SaaS providers have an opportunity to increase top-line revenue and enterprise value through payment integration. Companies like Stripe and Square changed everything in the 2000s by eliminating the common gripes associated with card-based payments. These companies built and managed digital payments infrastructure, delivered a great user experience, and kept fraud under control while keeping in line with regulatory requirements. By removing these barriers, first-generation digital-native payments platforms uncovered a massive market opportunity, with several now commanding multi-billion-dollar valuations.
Payment processing integrations now present an excellent opportunity for vertical SaaS providers to increase revenue through transaction fees shared with the payment processor.
For one, the integration benefits customers, who are happy to pay with an interface they’re familiar with. Payment integration also benefits SaaS users, because they don’t have to worry about managing disparate software solutions for operations and payments. With payments grouped in as part of a standard workflow in the SaaS solution, the SaaS user benefits from improved productivity and user experience.
SaaS providers will also reap the rewards as they generate new top-line, high-margin revenue from transaction fees on highly retentive SaaS users. Consider that a SaaS user with 100 end customers, each averaging $1 million in online transactions per year, could generate an additional $1 million in revenue for the SaaS provider from an introductory 1% fee.
Integrating payment processing improves the quality of business for all parties. Still, it is especially beneficial to the SaaS provider and payment processor because it offers highly predictable, high-margin revenue for each.
However, as data breaches in commerce increase, a secure payments strategy is critical for long-term viability. To best ensure security, SaaS companies should look for payment solutions that use EMV “Chip” cards, which create unique transaction codes for each transaction. The solution should also utilize Point to Point Encryption (P2PE), which is the most effective method for securing credit card data at the point of sale, and tokenization, which allows merchants the utmost flexibility to support any type of payment needed.
