Embedded Payments and SaaS companies: Removing Friction and Powering Growth

SaaS businesses are growing rapidly, fuelling the need for smoother payments

SaaS is the way to go in future. 80% of businesses plan to use all SaaS products by 2025, and spending is projected to go up by 44%, data from DevSquad shows. Much of this is because of its low barrier to entry, accessibility and scalability.

While only 2% of UK businesses are not on cloud, in the EU, only 46% of businesses are using cloud services. But there’s plenty of room for growth – as more businesses take a digital-first approach and internet penetration grows in the region.

In today’s remote economy, people are consuming more products and services on the subscription model – from gym membership to food deliveries to streaming. Enterprises are using SaaS for everything – from storage to accounting to security to HR. The main reason – convenience.

No less a factor in this growth has been the rise of work-from-home. Cloud based products and services that enable team collaboration (think Zoom) and remote work have become huge. And as this industry grows, SaaS consumers will only increase.

What makes SaaS so popular is that just about any business can work using a subscription model. With its predictability and recurring revenue, customers find SaaS products and services convenient, scalable, and easy to manage.

Seamless, secure, and fast payments are in demand

In the internet economy, or post-pandemic economy, if you will – more consumers prefer a seamless, hassle-free, frictionless payment experience. This holds true for subscription payments as well.

Customers demand flexible payments
Customers want flexible payment options and know what suits them and their needs. They want to be able to break up their payments and manage their spending better. SaaS brands must keep this in mind and design their checkout and payments to deliver both convenience as well as flexibility to their customers. That’s the way to build loyalty and stickiness.

Payment preferences vary across countries and regions. For example, Mastercard, Visa, and Amex cards are preferred in the US, while in the EU you have PayPal, SEPA Direct Debit, Klarna, SOFORT, and other local options, like Giropay in Germany. Brands must keep their payments strategy flexible to cater to the changing needs of shoppers and the market.

Customers desire a frictionless experience
According to Pymnts.com, half of the customers would switch service providers for a better payment experience. Brands must keep customer convenience at the heart of their strategy and minimize hurdles for buyers.

Speed, efficiency, and lesser friction are essential. Shoppers don’t like complex checkouts and are more likely to buy when payments are embedded into the checkout flow. A faster checkout process with minimal waiting time is highly desirable to create a frictionless payment experience.

Features such as one-click payments, auto-renewing subscriptions, and digital wallets are the type of innovations customers appreciate. In short, payments must feel as a seamless part of the entire customer journey.

No compromise on security and compliance
Security is of utmost importance for all SaaS businesses. And so is complying with all local and global payment and data laws. Strong customer authentication (SCA), 3D Secure 2, and AI-based risk management tools are all essential to mitigate threats, derisk, and create a safe environment for customers to pay. They are also necessary to comply with regulations like PSD2, AMLD, and GDPR in Europe.

While some report decreased conversions owing to SCA, brands have to take a balanced approach to meet compliance without ignoring customer experience. When done right, you can reduce false payment declines and still meet compliance rules. Working with the right payments partner who is dedicated to your growth, therefore, is key to your success.

How SaaS business leaders can leverage modern payment tech for faster growth

There are several things SaaS brands can do to tap into market opportunities and drive robust growth. Let’s take a look:

Increase the use of real-time data, analytics is the way to go
The sheer volume of online payments is generating tons of data. Brands that analyse this data stand to gain rich insights into customer behaviour and payment habits. This helps you tailor your brand offerings and your payments to match their preferences.

Payment analytics help you gain real-time info on what’s happening, identify redundancies, and streamline operations. This helps you reduce costs and respond to customer needs faster. You can identify transaction issues and false declines and also detect fraud.

As data becomes more dynamic, real-time analytics tools that can be customized and easily integrated into your business systems, are becoming available. Without analysing data, brands will not be able to draw meaningful insights which aid better decision-making. 80% of businesses that use analytics report increase in revenue; reasons why you cannot afford to ignore the data.

Modernize your payment stack
SaaS companies have to modernize their payments tech in order to grow faster. According to 451 Research, 37% of SaaS brands consider online payment processing as one of their top four investment areas.

Modernizing your payments mean developing seamless, omnichannel, and personalized payments. It means focusing on real-time processing capabilities that run 24/7, with minimal failures. Payment orchestration and intelligent payment routing features can help you respond quickly to downtimes and delays and ensure customers face no hassles while paying.

From AI-based systems to advanced analytics to AP/AR automation, payment modernization primes you to respond to market challenges and deliver a smooth payment experience to buyers. That is why SaaS brand leaders must demand top-notch capabilities from their payment partners.

Use Advanced payment methods, keep up with customer preferences
The way customers are paying is changing worldwide. Gone are the days when everyone used just cash to pay for their purchases. With today’s digital-first customers, SaaS companies must offer the latest in payment methods – from digital wallets to BNPL to crypto currencies.

Digital wallets are now the most-used payment method in Europe, while 57% of customers report using BNPL. Choice is king – the more you offer, the more your customers will love and appreciate you for it.

Leverage AI and Machine Learning
AI allows SaaS businesses to become more efficient and intuitive, while using fewer resources. It allows brands to use data intelligently, build speed and agility, and secure their systems. They help you understand your customers and market better, and create more personalization.

How does AI help your payments? First of all, it predicts customer buying and paying patterns, which helps you to offer intuitive and relevant offerings to them. It also reduces false payment declines by learning from previous customer interactions and shopping history and suggesting mitigating steps.

AI risk tools enable you detect and prevent fraud in real-time. Plus, it also makes your Know Your Customer (KYC) verification simpler and faster.

Prioritize security and compliance
Secure payments are essential to retain customers and enhance their trust in your brand. Fraud directly impacts customer loyalty. Consumers expect brands to protect their data and keep payments secure. Using best-in-class fraud prevention measures, therefore, is a must to be seen as a trustworthy brand.

SaaS leaders must invest in AI-based risk management tools to detect and mitigate advanced types of fraud. These tools use machine learning to constantly adapt to detect newer forms of fraud.

An AI-based risk strategy helps you detect and prevent fraud in real-time, increase payment acceptance rates, and enhance the user experience. And don’t forget to use a PCI-compliant gateway and the latest versions of 3D Secure 2. Verifying all online transactions using multi-factor authentication (SCA) is a must to comply with PSD2 norms in Europe.

Use Payment recovery methods to reduce customer churn
Payment recovery options are essential to reduce payment declines and customer churn. Offer alternate payment methods, which can act as a fallback option in case a customer’s primary payment method fails. For example, the option to use another card, a digital wallet, or an invoice payment.

Use automatic retries for payments that fail. You can set multiple retries for subscriptions that fail to bill successfully. Give customers the option to edit/update their plan, or offer them discounts and/or partial payments.

A recurring indicator tool can also help you reduce recurring payment declines. With this tool, you can flag a regular subscription payment to the customer’s card-issuing bank so that the bank approves it without any hassle.

Many recurring payments are declined because of expired or reissued cards. Using automatic updater programs such as MasterCard Automatic Billing Updater or Visa Account Updater helps you to automatically update payment details so that payments don’t fail.

How Can Novalnet Help

We can help you build the best payment strategy for your SaaS business so that you can maximize value for your clients.
As a global PSP with decades of experience, Europe’s leading brands trust us to process their payments securely. With our technology, you can accept payments globally in 125+ currencies in 150+ automated country-specific payment methods. Plus, our AI-based risk management solutions and advanced analytics solutions help you design the best payment experiences for your customers, all in a fully secure PCI DSS-certified environment.
Give us a call today to know more.

Jose Augustine

Jose Augustine is the Chief Business Development Officer at Novalnet with extensive experience in European payment industry and a knowledge powerhouse.