As opportune as it is being a Software as a Service (SaaS) company today, it’s even more lucrative if the SaaS firm offers integrated payments within its software or app. This additional step of payments integration has the potential to increase revenue and a SaaS company’s valuation because of the various benefits that result from this enhancement.
Below we explore what the term ‘integrated payments’ means and the various reasons SaaS companies stand to benefit from implementing this product feature.
What is an integrated payments option?
Having an integrated payments functionality within software or app allows clients to transact and pay within the app or software environment. There is no need to be routed to a separate site or third-party app which collects the payment details and processes them.
The integrated payments feature has the complete customer details, which can be automatically used for a one-time payment or set up for recurring payments. The system can easily allow customers to add or modify their saved payment options and have a history of transactions along with their receipts.
What are payments options for Software as a Service Businesses?
As more and more customers pay via a cashless method, and as digital native consumers adopt eWallets, not having the right payment option for the SaaS company can be sufficient to lose customers.
Beyond the traditional payment options, credit card, debit, ACH, all the major card networks, payments options for SaaS can include the ability to pay through mobile apps, various digital wallets such as Google, Samsung, Apple Pay, etc. There is also the API option. Let’s not forget about government contracts that require additional transaction details through Level 2 and Level 3 to enhance data processing. How about Paypal? Or crypto?
Why is offering integrated Payments options important?
The more diversity there is in payment options for consumers, the more likely businesses can do business with a large swath of people who have varying digital payment preferences. A study conducted in March 2020 found that small businesses can increase their revenue by as much as 30% by offering multiple payment options. A 2019 Harvard Business School research found that “consumers who switch to digital payments maintain their purchase frequency but spend more and are less likely to return their purchases.”
Better User Experience
Ask any novice of design thinking, incorporating integrated payments into your products allow businesses to greatly increase the user experience. There are so many flywheel effects resulting from this functionality, the business can become the preferred vendor resulting in more traffic to your site, higher conversion, and increased sales.
Of course, integrated payments are no panacea, companies still need to have a great product and an active and loyal client base. Once the clients arrive at your site, you can have a tremendous user experience with a minimal amount of effort within the checkout process.
Improved liquidity
As minimalist SaaS business can be with the checkout process, the better. There could be the multi-stepped approach to checkout, however, that adds friction to the sales cycle, forcing the customer to enter payment details, possibly increasing the chances of an error and having the transaction rejected and chargebacks.
None of that would apply once payments are integrated and customers may not need to go through additional steps of repeatedly entering the payment and mailing address details. The easier you make it for someone to make a purchase, the likelier it is they purchase from your site.
Frictionless Sales
Think back to 1999, when Amazon patented and started offering ‘1- Click” ordering and payment. After the initial purchase, users are no longer required to enter payment details with Amazon’s offering. It was a novel idea that eliminated many hassles of making a purchase online. Today Amazon is one of the largest retailers in the U.S. and has a valuation of nearly $2 trillion.
According to R. Polk Wagner, a professor at the University of Pennsylvania Law School, “When we write the history of electronic commerce, the 1-Click patent … allowed Amazon to create a very strong position in the market.”
Paid up front, no more chasing receivables and writing off bad debts
With all the added versatility from integrated payments, clients often have the option to process payments in advance, as is often the case with numerous subscription-based companies.
There are tremendous benefits from this. Businesses no longer need to track open invoices, make collection calls, or possibly have to write off bad debt. All of this is done away with as integrated payments automate the invoicing and payment receipts process. Some major payment processing vendors have automated the process well over a year ago.
Security
As a SaaS firm with integrated payments give them the option to collect and store consumer payment data onto a single secure platform and is not shared with third parties as would be the case with non-integrated payment options.
Of course, SaaS companies would need to ensure they’re offering industry-standard encryption such as Secure Socket Layer (SSL). Some transactions may require additional security measures such as Address Verification Service (AVS) and Card Code Verification (CVV2).
The security features as well the removal of additional parties having access to customer data offers tremendous peace of mind for customers. Again looking at Amazon’s 1-click patent and process, Professor Wagner said, “Most importantly, it allowed Amazon to show customers that there was a good reason to give them their data and the permission to charge them on an incremental basis. It opened up other avenues for Amazon in e-commerce. That is the real legacy of the 1-Click patent.”
SaaS companies are growing leaps and bounds. As spending habits and demographic trends shift, businesses must offer as little friction to the process as possible. The experience is likely to improve the overall perception and ratings of the SaaS business, increase interest and traffic, and ultimately increase sales. The efficiency can do wonders in eliminating many of the mundane tasks of accounting, reconciliation, following up on invoices, and emailing receipts. All this becomes automated.