SaaS payment gateway
What is the SaaS business model
SaaS (Software as a Service) is a business model that implies providing software to customers for a monthly fee. SaaS is most often hosted in cloud infrastructure, which means that users do not have to install anything to access product functionality. Plus, they can use the software from any device. Simply put, the SaaS model is when a customer works with a ready-made solution online.
The most popular types of SaaS services include:
- Customer Resource Management (CRM)
- Enterprise Resource Planning (ERP)
- Accounting and Billing
- Project Management
- Web Hosting & E-commerce
- Human Resources
- Data Management
The SaaS billing types are quite diverse. In most cases, a user purchases a service subscription to gain access to product functionality. The types of subscriptions can vary depending on a period of time, the number of users, feature set, etc. Usually, the most expensive subscription includes almost limitless possibilities, including the development of customised solutions according to clients’ wishes and additional integrations with the platforms they use.
Convenience, flexibility, and relatively small expenses compared to licensing fees in software instals make SaaS products highly attractive to users worldwide. Realising the profitability of this type of business, the developers began to massively offer software, apps, databases, CRMs and other products on a subscription basis.
Here are some benefits of the SaaS business:
- Having developed a product once, the business makes a profit on an ongoing basis.
- Super-fast scalability thanks to cloud operating model.
- Broad customer coverage thanks to a variety of pricing plans: from free trial to enterprise subscription.
- Relatively steady revenue.
Since SaaS businesses operate on a regular billing model, it is essential to ensure that payments are processed smoothly. Any problems with payments can lead to financial losses, and more importantly, customers’ refusal of the product. That’s what a SaaS gateway is for.
Why SaaS payment gateway is important for business
As mentioned earlier, the SaaS billing model is usually based on recurring monthly payments, debited automatically from customers’ credit cards. Since online transactions are the most susceptible to fraud, organisations need to maintain processing security, and with this, they are helped by payment gateways.
Payment gateway is a web-based technology for the secure processing of electronic transactions. It authorises online payments and establishes contact between a customer, a merchant and the other parties involved in transaction processing.
Let’s find out how the SaaS payment gateway participates in processing online payments:
- Customers enter their card details on a merchant’s checkout page.
- Gateway encrypts the received information and securely sends an authorisation request to the merchant’s acquiring bank. It also sends another request to the card network serving the cardholder (Visa, Mastercard, or other).
- The card network sends a confirmation to the acquiring bank and informs it of the amount to be debited from the customer's account.
- The issuer checks the customer’s account balance and sends the transaction confirmation back to the network.
- After approval of the transaction, the funds will be debited from the customer's account and credited to the merchant's account.
Being an intermediary of each electronic transaction, payment gateway protects cardholders data from breaches and unauthorised use by applying encryption, tokenisation, and other security measures. Here are some other reasons why gateways are so important for SaaS business.
As we’ve found out, the main purpose of a gateway is the secure transfer of payment information between all participants in the processing, with the use of all necessary tools for protecting sensitive data from fraud. These measures include TLS (SSL), encryption, tokenisation, etc. In addition to security tools, providers must continually maintain their infrastructure through penetration testing, monitoring, scanning, and other measures. As SaaS organisations deal with a large flow of transactions from users around the world, protecting their clients' confidential information is crucial.
One of the main benefits of the SaaS model is its global reach and the ability to serve customers anywhere in the world. That’s why international transactions and currency conversions are daily practices for such businesses. Luckily, there are payment solutions that provide SaaS merchants with the ability to accept whatever currency their clients are most likely to use while avoiding high currency conversion fees.
The payment gateway API is important for SaaS companies like nothing else because they need to accept payments on-site, avoiding the risk of abandonment. With this in mind, service providers offer merchants a customisable API so that they can seamlessly interact with customers. In addition, custom gateways provide a great convenience for buyers, significantly enhancing their experience with the product.
What do you need to consider when choosing a SaaS payment gateway
Considering the fact that the success of a SaaS business is directly dependent on clients’ satisfaction, the choice of a payment gateway should be treated very responsibly. Here are a few factors that we recommend you pay attention to when choosing a processing solution for your company.
Despite the robust security tools that providers have, there’s always a risk of data breaches and fraud. Such incidents can harm the reputation of a company and lead to loss of revenue. Only a processing solution that meets the strictest requirements of the Payment Card Industry Data Security Standard (PCI DSS) can protect your client’s sensitive details. Check out all the protection tools a particular provider uses and make sure that they have a valid certificate of compliance with PCI DSS.
Payment options available
If a SaaS product aims to reach an international audience, they need to adapt to customers’ payment preferences and the methods available in their region. The more options you integrate into your website, the more likely customers are to subscribe. At Corefy, we support more than 400 methods of payment, which allows the merchant to enter the international market quickly.
It is a well-known fact that acquirers charge merchants a commission for the ability to accept cards — typically, a percentage of the transaction amount plus a flat fee. In addition, there are interchange and chargeback fees that make up the bulk of the costs in the case of an international SaaS business. However, by cooperating with a third-party provider, you can significantly save on bank fees and offset the fees for accepting foreign cards.
Almost all SaaS organisations run on a recurring payments basis, which means that customers can purchase access to a product for a regular fee based on a monthly, semi-annual or annual subscription. By providing your clients with the opportunity to activate recurring billing, you save them from being left without your service at the most inappropriate moment. What’s more, you protect your business from losing clients.
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