Leverage Integrated Payments For Success in Subscription Management, Recurring Billing

Here's how SaaS providers in the subscription management and billing industry can avoid a fragmented network of payment gateways, banks, and other providers.


SaaS providers in the subscription management and recurring billing industry recognize that a well-managed customer experience reduces churn and promotes a steady stream of predictable income. In addition to building a customer relationship that is mutually beneficial to both parties, subscription management professionals also understand the importance of optimizing efficiencies and maximizing revenue opportunities — all of which are key to success.

However, a hindrance to this success is the disparate structuring of payment processing networks and the expense of payments, especially in the B2B space. SaaS providers in the subscription management and billing industry often implement a multitude of payment integrations based on customer preferences, resulting in a fragmented network of payment gateways, banks, and other providers. This network is expensive to maintain and results in higher processing fees for clients. A pieced-together payment stack may work short-term, but over time, cracks in the infrastructure will surface, including higher than average fees for B2B payments, outdated integrations, limited scalability, end-user customer service issues, and inefficient onboarding processes.

The Case for Integrated Payments

Many SaaS providers don’t realize the potential of integrated payments when leveraged as part of a cohesive business strategy. Integrated payments connect payment functions with back-office systems and software so that payments are processed within the SaaS solution — opening the door to untapped opportunities for SaaS providers.

According to an S&P Global Market Intelligence survey of global payments decision-makers, more than one in 10 merchants now use an integrated payment processing service from one of their primary software vendors. Long-term opportunity is also promising, with three in four businesses that don’t use payment processing saying they are “very interested” in doing so, and an additional 21% indicated they were “somewhat interested.”

By partnering with an integrated payment provider offering a payment strategy, SaaS providers stand to reap an abundance of benefits — including an additional income stream, reduced processing fees, and an improved user experience.

Maximized Revenue

In an integrated payments partner relationship, the payment processor shares any processing revenue collected on the subscription management or recurring billing company’s SaaS platform. Considering the volume of transactions that these businesses typically process, SaaS providers stand to earn a sizable stream of income. For example, a SaaS provider who serves 200 users, each averaging $1M in online transactions per year, could generate an additional $1M in transactional revenue from a basic .5% fee. Assuming a 50/50 revenue share, the SaaS provider can potentially add up to $500,000 or more to their bottom line. Depending on the type of integrated payment model the SaaS chooses and the interchange rate optimization services the integrated payment partner can provide, this revenue split has the potential to increase further.

Reduced B2B Processing Fees

B2B credit card payments are expensive, with high processing fees often affecting subscription providers’ profits. The rules that govern rates are complex and vary widely based on many factors, including business type, industry, processing method, and more. Integrated payment providers can offer subscription management businesses a technology known as interchange optimization, in which the provider obtains the data required by the card issuer to qualify for the least expensive rate. As a general rule, interchange fees will be lower when the card issuer determines that a transaction has a lower risk — for the card issuer, more data results in less risk. As a subscription management or recurring billing provider, lowering these fees delivers a competitive differentiator in a crowded marketplace.

Improved User Experience

Integrated payments offer SaaS providers more control of the overall user experience — from onboarding and account approval to processing speed and the latest payment technology. Instead of relying on a disparate payment network, a single integrated payments provider can offer a standardized procedure for account setup, resulting in more efficient onboarding. Integrated payment providers can also reduce development time and infrastructure investment with built-in technology improvements such as the ability to accept digital wallets, mobile, and cryptocurrency payments. And without multiple payment integrations to manage, ongoing maintenance costs are reduced. Plus, a dedicated support team is on call, giving subscription management businesses and their subscribers extra support.

The Path to Integrated Payments

Integrated payments can be implemented using several payment models. The most common models include an Independent Sales Organization (ISO), Payment Facilitator (PayFac), or PayFac-as-a-Service (PFaaS). The main differences between these three are the level of investment and risk a SaaS business is willing to accept in proportion to revenue potential. However, each model offers the benefits of a profitable revenue stream, lower B2B processing fees, and an enhanced user experience. Instead of a cost center, payments are now integral to the business strategy for many SaaS players in the subscription management and recurring billing industry.

Blake Rouse is Sr. Director of Business Development at Cardknox, a leading payment technology provider. With over 14 years in the fintech space, Blake is an expert in the payment industry and enjoys helping people implement technology to improve their businesses.