5 Steps to Successfully Monetize Your Embedded Payment Solution
Many SaaS companies are becoming aware of the massive revenue opportunity that exists by monetizing payments within their platform, but only some are rising to their full potential. How have others like you been successful? Read on to learn how to set yourself up for transformative growth with embedded payments.
Managing payments can be complex and time-consuming, especially for new entrants and SaaS startups. Without proper scoping and defining a payments roadmap for implementing your solution, you can easily get lost and end up back at square one.
As another example, SaaS companies that were working towards a vision of becoming a payment facilitator (payfac) have quickly realized they are exhausting their resources trying to build and manage the solution themselves. Whether you are working with a payments partner or going at it alone, the checklist below will help you create a comprehensive payments roadmap for your organization.
- Define your target audience and use cases
- Outline development goals and timelines
- Complete an in-depth review of compliance and legislative requirements to meet (by partnering with an existing payfac like Payrix, this is already done)
- Plan for hiring and/or outsourcing staff to manage your payments solution (some payment partners will offer this as part of their solution)
- Draft budget and resource plan
- Map out your integration strategy
- Determine your beta testing strategy
- Implement a Quality Assurance (QA) process
- Estimate ongoing resources needed to maintain your solution
Adding payments to your platform is a strategic business decision, so we recommend dedicating time to develop a plan and weigh your options before you move forward. If you’re working with an embedded payments partner, much of this will be completed for you — or at least the foundations will be in place to get you started.
When done right, offering payments as a feature for your software has significant upside for your business. However, without some sort of payment monetization strategy in place, SaaS providers tend to struggle to generate a tangible return on investment.
Why should you enable payments?
- Here’s why other SaaS providers find embedded payments attractive:
- Remaining competitive in your vertical market
- Staying ahead of customer demands
- Adding value to your existing product
- Expanding into new regions or markets
- Retaining existing customers
While these are all valid and viable reasons to enable payments, they can be harder to track in terms of tangible revenue. To really maximize on offering payments-as-a-service, you need to understand how to generate a profit from the volume being processed through your platform.
How can you maximize your revenue? Monetizing your payments usually involves:
- Charging a % transaction fee for payments that are processed through your platform
- Charging a flat fee for payments processed
- Marking up payments as a premium feature or bundle of features
- Including fees for non-traditional payment services (i.e. sign-up, monthly SaaS, funding/payout) in your pricing strategy
- A combination of the above
You will be surprised what your revenue can look like by implementing a proper pricing strategy for your payment solution. For example, one Payrix client is monetizing payments to fuel over 90% of their ARR, while eCommerce giants like Shopify continue to use this tactic to fuel over $787.5 million revenue in Q3 2021 (source).
The core of your payments strategy should revolve around how you will generate adoption. Without your customers (merchants) using your payment features, you cannot maximize the benefits of enabling payments.
Driving adoption of your payments solution is centered around understanding your customer’s needs and communicating the benefits of your solution. Here are some quick tips on generating adoption to help you get started:
- Communicate key benefits
- Offer industry-specific features
- Leverage existing channels
- Guide your customers through signup
- Show off the benefits and how to get take advantage them
Just like any feature or service, maximizing adoption is a key metric to success with an embedded payment solution. By partnering with an existing payfac (see number 4), you can leverage your partner’s resources and expertise. For example, Payrix will assign a dedicated partner success manager that works with you to develop and execute on your adoption plans.
Adoption is an important indicator of customer experience, user acceptance, product-market fit and customer satisfaction. Developing a plan to generate adoption will help you accelerate your time to revenue.
Most SaaS companies are not ready to take on all the heavy lifting when they first add payments to their solution, either because they cannot afford to resource the development costs, staffing, legal requirements and adoption plans required to make their payments solution successful, or they have other product development goals that need to be dealt with in-house, making payments unrealistic due to the extensive resources and investment required to make it work.
With the right embedded payments partner, you can enjoy the benefits of offering payments in a much shorter time frame, with significantly less investment. Choosing the right partner is an important decision, as it will impact the quality and success of your payments solution. Some providers will set you up with a merchant account and then leave you to figure out the rest, whereas others specialize in partnering with SaaS platforms to build mutually beneficial partnerships.
There are payment providers like Payrix that allow you to embed a core payments solution directly into your platform using sophisticated APIs, and will also help you with some or all of the ongoing maintenance and compliance requirements.
In some cases, you’ll see providers only offer pre-set pricing (such as 2.90% + 30c per transaction) —this caps your potential earnings. Payrix gives you the freedom to control all of the processing fees that are charged to your customers, so you can maximize your revenue on the processing volume flowing through your products.
Similarly, Payrix provides an all-in-one solution for embedded payments, whereas others have a module based or partial solution requiring you to manage multiple providers. This can extend your development costs and time to go live with payments, as well as requiring higher ongoing maintenance.
In terms of choosing a partner, it’s important to select one with payments expertise that you can lean heavily into as you are getting started. If you are coming from an integrated solution, you may already have a little experience under your belt — but if you are new to payments, having a partner you can trust to support you and your customers as you get up to speed is critical to your success.
Whether your reputation is already strong or you are still building your name in the market, your payment solution can be used as an extension of your brand to create a more consistent customer experience. This is crucial for driving loyalty and retention, and building an inherent value in your company that goes beyond just product features or comparing prices.
Consider how you can create brand touchpoints throughout your payment features, driving more engagement and loyalty from your customers throughout.
Some providers offer co-branding options, while Payrix white-labels our entire platform for your brand including onboarding forms, merchant portals and checkout pages.
Making moves to fully monetize your payment solution offers a world of possibilities — to you and your customers. These best practices will help you avoid the potential pitfalls of embedded payments that can keep you from boosting your revenue potential and strengthening your customer experience. By enlisting the software and payments experts at Payrix, you will have a partner that understands the in’s and out’s of maximizing payments revenue, so you can take your SaaS platform to new heights.