Choosing the Right Payment Processing Software for Your SaaS Scale Up
Feb 1, 2022
As you well know, the B2C payment market has been rocked in the past 10 years. Many new players like PayPal and TransferWise have entered the market and disrupted it, creating new industry standards.
For the B2B world, however, it’s different. In the last decade, a lot of areas in the B2B payment market have remained quite archaïc. In fact, in many industries, a lot of companies still process payment via checks (this old paper thing).
Luckily - and especially for SaaS businesses - B2B payment processing has started to evolve over the past few years. Nowadays, you can find a plethora of solutions on the market.
While choice is good, we all know that analysis paralysis is a real thing: it’s easy to be overwhelmed with all the options available. Add to this the high-pressure environment of fast-growing companies, and it’s easy for anyone to feel like there is no time and to jump on the first option available.
When it comes to choosing a payment processing software, SaaS CFOs must have in mind:
Their long-term vision: the software adopted needs to fit the company’s current and future needs. Switching costs are too high to be changing tools every few years.
Cost: most payment processing software have a very high cost - that’s a key criteria in the decision-making process
Churn rate: a suboptimal payment processing software can lead to involuntary churn.
Compliance & governance: the regulations are different across countries and the solution they choose must facilitate adhesion to local rules.
The question, therefore, is: how to make sure all the above criteria are checked, while not spending months making a decision?
In other words: how to choose the best processing software for your SaaS scale-up?
Read on to discover the (surprising) answers that will make it easier for you to manage your SaaS payment solutions.
Introduction to SaaS Payment Processing
When it comes to SaaS payment processing, you know there is more than meets the eyes. A lot of different processes and functionalities go into the operations of selling SaaS - well beyond processing payments:
Checkout and customer experience,
Tax and financial compliance,
Reporting and analytics,
Fraud prevention & security,
Since the process isn’t only about payment, your perfect solution won’t be coming from only one tool. Indeed, payment processors are just one part of your full SaaS financial stack.
So let’s bust this myth right away: there is no such thing as the “best payment processor”.
The best processor for you is a combination of multiple processors and tools that are part of your overall stack - depending on your business type, needs, and specificities.
Choosing the best finance stack for you means choosing a suitable payment processor for sure, but there is more to it. Your finance tech stack must meet other needs related to transactions, records, planning & forecasting, and strategic finance.
Keeping the big picture in mind, let’s zoom in on our payment processing software choice again.
What Is a Payment Processor?
First things first: what exactly is a payment processor?
It’s a company that manages the transaction process, acting as a bridge between your customers, yourself, and your respective banks.
Put simply, the payment processor communicates information from your customer’s card to your bank and the customer’s bank. If there are funds, the transaction goes through.
A key thing to remember about payment processors is that they aren’t one size fits all - they’ll offer various payment methods, but rarely (if ever) cover them all.
This means if you’re interested in more local payment options or if you have a key regional strategy, you’ll likely need to introduce a mixture of payment processing tools.
Some payment processors may also tick other boxes of your stack, like subscription management and billing for example, which comes with additional costs.
Lastly, some tools of your finance tech stack will not be payment gateways themselves but will integrate with payment gateways in order to collect payments online.
That’s the example of Chargebee and Upflow - we give you more details about this below.
Challenges Associated with SaaS B2B Payments.
We mentioned it briefly in the intro: payments for B2B SaaS come with their set of challenges that a good payment processing software will solve - or at least make easier - for you:
When it comes to B2B credit Card payments, your customer journey is quintessential. A confusing experience may result in late invoices - or high rates of abandoned carts if you’re self-serve.
A poor payment experience will translate into a lack of trust for your users, a feeling you do not want to be associated with your product.
On the other hand, a seamless experience will make your customer relationships smoother. Nowadays, most payment processing software has a good UX, but it’s still worth checking it yourself when you’re considering a switch.
Dunning and Involuntary Churn
Dunning is a constant challenge of B2B SaaS companies. Each payment processing software will have different rules set up when a payment fails - make sure these workflows meet your needs or are customizable.
For example, when do you want to be notified of a failed transaction: on the first fail? The third? Different scenarios exist, it all depends on what your company requires.
It goes without saying that dunning can lead to involuntary churn, an important element to consider when choosing a payment processor. Make sure you choose a finance tech stack that enables you to follow dunning best practices and avoid this "passive churn".
Varied Pricing Models & Subscription Management
Your pricing model will directly influence the software you pick as a payment solution for your SaaS.
One-time sales and subscriptions are handled differently, so make sure that the tool you pick has the features to support your SaaS payment model (which includes your pricing strategy and your payment terms).
Pay special attention to:
Monthly, quarterly, and yearly payment options,
Set up fees, discounts, and payment plans.
Usage-based or user-based pricing for example are treated differently and will therefore require different features from your payment processor.
Compliance with Local Authorities
The ability to manage different currencies is a sought-after feature for B2B Credit Card payment in SaaS (that’s also valid for direct bank transfer).
If you’re planning to expand to more countries, make sure these currencies are supported by your payment processing software. The switching costs are high and it’s better to plan ahead.
Payment processing software should also make your compliance easy. Whether it’s the PSD2 in Europe or the relatively new SCA (Strong Customer Authentication), you need to abide by them in a time-effective manner.
Meeting your accounting needs and respecting the GAAP will also be facilitated by a good payment solution as they normally do the heavy-lifting for you.
How to Choose the Right Payment Processing Software for Your Scale-up.
There are two types of payment processing services:
1. All-in-One Services
These are the full-stack services like Stripe, Braintree, or Gocardless. They are convenient as they provide a payment processor, a merchant account, and some basic features for subscription management.
They’re easy to use… if not efficient. For one, their costs tend to be higher - that’s the price of convenience.
They also tend to be directed at SMBs. When you reach a certain stage, they either become too expensive or too limited (or both).
2. Subscription Management tools
The alternative to the above is subscription management software for SaaS. Chargebee and Recurly both include a payment processor plus many other features a scale-up needs.
Since they are specifically serving SaaS companies, they are tailored to your needs - current and future ones.
They support you in many stages of your customer lifecycle: subscription, set-up fees, renewal, and have built-in tools for reducing churn while making sure you remain compliant.
You get the idea: they’re the full package. Because they’re designed for B2B SaaS, you know that they’ll keep on developing new features that will serve you even more in the future.
One final thing to consider when it comes to decision-making for your payment processor is the opportunity cost: yes, you could be switching tools every two years. You could also spend time on the integration of your many tools in your tech stack.
You could even decide to go further and become a PayFac.
But at Upflow, we believe that the right finance stack is one that:
Fits your current and future needs,
Integrates with your existing ecosystem,
Makes your life easier.
That means going for a solution that other people have to manage, maintain, integrate and make compliant - versus building something in-house that you’ll have to worry about.
That’s why we recommend focusing on solutions designed specifically for B2B SaaS scale-ups.
At Upflow for example, we use Chargebee to manage our subscriptions. Good news is: they integrate with Upflow, which, obviously, we use internally as well to manage our accounts receivables.
Using Upflow to Enable Your B2B Scale-Up Process Payments.
Upflow is a SaaS that allows you to collect your customer payments effortlessly. No more wasting your team’s time running after past due invoices.
With Upflow you can automate payment reminders and accelerate communication with your customers.
Our product is designed to help B2B SaaS collect payment easy by:
Keeping your clients up to date: your customers know when and what they owe exactly. Through their customer portal, they can see the list of their paid and unpaid invoices, adding transparency to the payment process.
Keeping the communication going: in a few clicks, your clients can let you know when you can expect their payment, as well as raise any disputes or questions on their invoices.
Enabling new & flexible payment options: turn on new payment methods without complicated setup or fees. We also provide automatic reconciliation of your transactions.
Bringing you insights to help decision-making: get a live overview of your most important A/R metrics at any time.