Is Now the Right Time for Integrated Payments for Your Software Business?By: Megan Heinz | July 12, 2021
“Integrated payments” describes a seamless experience through which your customers can capture payments from their customers using your software platform. Integrated payments are often considered an essential element for SaaS providers who wish to offer their customers an all-in-one platform.
Many software companies have existing relationships with third-party payments providers, which their customers then access to process credit cards and issue online invoices. However, to be truly “integrated” requires making an investment in your product, your go-to-market and your customer-facing teams. It’s not an easy lift, but the dividends can be significant for both you and your customers.
So, are you considering making the change?
This post will help you determine if now is the right time for your SaaS business to offer a full payments solution as an additional revenue stream.
Step 1: Evaluate the current state of payments in your business
Are you currently facilitating payments for your customers? If not, then your first step is actually easier: skip step 1 and go directly to step #2: determining how integrated payments fits into your product roadmap.
If so, you likely have existing agreements with third-party payments providers. Start by reviewing those agreements in detail. Many SaaS companies, especially those earlier on in their journey, sign out-of-the-box contracts with large payments providers to offer a trusted solution while focusing on developing their core product. While we feel all contracts should be read in their entirety, for additional considerations, we believe it’s especially important to look at the following:
Term: Most contracts outline an initial term followed by an automatic renewal term unless written notice is provided, often a 30-, 60- or 90-day period prior to the next successive renewal date. Look at how the contract terms and notice dates would play into your timing of introducing an alternate payments option.
Exclusivity: Some payments providers require exclusivity during the set term, meaning all—or a set percentage—of your customers must be referred to them or be processed exclusively with them. Be clear on these clauses, as any alternate payments offering during this term could jeopardize residuals you might receive from your existing customers.
Non-Solicitation: Many non-solicitation clauses restrict moving, or influencing the move of, existing customers to an alternate solution. This typically holds for the existing term and extends for a period, often one to two years, beyond the term cancellation. Be sure to evaluate this clause and how it would affect your potential residuals as compared to your existing customer base currently under contract with your existing provider.
Referral Fees: If your company is entitled to referral fees or a share of the residuals, it is important to understand the continuation of payment of those fees beyond the lifetime of the contract. This will also be crucial in evaluating your alternate payments opportunity with your existing base of customers.
Step 2: Determine how integrated payments fit within your product roadmap and resourcing
Like most product decisions in your business, payments will need to be evaluated within the context of all key initiatives. In other words, what other product enhancements might you be sacrificing if you implement payments? This is commonly what keeps SaaS businesses from pursuing integrated payments: there is simply too much to do and not enough hands to do it.
When making this decision, it helps to enlist your finance team to model a comparison of the revenue you’d receive from an upgraded payments integration and negotiated contract, compared to what you make from keeping your customers on your existing payments solution. Model inputs should include, adoption rates, conversion from existing providers, anticipated pricing and fees, etc. While there may need to be significant development resources devoted to standing up a new payments solution, understanding the growth in recurring revenue and the ability to then hire additional development resources from that revenue is important.
Resourcing for payments, however, shouldn’t and cannot be strictly limited to tech.
Step 3: Establish your payments team beyond tech
While most companies do not need to be experts in payments, you should have a dedicated, analytical-minded and operationally driven individual with at least 50% of their time and job description dedicated to payments. This person should have access to revenue reporting systems as well as influence on sales and customer support leadership and processes.
This role is intended to:
- Manage the partner relationship with your preferred payments vendor
- Maintain regular analytics, audits and KPI dashboards
- Recommend operations, systems management and training of sales and support teams
Put another way, if you were to launch a new product line, you would need a dedicated project manager ensuring all teams were prepared to sell and support that product. Payments is no different.
You’ll know when you’re ready
Offering integrated payments through your product can be a game-changer in terms of revenue streams and customer service, allowing you to truly offer an all-in-one solution. Knowing when to invest in payments implementation, however, requires nuance.
When making this decision, consider the state of your existing payments contract and terms, ask yourself how the decision would fit into your product roadmap, consider your current and future resourcing needs and build out a team to support it.
Then, you will be ready to go all-in on an updated payments solution.
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