As of today, the average enterprise uses upwards of 110 SaaS applications. And in two years, you can expect 85% of business applications will be SaaS-based.
While the future of SaaS seems promising, one crucial question arises: Will your SaaS business be among the frontrunners? A shift is coming, and the way payments have been handled in SaaS is ending. The battle between two heavyweight contenders, bank account payments (ACH and EFT) and card payments is coming to a head.
This guide serves as your roadmap through the twists and turns of this ever-changing landscape, helping you make informed decisions that can reshape the financial future of your SaaS business. So, let's kick things off with the cold, hard facts and insights you need to navigate account-to-account payments (A2A) and credit card payments in the world of SaaS payments.
Going forward, digital platforms must make critical decisions about how they handle their financial transactions. Not only does sending an end user to a different platform to pay cause friction but there is also a heavy cost to doing so (more on that below).
Advances in payment technology have made account-to-account transactions significantly more cost-effective than almost all other payment solutions. Unlike conventional payment solutions, A2A transactions facilitate direct money transfer between bank accounts--bypassing intermediaries—translating to faster processing times and significantly reduced transaction costs.
Credit and debit cards have become the vinyl records of the payment world, once revolutionary and now almost nostalgic. The ability to accept these little plastic cards for recurring transactions enabled SaaS platforms to scale to a point.
They were familiar to everyone, like a well-worn melody. But familiarity isn't necessarily good these days when your platform is trying to stay a cut above the rest. Credit cards, for all their widespread use, have glaring imperfections.
When recurring payments are the lifeblood of your business, enterprises need to consider what payment solutions are the best for their business without simply defaulting to credit cards.
Whether we are talking credit cards, traditional payment rails or cheques (no platform should be using cheques in 2023), processing fees are off the charts. Fees, for starters, can be a real wallet-wrecker. Processing fees, interchange fees, and other fees pop up like unexpected guests at a party. Accepting credit cards over bank account payments can cost a platform 15x more than a bank account transaction. Traditional payment rails have their own hefty costs to bear, albeit most of them come from increased workload and decreased operational inefficiency. All of this can significantly impact profit margins.
The biggest culprit here is credit card payments. When customers' credit cards on file become invalid due to card expiration, the revenue stream is disrupted, and payment recovery weighs heavily on workforce resources.
Call them what you want because SaaS platforms, more often than not, run on the subscription model and recurring billing cycles, leaving you especially vulnerable to them all. How often have you had to chase up a payment due to manual data entry? How many customers actually get the Swift Code or Bank Identification Code correct? With an account number and routing number with all these numbers, someone will make a mistake somewhere. Let's not forget credit expiration (mentioned above), credit card limits, or insufficient funds in the account.
Managing compliance, KYC, and financial data security is a massive undertaking. Onboarding clients, handling debit forms, voiding cheques (is this still being done?), and manually inputting data entry all lead to potential security risks and big headaches. Not to mention the high risk of fraud surrounding credit cards. Risk and compliance efforts around payment processing are complex and costly.
Maybe you think none of this applies to you because you are a savvy digital enterprise, and you are already well aware of the value of bank account payments, and they are deployed payment solutions within your platform. Maybe you are a property management platform, and your landlords collect rent through account-to-account payments. Or perhaps you are in the lending industry and use A2A debit payments to collect loan repayments. The reality is that traditional A2A payments running on legacy payment rails can not hold a candle to what third-party payment providers can now offer, and this is something that cannot be ignored.
Forget about financial planning, forecasting or clear and concise cash flow visibility when it comes to strategic decision-making. Almost every other payment method holds your platform back in more ways than one. Ineffective payment solutions deliver unpredictable revenue. Traditional bank account payments can take upwards of four days to process, not to mention there's no guarantee the funds will be there when they get processed.
Some customers may be unable to pay by credit card; alternatively, others will leave your platform journey the minute friction is encountered during sign-up or subscription renewal. Whether it is the choppy experience of being redirected to a payment gateway or wanting to ensure financial security, decreased conversion rates due to customer dissatisfaction throughout the payment process are on the rise. Consider this: for example, if Crave makes it difficult for the end-user to sign up and easily pay within their platform, there are ten other streaming platforms they can and will go to. Customers will sign on and spend money with whoever makes it easy for them. And it has to be you.
SaaS platforms need a clear and concise way to address each and every challenge outlined above. They want to diversify their payment methods easily and offer alternative payment solutions like bank account payments.
Digital platforms are looking for more control over their financial operation. They are held back by the lack of visibility and transparency in their financial data.
For this reason, the awareness of embedded payment technology has grown immensely over the last two years. Every SaaS platform is built to solve an inefficiency; the product exists to fix their customers' problems. The challenge is they can’t do it in a way that allows them to scale without payment infrastructure.
This is why embedded payment solutions in SaaS have gained momentum. Incorporating account-to-account payments is a strategic move. And the ability to integrate white-labelled payment solutions into their platform to deliver it is appealing to many. And for good reason.
Embedded account-to-account payment technology offers a range of benefits that can reshape your payment landscape.
Automating recurring payments with A2A payments offers a standout solution for SaaS platforms reliant on subscription-based revenue models. By introducing automation into billing cycles, platforms can easily schedule and collect recurring payments, whether monthly, quarterly, or annual. This automation eliminates most, if not all, of the administrative burden associated with recurring payments.
Unlike traditional bank account payments that can take several days to process, A2A payments often provide swifter fund availability, reducing the uncertainty of waiting for funds to clear. This efficiency positively impacts your cash flow and financial planning.
In the realm of financial management, predictability is crucial. A2A payments provide SaaS platforms with vital transaction visibility and insights, enabling them to manage their cash flow. Real-time transaction tracking allows for up-to-the-minute awareness of cash flow, while predictable cash flows enable precise financial planning and resource allocation. Customizable reporting and analytics tools provide in-depth transaction insights that facilitate informed financial strategies, reducing payment delays and streamlining reconciliation efforts while supporting accurate cash flow projections and enhancing financial stability. This enables SaaS providers to seize opportunities as they arise.
Security breaches and compliance complexities are minimized with A2A payments. By replacing sensitive data with secure tokens and deploying real-time fraud detection mechanisms, embedded A2A payments can effectively neutralize the risk of data breaches.
In a fiercely competitive digital landscape, providing A2A payments gives your platform a distinct advantage. These payments are quick and convenient and are increasingly popular among users. By offering this option, you set yourself apart from the competition, attracting and retaining more customers.
Customers are likelier to stay with your platform when they encounter a smooth, frictionless payment process. Customers who experience a seamless, frictionless payment process will likely remain with your platform for the long term. This translates into higher customer retention rates and increased customer lifetime value. A smooth payment experience fosters a sense of trust and reliability, encouraging users to continue engaging with your platform, which, in turn, positively impacts your bottom line. By reducing the hurdles of traditional payment methods, you solidify your platform's reputation as a user-friendly, customer-centric solution.
Integrating bank account payments streamlines your administrative processes and minimizes manual tasks that often burden your administrative team. Tasks such as handling debit forms, manual data entry, and managing payment-related paperwork become significantly more efficient and require less effort. This newfound efficiency reduces administrative overhead and frees up your workforce to focus on more strategic and value-added tasks. It empowers your team to redirect their energy toward customer support, platform enhancements, and other areas directly contributing to platform growth and competitiveness.
Integrating bank account payments as an alternative solution can open doors to new markets and a broader customer base. This expansion is particularly significant for SaaS platforms looking to grow and diversify their user demographics. By accommodating customers who prefer bank account payments over other methods, you increase your platform's accessibility, attracting users who might have been hesitant to join due to payment restrictions. This broader reach can spark growth opportunities and position your platform as a flexible and inclusive solution.
Save upwards of $15 per transaction and cut 20% off your administrative costs. Bank account payments starkly contrast traditional payment methods, particularly in terms of transaction costs. Reducing intermediaries involved in the payment process translates to substantial cost savings. You can significantly enhance your profit margins by cutting down on processing fees and related expenses. These cost savings contribute to the financial health of your platform, allowing you to allocate resources more strategically, invest in innovation, and remain competitive in the market. It's a direct path to healthier financials and long-term sustainability.
There are some crucial considerations when choosing the ideal payment solution for your SaaS business. It's not just about processing payments but solving your complex money movement challenges. Payment orchestration is incredibly complex. If it were as easy as sending one API call and the transaction was processed, every company would build its own intelligent payment infrastructure. There’s a reason they aren’t. It is complicated; there are many components to understand, and maintaining takes time and resources these platforms don’t have.
This is where the embedded payment solution steps in. A white-labelled payment service provider allows the end-user to make and collect payments seamlessly without ever leaving your platform.
In a world where efficiency, security, and user experience matter, the right payment solution can be a game-changer for SaaS businesses. So, whether you're offering ACH, EFT, or other bank account payment solutions, the goal is clear: deliver convenience and reliability to your customers, and you'll have a competitive edge in the software platform arena.
By choosing VoPay today, you're not just selecting a powerful payment technology; you're stepping into a future where payments seamlessly integrate into your platform's DNA.