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, the feature set, etc. Usually, the most expensive subscription includes almost limitless possibilities, including the development of customised solutions according to client’s 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 niche, 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 the 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.
How do SaaS payments work?
If you are a software company that sells SaaS services, then you are most likely selling through a subscription model and offering your customers access to your product or service for a fixed period of time, usually monthly or annually. In order to make money from SaaS payments, you need to facilitate them. You can do this by setting up your own payment gateway or working with a third-party payment processor which can handle all aspects of accepting credit card payments on your behalf. The process is quite simple: the customer buys your product or service online, pays you and the payment is processed by your chosen SaaS payment system, which takes care of everything from taking the money from their credit card to transferring it into your bank account.
SaaS companies handle payments in a variety of ways, ranging from collecting credit card information upfront, to asking for it after the customer has already signed up. But there is something that unites such payments: they are impossible without SaaS payment processing solutions.
What is SaaS payment processing?
SaaS payment processing refers to the ability of businesses to collect payments from customers without having to deal with the hassle of building and maintaining their own payment processing infrastructure. This is accomplished by using a third-party payment processor, which handles all aspects of online payment processing from start to finish. Usually, SaaS payment solutions are cloud-based platforms that integrate seamlessly with your existing financial infrastructure, enabling you to accept payments in multiple currencies without having to build your own processing. The SaaS payment platform's benefits include centralised, secure and scalable payment processing, integration with any billing system or payment service, the flexibility to use multiple payment methods, real-time reporting, and analytics tools.
Setting up SaaS payment processing is one of the most critical steps in starting your company. Not only does it help you get paid, but it provides an easy way for your customers to pay you.
You already know that SaaS payment processing is a complex concept that includes many participants. To accept different payment methods from your customers, you'll need a payment gateway for SaaS businesses and a merchant account. A SaaS payment gateway is an online payment processing solution designed to enable merchants to accept credit card payments directly from their websites. It authorises online payments and establishes contact between a customer, a merchant and the other parties involved in transaction processing.
The benefits of using a SaaS payment gateway are numerous: no need for extra hardware or software, low maintenance cost, high security standards, and easy integration into existing websites/e-commerce stores with no additional coding required (since most gateways come with ready-made plugins).
Merchant account for SaaS businesses
If you're running a SaaS business, you need a merchant account. The good news is that it's not hard to get one. But first, let's talk about what a merchant account is and how it works.
A merchant account is an arrangement between a business and a provider (usually a bank) that enables the business to accept credit card payments and any digital payment method online. When you sign up with a payment service provider, they'll give you access to their software so that you can start processing transactions right away. The SaaS payment gateway and merchant account are often provided by the same payment system, but they can also be separate entities.
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.
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, the 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 businesses.
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 make it possible to accept many currencies 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 great convenience for buyers, significantly enhancing their experience with the product.
What do you need to consider when choosing a SaaS payment gateway
Business owners are often confused about which SaaS payment gateway to use for their business. There are so many options out there, so it can be hard to know where to start. 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 SaaS payment platform 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 a 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 its region. The more options you integrate into your website, the more likely customers are to subscribe. At Corefy, we support more than 400 payment methods, 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.
SaaS payment facilitation requires a complex and thorough approach, as well as an in-depth analysis of your target audience. The good news is that our payment orchestration platform is capable of meeting all your SaaS business needs. Please contact us for more details!
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