Why SaaS Companies Are Becoming Payment Providers

The days of being limited to a small selection of payment options is well behind us. Through the possibilities afforded by the internet, customers can now choose from countless online payment systems with varying degrees of popularity and acceptance.

But it isn’t just banks and dedicated fintech companies like PayPal that are getting in on the action. We’re now seeing SaaS companies of all kinds taking steps to provide integrated payment gateways. How do they benefit from this?

Well, there are various reasons why so many SaaS companies are moving more and more of the payment process into their ecosystems. Here are the biggest ones:


Integrated payment systems are smoother

If you want an example of how to get user convenience right, look at Apple. Using an iPhone will never get you the kind of customisation options you can get from an Android device, but it will grant you access to a carefully-curated ecosystem that Google has taken steps to imitate in recent years. Users invest so much (both financially and personally) in the ecosystem that sticking with Apple is the path of least resistance when the time comes to upgrade.

The same can be said of SaaS companies. When they bring customers in to use their primary services, they must face the prospect of driving them away with complicated payment processes. Moving them in-house makes them significantly easier to smooth out and style to be indistinguishable from the rest of the user journey.

Outside of SaaS, think about how Amazon’s 1-click ordering set them apart for so long, or how Uber shot to dominance on a platform of irresistible expediency. They understood how vital the payment stage is. Never interrupt your enemy when they are making a mistake, and never interrupt a user when they are on the verge of placing an order.


Handling payments gives you bonus revenue

This is really a big enough reason to itself justify SaaS companies with sufficient resources investing in payment provision. If your company runs the payment processing, you can make money from charging the seller payment processing fees (transaction fees can still crop up, but they’ve mostly been made obsolete now).

What’s more, unlike a fintech company, your success won’t stand or fall on that revenue. It will simply be an added bonus to your main revenue stream. This also means that you’ll be free to tweak your charges and terms over time to see what works and what doesn’t without having to worry too much about what might go wrong.

Alternatively, of course, you can take the approach of not charging any fees at all. Your overall business model can probably absorb the negligible hit, and you’ll win a lot of goodwill with existing and prospective customers alike.


Expanded ecosystems make SaaS packages more appealing

Even if a SaaS company can’t provide an integrated payment system that is any more convenient than an external one, it’s still valuable to have it, because transaction speed (while very important) isn’t the only factor that matters to customers when they’re considering an overall SaaS package.

Keeping payment processing within your ecosystem makes it significantly easier to handle things like data analysis, refunds, and payment mistakes in general, which is a huge boon for any customer service department that’s shooting for greatness. Handling those issues in-house brings greater risk, but also much greater reward.

For an example of this, look at how Shopify has made Shopify Pay (built on Stripe) its default payment system. It benefits the end user by seamlessly accepting various payment options, and gives the merchant further incentives to choose Shopify when making an online store in the form of waived transaction fees, real-time analytics, and 24/7 support with payment issues.

You can also consider Xero, an accounting solution that allows users to integrate their payment processing with invoices. Not only it is more convenient for recipients to be able to pay their invoices directly through the accounting platform, but it’s also easier for senders because they don’t need to spend time worrying about payment portal issues.


SaaS collaboration is mutually beneficial

I mentioned that Shopify Pay is built on Stripe, and it’s important to directly acknowledge that most (if not all) SaaS companies with integrated payment processes do not design them from scratch but instead repackage existing solutions like Stripe, Worldpay or Braintree that are themselves SaaS operations.

While SaaS businesses in the same sector will invariably be competitors, two strong SaaS companies in different sectors are natural collaborators, because each one can integrate the platform of the other to strengthen its own. They benefit not only from the positive association but also from the added functionality they can offer.

As time goes by, we’re likely to see more of this kind of technology-sharing arrangement generating profits for multiple companies at minimum cost. It’s a very practical alternative to trying to develop rival software in-house.

Related reading