Recently I attended a meeting of over 200 SaaS founders. What a great experience. I found through my discussions with SaaS founders, that they were acutely aware of revenue, but not aware of the role credit cards played. Many start their “payments” journey by using a third party — to “get it done.” This works. But with more discussion, many expressed concerns about the fees they were paying. Sure, when they started fees did not add up to that much, but as the company scaled, so did the fees.
Payments need to be part of the business plan.
Clearly how you choose to process cards impacts your cost structure and may introduce concerns about security, compliance, and risk.
On the positive side, a well-formed strategy for a SaaS company can move from a cost center to an opportunity to drive revenue and improve client loyalty. Everyone I talked to was interested in revenue and client loyalty. So, here are a few thoughts.
There are many third-party options:
- Get to know what is involved when a card is swiped or dipped. By understanding what happens you will understand the fees better.
- You need to understand what’s in the contract and what is missing. Identify each function provided and the related costs.
Did you plan on paying 1.5% and find you are paying 3%?
SaaS companies also expressed concern about what appeared to be rising fees. There are two common reasons:
- They did not understand the industry pricing
- They did not understand the contract
None of the SaaS founders I spoke to knew that cards that carry a benefit to the cardholder (like frequent flyer miles or cash back) and corporate cards are more expensive to process. Don’t be surprised – be informed. Read a more comprehensive article here.
One thing for sure- as your SaaS company matures, your payment strategy must mature as well.
Payments strategy decisions are complex.
Some options need more resources and more time to implement. The more functions you perform internally require more resources.
Do you take on responsibility for security? Do you take on risk? How do you handle compliance? You need to balance between controlling the customer’s payment experience and payment responsibility, and having more control will increase your operating costs. On the other hand, it may also provide a strategic advantage and a better customer experience! To dive more into developing a strategy read Payment Strategy Must Fit Your Business Model.
About Payments Explorer:
We like to think of ourselves as a trail guide who shows users their options, then sets them free to explore payments for themselves. We’ll equip you with all the knowledge and know-how you need to conquer any trail, then let you decide what’s right for you and your business.
Visit us at PaymentsExplorer.com