As the software-as-a-service (SaaS) industry continues to expand, there is increased demand for consolidated payment solutions that manage SaaS billing effectively. SaaS businesses that plan on scaling and expanding into new markets need a SaaS billing software that handles the entire subscription journey. Your payments platform should make it easy to maintain steady revenue streams, reduce churn, and comply with local tax laws and payment regulations—without additional work on your end.

Below, we’ll cover what businesses should consider when choosing a SaaS payment processing solution.

What’s in this article?

• What is SaaS payment processing?
  
• How do SaaS payments work?
  
• What do SaaS businesses need from a payment processing solution?
  
• What to look for in SaaS billing software
  
• How Stripe Payments can help
  

What is SaaS payment processing?

SaaS payment processing refers to the way SaaS companies accept and process payments. While most ecommerce sales consist of one-off online payments, SaaS businesses often employ a subscription model, making recurring billing and subscription management high priorities.

How do SaaS payments work?

SaaS customers typically pay recurring subscription fees (monthly, quarterly, or annually) to access cloud-based software. Here’s how it works:

A customer signs up for a subscription

When a customer signs up for a new subscription, they enter their payment details and agree to be charged on a regular basis in order to keep using the software.

The business collects the first payment

The business’s payment gateway encrypts the customer’s payment details and forwards that data to the payment processor. The processor connects with the customer’s issuing bank, which approves or declines the transaction, and informs the gateway which answer to communicate back to the business. If the payment is successful, the money will typically settle in the business’s merchant account within a few days, depending on the payment method.

Recurring billing kicks in

After the first payment, the business’s billing system will automatically bill the customer according to their subscription plan. If they have a payment method on file, it will be charged for each subsequent payment.

Subscription management

Customers’ payment amounts might change if they upgrade, downgrade, or pause their subscription, and the businesses billing system will prorate or pause their bills accordingly.

What do SaaS businesses need from a payment processing solution?

Collecting payments for a SaaS product means keeping track of the entire subscription lifecycle.

SaaS businesses generally need their payment processing solution to support:

• Recurring billing: Subscriptions require recurring billing, and automating this process can save SaaS businesses time and resources. Good SaaS billing software offers businesses the ability to set their own subscription plans and recurring payment schedules without investing engineering time and energy into adapting their payment processing system.

• Proration: When customers upgrade or downgrade midcycle, proration ensures they’re paying the correct amount. But doing this manually takes time and is more prone to errors.

• Free trials: A payment solution should allow businesses to offer free trials that can turn into paid subscriptions. Customers can use the service for a specific period of time—usually 7, 14, or 30 days—experiencing its value before they commit.

• Multiple payment methods: Not every customer wants to pay with a card. The ability to accept a variety of payment methods gives you and your customers more flexibility.

• Subscription management: Customers should be able to easily upgrade, downgrade, pause, renew, or cancel their subscription, and the SaaS business should be able to easily track those events.

• Dunning management: Sometimes a customer will forget to pay or their payment method on file will fail. It’s important to have a process in place to retrieve that payment.

• Growth: In order to grow a SaaS business, you need the infrastructure to scale globally. That means allowing customers to go through the payment process in different languages, being able to accept payment in different currencies, and offering multiple payment options.

• Secure payments: Ensuring you have a secure system for processing payments is especially important for recurring transactions. A SaaS payment processing solution should automatically encrypt sensitive information and take measures to detect and prevent fraud.

• Revenue analytics: It can be extremely time-consuming to create financial reports without software designed specifically for that purpose. Businesses benefit from being able to track their transaction analytics in a simple dashboard.

Building a new billing system in-house is expensive, and it can be frustrating to use different software services to handle each billing and payment task. A unified payment processor will tackle all of the above, as well as help you gain customer insights based on the data available from each transaction.

What to look for in a SaaS payment gateway

An efficient SaaS payment processing system should take the stress out of payments. Here’s what to look for in a SaaS payment gateway.

• Recurring payments
  SaaS businesses rely heavily on recurring payments, so a payment gateway must be able to handle these payments quickly and easily. The payment page should make it clear when customers are signing up for recurring payments, and the gateway should be able to handle the payments automatically after the first entry.

• Payment methods
  Accepting a variety of payment methods allows businesses to cater to different types of customers and preferences. A SaaS payment gateway should support more than just credit and debit cards.

• Fraud detection and prevention
  A good payment gateway detects fraudulent charges and blocks them before they go through, using tools such as address verification system (AVS) and card verification value (CVV) checks. It should also comply with Payment Card Industry (PCI) security standards for all card payments.

• Localization
  Global businesses need a payment gateway that can adapt to the language and currency of customers in different countries while ensuring every transaction complies with local payment regulations.

• VAT and sales tax
  Keeping track of VAT and sales tax compliance across the globe can require significant resources, and failure to comply can lead to financial penalties. It’s important to choose a gateway that supports tax integrations that use a customer’s location to calculate and collect the right amount of tax.

A unified SaaS payment solution will incorporate all of these features, allowing your business to increase efficiency, reduce errors, and grow recurring revenue without investing additional engineering time.

How Stripe Payments can help

Stripe Payments provides a unified, global payments solution that helps any business—from scaling startups to global enterprises—accept payments online, in person, and around the world.

Stripe Payments can help you:

• Optimize your checkout experience: Create a frictionless customer experience and save thousands of engineering hours with prebuilt payment UIs, access to 125+ payment methods, and Link, a wallet built by Stripe.
  
• Expand to new markets faster: Reach customers worldwide and reduce the complexity and cost of multicurrency management with cross-border payment options, available in 195 countries across 135+ currencies.
  
• Unify payments in person and online: Build a unified commerce experience across online and in-person channels to personalize interactions, reward loyalty, and grow revenue.
  
• Improve payments performance: Increase revenue with a range of customizable, easy-to-configure payment tools, including no-code fraud protection and advanced capabilities to improve authorization rates.
  
• Move faster with a flexible, reliable platform for growth: Build on a platform designed to scale with you, with 99.999% uptime and industry-leading reliability.
  

Learn more about how Stripe Payments can power your online and in-person payments, or get started today.