SaaS Payment Processing Overview

Everything You Need to Know About SaaS Payment Processing in 2023

Software as a service (SaaS) has unique payment processing requirements that don’t apply to many traditional businesses. However, when you get your payment processing right, recurring payments from SaaS subscriptions enable you to build monthly recurring revenue from customers around the globe. In general, the more your payment processor can do in terms of subscription management and tax compliance, the more time you’ll have to focus on scaling your operations. Ready to learn about SaaS payment processing? Let’s dive in…

Features of Payment Management for SaaS Businesses

When it comes to SaaS businesses, “payments management” or “revenue management” are more accurate terms than “SaaS payment processing.” Why? Because with SaaS, the initial sale is never the end of the story.

Whereas software companies used to process a single customer transaction and then mail out a software package as a digital download, CD or floppy disk (and the transaction was over), software-as-a-service companies need to manage revenue from each customer long-term, giving customers the flexibility to upgrade, downgrade, cancel, or put their subscriptions on hold at any time.

To facilitate the SaaS subscription process from beginning to end, every SaaS business needs:

  • A user-friendly dashboard where customers can choose a subscription frequency, a fixed or variable pricing plan and optional add-ons
  • The ability for customers to create accounts where they can manage their subscriptions
  • An international customer service team
  • A secure international payment gateway that accepts global payment methods and integrates seamlessly with your e-commerce platform
  • A secure place to store customers’ payment information
  • A merchant account
  • An automated recurring billing solution
  • Automatic sales tax withholding and tax remittances
  • License management for digital content
  • Dunning management for failed transactions
  • The ability to generate and apply coupons, discounts and gift cards
  • Software that can manage transaction emails, follow-up emails and email marketing
  • Revenue analytics (including monthly recurring revenue and churn rate) to help you make smart business decisions

If you break this list up into its smallest components, you essentially need:

  1. A payment gateway
  2. A merchant account
  3. A subscription management system

While you can find these services offered separately, it often costs far more time and money to manage payments using disparate services and add-ons over time than it does to choose an all-in-one solution from the start.

Questions to Ask When Comparing Payment Processing Providers

When comparing payment processors and the features they offer, ask yourself:

  • How large is my potential target market?
  • Which countries do I want to sell to?
  • What kind of subscription options do I want to offer?
  • What do I want the user experience to be like?

Rather than looking at payment service providers that can meet your processing needs now, look at SaaS billing systems that can scale with you and meet your needs when you serve thousands of customers from all around the world—without creating more work for you.

Before signing a contract, it’s also important to find out whether all of the features you’ll need are included in the provider’s base pricing or come as add-ons at an additional cost. You certainly don’t want an exorbitant bill down the road when you need more features than you did at first.

Key Challenges that Every SaaS Business Must Overcome

If your aim is to join the ranks of the SaaS businesses like Microsoft (Microsoft experienced 45% year-on-year growth between 2021 and 2022) and Salesforce (Salesforce experienced 25% year-on-year growth between 2021 and 2022), you’ll need to find a SaaS payment processing solution that addresses the top challenges and risks of a subscription business model.

Account Security

Digital transactions come with a risk of data theft and payment fraud. To keep customers’ payment information safe and prevent hefty fines:

  1. Use a PCI-compliant payment gateway that tokenises customers’ payment information using the latest encryption methods.
  2. Keep customers’ card details off your business website by outsourcing payment processing to a PCI-compliant merchant services provider.
  3. Use card verification value (CVV) and address verification service (AVS) checks at the checkout.
  4. Use two-factor authentication for customers and employees.
  5. Choose a payment provider that offers customisable and adjustable fraud scrub tools.

Compliance with International Regulations

Tax laws and digital commerce regulations vary around the world, and taking your customer base global means complying with local laws wherever your customers reside. When choosing a payment processor, look for one that can take care of collecting and paying sales tax on your behalf and that will handle the burden of compliance in each country.

Unicorn Payment, for example, works within regulations that apply to European Union member countries, including the E-Commerce Directive, General Data Protection Regulation, revised Payment Services Directive (PSD2), Strong Customer Authentication (SCA) guidelines and EU VAT Directive 2022. This familiarity with regional regulations is an advantage for SaaS businesses that want to process payments from customers in Europe.

Accepting Global Payment Methods

For SaaS companies, the easiest payment method is undoubtedly payment by credit card. However, customers like to have options when it comes to how to pay. At a minimum, your SaaS business needs to be able to accept:

  • International credit and debit cards (some customers may want to save multiple cards in their account)
  • E-wallets
  • Electronic bank transfers, including direct debit, standing order and ACH payments for customers located in the United States

To maximise your customer base, you need a payment solution that will process international cards—even those from countries considered “high risk”—while flagging and blocking fraudulent transactions. Additionally, it’s an advantage to have a merchant services provider that lets you store multiple currencies in your merchant account and settle your earnings in the currency of your choice.

Churn Rate

Churn rate refers to the percentage of members or subscribers who unsubscribe from your software service or suddenly stop making payments. This rate includes both voluntary churn—members who have decided they no longer wish to use the software—and involuntary churn—members who drop out because of failed transactions or because it’s too difficult for them to make changes to their subscriptions.

According to research from Spiceworks, the average annual churn rate for SaaS businesses that make €9.4 million annually is 20%. While customers are always free to change their minds, Paddle estimates that 20-40% of churn is involuntary—i.e. due to failed transactions and expired credit cards.

To keep otherwise happy customers on board, it’s essential to:

  • Make it easy for customers to manage their subscriptions and payment methods online (upgrade, downgrade, cancel or put their subscription on hold).
  • Use a subscription management provider that can automate reminders for customers to update their credit card details before they expire.
  • Choose a subscription management provider that allows you to manage failed transactions from one centralised, cloud-based SaaS payment processing platform.
  • Contact customers after a failed transaction to find out what happened and coordinate a transaction retry or change the billing date, if required.


Last but certainly not least, subscription businesses like SaaS have a high risk of chargebacks from fraudulent subscriptions and customers who can’t work out how to cancel their subscriptions manually.

To keep your chargeback ratio low and stay on good terms with the card networks, make it easy for customers to cancel their subscriptions and look for a provider that actively works to mitigate chargebacks before they go through.

The Right Payment Partner Can Unlock a Global Market

Offering software as a service has the potential for almost unlimited revenue, but technical issues with payments can cut into your profits.

When considering the different payment gateways on the market, look for one that has a proven track record with subscription services and offers all of the merchant services you need—both now and those that you’ll need as your business grows.