating various payment platforms. Cross-selling can come in three main variations:

  • Upgrade opportunities, where customers will pay more for additional features, or premium versions of your software
  • Other software products, offering distinct but complimentary functionality to the product they initially bought (e.g. marketing automation software that is integrated with their CRM solution)
  • Non-software products and services, often in the form of research reports, how-to ebooks, or coaching and advisory services based on the vendor’s domain expertise

While you could theoretically sell these as separate products through any payments solution, there are significant benefits to a platform that offers specific cross-sell capabilities.

For example, such platforms will usually include the ability to present these cross-sells at strategic moments in the checkout process, which is when buyers are most receptive to them. Some platforms will also provide you with the tools to track the performance of various cross-selling offers, thus allowing you to identify the most effective approaches for your specific customer base.

Companies that take full advantage of these features will find their payments platform paying for itself in no time.

Channel Partner Integrations

Recruiting channel partners is a great way to accelerate SaaS growth. However, partner commissions for recurring subscriptions can be complex to calculate and distribute, and most payment platforms simply do not provide this functionality, as they are designed for one-time sales.

So if you have a partner program in place, or might start one at any point in the future, you need a solution that offers strong partner integration capabilities. At a minimum, the software should be able to automatically track partner sales, then calculate and distribute the associated payouts on a recurring basis. But beyond those basics, there is so much more a partner-focused platform can do.

This is an area where Moresby Media really excels. Out platform includes an open API for easy integration with partner systems, and a dedicated portal for partners to track their sales and payouts. This essentially automates partner management for SaaS vendors, while providing partners with a high level of financial transparency.

The system also allows vendors to customize incentives for each individual partner, thus offering a high degree of flexibility for recruiting partners under different arrangements (e.g. affiliate, reseller, distributor). And it has support for international tax and remittance requirements, making it easy to onboard and manage partners around the world.

By selecting a partner-focused payments platform, you’ll be establishing a strong foundation for your SaaS company’s continued growth.

Avoid Buyer’s Remorse

When it comes to ecommerce payments, SaaS businesses have very specialized requirements. Before signing on to a payments platform, you should do your research carefully to determine whether it meets your company’s needs. The four key features described in this article will help you narrow the field, and choose a solution that serves you well in the long run.

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