Payment Monetization for SaaS Companies

on Jul19
payment monetization
Written by
James Davis
Written by James Davis
Senior Technical Writer at United Thinkers
Author of the Paylosophy blog, a veteran writer, and a stock analyst with extensive knowledge and experience in the financial services industry that allows me to cover the latest payment industry news, developments, and insights. Read more
payment monetization
Reviewed by
Kathrine Pensatori
Product Specialist at United Thinkers
Product specialist with more than 10 years of experience in the Payment Processing Industry. I help payment facilitators and PSPs solve their various payment processing issues. Read more

Payment monetization tactics for software-as-service business segment

For a long time, payment monetization remained beyond the horizon of SaaS companies’ operations. Software-as-service platforms did not include merchant services within the scope of their activities. These services were the prerogative of acquiring banks, and then they were delegated to ISOs and other entities.

Nowadays, however, SaaS companies realize that they can implement and capitalize merchant and payment processing services themselves. Through implementation of integrated payment functionality, they can generate a new revenue stream on top of their core product.

Indeed, integrated payments open payment monetization opportunities for SaaS businesses. A SaaS platform featuring embedded payment logic can diversify and increase its customer base. Critical payment features incorporated into a platform boost its advantage over competitor’s payment solutions.

In the current article we decided to outline the most common payment monetization tactics available to SaaS platforms.

Key Payment Monetization Principle

Payment features play an increasingly important role within SaaS platform offerings. Embedded payment logic allows a platform to offer merchant and processing services in exchange for merchant services fees. So now, these fees can go to SaaS platforms instead of third parties such as ISOs.

         Of course, the core product still remains the major source of income for the platform. However, addition of payment functionality allows it to generate additional revenue streams from payments.Moreover, the platform’s existing and new customers get an incentive to use is as the merchant services provider.

         Now let us list the key payment monetization tactics a SaaS platform can follow.

Markup System: the Most Common Approach

The most common payment monetization tactic is based on markup system. Particularly, a software-as-service platform might offer its merchants a flexible multi-tiered transaction pricing policy. Such a policy would encourage them to process larger volumes through the platform. using its pricing policy. For example, if a merchant’s processing volume exceeds a certain level, the platform can offer this merchant a discount. This approach would further motivate the platform’s users to consolidate payments.

For example, processing cost amounts to 2.4%+$0.15. The platform charges the merchant 2.9%+$0.35. So, based on revenue sharing principle, the platform can collect the difference of 0.5%+$0.20 per transaction. Particular markup amounts would depend on the specific transaction pricing model and service plans.

Monetizing Pricing Plans

The services of any SaaS business have their price. This price can vary, depending on specific service packages or plans it offers to its customers. Access to payment functionality within more expensive service package would encourage the customers to opt for this particular package.

For instance, a basic service plan might include just the core service (without payment experience). Let’s assume a SaaS platform charges $12.99 a month for it. A standard plan might include standard CNP functionality and basic payment processing features. Its price might amount to, say $23.99 a month and 2.8%+$0.2 per transaction. Finally, a premium plan (costing $45.99 a month and 2.5%+$0.1 per transaction) might include recurring billing and free hardware for card-present payments.

To summarize

         Software-as-service platforms are in position to profit from payment monetization. Particularly, they can monetize payment features they add to their core offering.

With the right payment partner, such as United Thinkers, you can always have the system adjusted to the newly emerging needs. Using the licensed open-source-code API, your SaaS platform can develop additional logic and sell it as a value-added feature set.

The flexible white label payment gateway technology UniPay gateway, already implemented by multiple SaaS companies, can make the process smooth and seamless. More information on the subject is available in our free payment monetization guide.

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