SaaS payments: find the right strategy for your business

When running a software as a service company, there is lots to think about: onboarding, KYC, pricing, branding, financing, product development – the list goes on. Another consideration is payments. After all, every SaaS company needs to work out how to offer pricing to attract customers and recurring billing to keep them happy.

The software as a service industry (SaaS) is on the rise. In fact, Statista predicts that European SaaS sales will grow by 44% in the next four years, totalling €73.3 billion by 2026. This growth also means more competition in the SaaS market, so getting your payments strategy right is crucial to delivering seamless customer experiences and understanding how you can use payments to drive growth.

As payment specialists, we aim to help SaaS businesses understand how they can use payments to get ahead. So, in this article we’ll explain how SaaS payments work, the best payment services for SaaS companies, and SaaS payment gateways. We’ll also show you how to accept subscription payments online and guide you to find the best payment strategy for your SaaS business.

SaaS payment

What are SaaS payments?

The majority of SaaS payments (or SaaS billing) are processed through subscription billing or recurring payments. This means charging customers regularly to use a product or service. Some SaaS platforms also allow customers to accept payments from consumers (or their customer’s customers) through payment facilitation. In this article we’ll explain both, starting with subscription-based payments.

How do SaaS payments work?

If you’re running a SaaS company, how do you accept payments, and how do they work? You have to take several steps to deliver a seamless and stress-free experience to your customers, ensuring they maintain a long and successful partnership with your business.

1. Payment gateway

The payment gateway for SaaS is the first thing a customer sees when they decide to purchase a subscription to your product. It’s where they choose a SaaS payment plan and the subscription payment method that they will use to pay on an ongoing basis. This payment gateway should offer total security for both you and your customer as they make a payment.

2. Merchant account

All SaaS businesses need an account that their customers can pay into. This is called a merchant account. You might already have a merchant account or partner with a company that provides one for you, such as a payment service provider.

3. Subscription management

After setting up the payment plan, you need to assess how to manage the ongoing subscription. This includes storing information that will help you keep track of managing the payment schedule. Good subscription management plans will also assess how you can help customers use your services and retain them for as long as possible.

Subscription management is not the same as recurring billing, which focuses on subscription payment processing and the recurring transactions between you and your customer.

Mollie payment dashboard

The benefits of a subscription-based payment model

So, what can a subscription payment model offer to your SaaS business? The benefits include:

– A more predictable future revenue stream

– The ability to deliver better customer experiences

– You can gather rich customer data and insights

– Reduced customer acquisition costs

Recurring subscription payments allow you to predict your future revenue stream more reliably. This will enable you to forecast more easily and confidently make business decisions. You can also gather customer data over a long period, which you can use to target new customers and develop better customer relationships with your existing customer base. By winning your users’ loyalty and lengthening the customer lifetime value, you will reduce the costs of acquiring new customers.

Subscriptions and recurring payments – customer churn

The benefits of a subscription model are clear. But there are also some areas of concern that all SaaS businesses should consider. And there’s one that is the biggest problem for software as a service platforms and companies that accept recurring payments – customer churn.

Customer churn

Thankfully, research shows that SaaS companies have lower churn rates than other industries, but it’s still something that can cause your business to lose money quickly. There are two distinct types of customer churn.

Voluntary churn

Voluntary churn happens when a customer voluntarily cancels their subscription to a product. This might happen when they no longer use it, decide to switch to a competitor, or are dissatisfied with the product or service. You can reduce voluntary churn by tackling the factors that might cause a customer to leave, such as your pricing or customer service.

Involuntary churn

Involuntary churn happens when a customer’s subscription stops due to an unintentional issue, usually a payment failing to process. A range of things can cause payment failures, including incorrect payment information, outdated card details, and the customer’s inability to pay.

Voluntary churn is inevitable. Customers may no longer need your service or might get a deal with a competitor that they can’t turn down. Involuntary churn is avoidable, and no business wants to lose a happy customer due to an administrative (or human) error. But, there are things you can do to decrease involuntary churn, including offering payment methods that are more suited to recurring billing.

The best SaaS payment methods

As the world moves into the digital era, paper invoicing is becoming less common for SaaS companies. Instead, most companies now offer their customers a range of online choices when they’re signing up. So, what are the leading online subscription payment processing options?

– Credit and debit cards

– Direct debits

– Digital wallets

– Alternative payment methods

Card schemes

Debit and credit card schemes such as Visa or Mastercard offer your customers a recognised and trusted way to pay. They provide a seamless experience to your customers who can usually fill in their payment details and complete a purchase in just one click, and the payment is processed instantly.

Card payments

With card schemes, you can let customers complete separate transactions based on their subscription plan (paying a set amount each month, for instance) or work with a processor who can help you keep card details on file and automate payments. Often, these payment processors will let you store multiple cards on file, which can help prevent involuntary churn.

Direct debit

Direct debits allow you to take regular payments from your customer’s bank account based on a pre-approved agreement. This agreement is called a mandate. To set up a mandate, customers need to complete a form that permits you to take money from their accounts. In Europe, the most popular direct debit method is SEPA Direct Debit.

Direct debits offer both you and your customers flexibility and security. They are relatively simple to set up and manage. Direct debit payments can also be reattempted if they fail. And because people don’t often change their bank accounts, they reduce the risk of involuntary churn.


Some digital wallets act as electronic cards that people can use to complete transactions. The card connects to the individual’s bank account through debit or credit cards. Apple Pay and Google Pay both offer this service. PayPal is also a type of wallet that supports subscription payments, though not all wallets do.

Alternative payment methods

Alternative payment methods include a range of different payment methods. In Europe, many local bank transfer methods support recurring payments for businesses. This includes France’s Cartes Bancaires and Giropay in Germany. Some recurring payments that use these European payment methods are operated via the SEPA Direct Debit scheme.

What payment methods should you offer?

The best payment methods to manage subscription payments allow you to store and reuse your customers’ payment details. Card schemes, direct debits, wallets, and bank transfer methods offer this: customer details are held and used to collect recurring payments.

SaaS payment methods

Payments need to be seamless and straightforward, and you need to provide methods that can help you easily collect recurring payments from your customers. Offering your customers the payment methods they prefer is vital. That also means offering a range of options to help satisfy different customer needs to boost conversions.

Security should also be top of mind in your payments strategy. If you’re accepting payments, you have to manage your customer’s financial and personal data and comply with all banking regulations. In Europe, you need a fully compliant PSD2 solution that can offer all the payment methods your customers prefer.

SaaS payment facilitation

Not all SaaS businesses use only subscription plans and payments. Some SaaS platforms also allow customers to accept payments from consumers (or their customer’s customers). This is often the case with SaaS platforms that facilitate bookings – such as at hotels or restaurants – or ticketing and events.

If your SaaS business wants to start facilitating payments in this way, then you have two options. You can set up to become a payment facilitator (PayFac) yourself, but this will likely cost you a lot of money and time. You will also probably have to recruit new employees who can help maintain your payment technology and take care of the security and compliance requirements of processing your own transactions.

Instead, many SaaS companies choose to partner with a PSP who can help them process the payments made by the consumers. As payments specialists, the PSP will make sure you comply with regulatory requirements, should integrate seamlessly with your technology, and can help you earn additional revenue by charging fees from the payments between your customers and their customers. They can also onboard your customers to help them quickly start accepting payments. We’ll address this more in the next section.

Onboarding for SaaS

If you’re a SaaS company that facilitates payments between your customers and their customers, you need to offer a positive, effortless experience. This isn’t always easy. In fact, without the proper infrastructure, your customers might have to wait for several days to complete a merchant account application before being able to sell their products or services through your platform.

By partnering with a good PSP, you can help make this process as smooth as possible. The best PSPs offer APIs that can help automate this process. That means your customers provide certain information when they sign up, and then the PSP helps quickly onboard them so they can start selling almost immediately. This frictionless onboarding also lets you focus on other parts of your business as you don’t have to add new customers to your account manually. It also takes care of all regulatory requirements.

Payment processing for SaaS

Many SaaS companies partner with a payment service provider (PSP) to help them sell their software as a service products. The payment solutions offered by these payment processors can help you:

– Provide a wide variety of payment options

– Comply with all necessary banking regulations

– Deliver a seamless customer experience and onboarding

– Easily integrate payments into your website

These are all essential things a PSP should offer your business, but there are other features that payment processors offer that can help you grow. These include features to securely onboard your customers and help you drive new revenue by providing payment processing as a service to your customers. They should also offer you the capabilities to track and manage your recurring-billing data in one place.

Connect for Platforms

Meet Connect for Platforms

At Mollie, we make SaaS payments effortless with Connect for Platforms. The fastest and easiest way to accept and integrate leading payment methods into your SaaS platform, it also ensures you’re always fully PSD2 compliant. Advanced features enable you to quickly and securely onboard your customers and give you the ability to add revenue by offering your customers reliable payment processing. We offer all this with transparent pricing, a powerful dashboard to help manage your recurring billing, and local human support that’s there for you when you need it.

Learn more about Connect for Platforms, or discover our integrations that can help manage your subscription billing and management needs.

Get better payments now.