What is SaaS payment processing? Guide for UK businesses

Summary: 

• SaaS payment processing refers to the way processors are set up to support the unique needs of SaaS companies in accepting and processing payments.

• This involves processing recurring payments with different pricing models and billing schedules.

• The best SaaS payment processors will manage subscriptions and invoices while handling payment. 

SaaS payment processing solutions keep up with subscription-based service demands like tiered price structures and recurring payments. At the same time, they support multiple currencies and popular international payment methods.

Over half (51%) of small- and medium-sized international businesses planned to enter new markets in 2024¹. For these businesses, global payments and custom billing controls are essential. So choosing the best SaaS payment systems that can grow with your business is important.

Learn more about SaaS payment processing below, and how to choose a provider. 

What is SaaS payment processing?

SaaS payment processing supports online transactions for SaaS businesses that predominantly use a subscription-based pricing model. This system includes everything from payment gateways that initiate transactions and the transfer of funds between accounts. 

SaaS payment processing can handle:

• Recurring billing

• Tiered pricing plans

• Automated invoices and billing

• Local and global tax compliance

SaaS payment processing supports subscription management by allowing customers to pause, renew, cancel, upgrade, or downgrade plans. Each of these actions impacts billing and invoicing, so having a strong SaaS payment solution is critical for efficiency and user experience.

How does SaaS payment processing work?

SaaS payment processing works the same way as any other business’ payment processing system:

• Payment gateways accept and authorise the transaction.

• Payment processors communicate between bank accounts to confirm and transfer payments. 

• Merchant accounts accept, hold, and disburse received funds.

SaaS businesses are usually subscription-based. So, instead of a one-off transaction, clients and companies have a prior agreement to process payments at a certain recurring time – often monthly or annually. 

Your SaaS payment processing system should record and organise customer details, like their subscription plan, payments, and billing period. The processor can then automatically trigger a transaction and process the payment.

Of course, that’s not all they can do. Some providers come with additional features like expense management tools to further reduce manual reconciliation so you can focus on growing your business. 

What payment processing challenges do SaaS businesses face?

SaaS businesses' unique pricing strategies create hurdles for the average payment system. Strong SaaS payment processing requires more consistent management than one-off purchases.

Managing billing frequency

Subscription pricing can present many challenges to businesses. Most businesses will offer packages with varying features and pricing, which may include trial periods, subscription discounts, custom enterprise pricing, and more.

Additionally, each customer’s recurring billing may work differently and on different schedules. Your SaaS payment processing solution should be able to offer customised solutions for all of these billing needs.

To avoid missed payments, make sure your provider offers retry features that automatically reattempt a failed payment according to your set rules. Smart retries can save time and effort chasing customer payments.

Large enterprises might create a custom payment processing system in-house, but building and maintaining this solution isn’t cheap. So, most SaaS companies benefit from established payment processing providers.

Having a scalable solution

Sustainable growth is a primary goal for most businesses. This is especially true if you want to expand your business globally.

Starting with a robust, flexible SaaS payment processing system means you can serve more customers and navigate local regulations, accept many different currencies, and display dynamic pricing based on locale more easily.

Payment processors like Airwallex specialise in international transactions with features like:

• Global reach with payment acceptance supported in multiple currencies from over 180 countries.

• Diverse payment methods for customers to pay in local currencies via different payment methods like card and direct debit.

• Localised checkout experiences so customers see prices listed in their local currency.

• Multi-currency business accounts to manage multi-currency payment collection and reduce fees with like-for-like settlements.

• Competitive processing fees for international and domestic transactions to manage costs effectively.

These features allow you to improve conversion rates while keeping your cost of doing international business low.

Choosing a secure payment processor

Ensuring you have a secure system for processing payments is especially important for recurring payments, since SaaS processors will need to store and manage this customer data on a recurring basis.

When choosing a payment processor for your SaaS business, consider how it handles sensitive customer information and how it prevents fraud when accepting payments. These measures will help you and your customers feel safe with their data.

It's mandatory for any business that processes, stores, or transmits data to comply with Payment Card Industry Data Security Standards (PCI DSS). Key aspects include building and maintaining a secure network, encrypting data transmission and storage, and regularly conducting vulnerability assessments.

Many SaaS payment processors also have fraud detection abilities to protect your business from cyber criminals. For example, our platform, Airwallex uses machine learning to analyse transaction patterns to identify anomalies in real-time. 

Reducing operational workload

Automation goes further than initiating and finalising transactions. Reconciliation can also become an administrative burden if you have a large number of customers. Consider that some customers pay each month and get a month’s service – easy. There are also annual customers who pay in advance and receive service for 12 months. You can’t recognise the revenue until that point.

Automation is especially valuable with the complicated subscription model SaaS companies rely on. As your SaaS business grows, accounting becomes a much larger task. So it’s important to consider solutions that allow automated rules to reduce the manual workload and ensure consistency.

Most important SaaS payment processing features

We’ve touched on many of the features that make payment processing services work for SaaS businesses, but the key ones to consider include:

• Payment method variety to accept virtual cards, direct debit, and local payment methods in the countries you operate in.

• Global payments and localisation to accept international money transfers and transactions, and improve user experiences for non-local customers. 

• Subscription management to simplify recurring payments and offer a variety of customisable service packages for different needs.

• Invoice and billing automation that considers subscription-based needs. 

• Fraud prevention that automatically identifies and protects against fraudulent transactions to protect your revenue. 

• Revenue management and analytics that organise transaction data and integrate with accounting software to show a full picture of your financial data.

Together, these will improve your business’ financial management and solve ‌many common SaaS business challenges. 

The five best SaaS payment processing platforms in the UK

The UK is full of great payment processors that specialise in different business needs. SaaS payment processing isn’t as straightforward as processing one-time payments, but there are still strong options to choose from, including:

• Airwallex (that’s us!) offers tailored payment solutions that cater to customers with different business models and multi-currency support.

• Stripe’s² flexible billing model includes dozens of integrations and a pre-built customer portal to easily manage recurring revenue.

• Braintree³ is a PayPal product with strong features for SaaS businesses that’s particularly good for mobile checkouts.

• Chargebee⁴ specialises in subscription management with Smart SaaS billing and flexibility to scale as a top priority.

• GoCardless⁵ offers payment processing for subscription services with a speciality in direct debit payments

1. Airwallex

Airwallex supports multiple currencies and payment methods, making it easier to accept payments from customers worldwide. Our subscription management features easily maintain subscription-based models with automatic recurring billing. 

You can set recurring bills to be automated weekly, monthly, or annually, so you don’t have to lift a finger to get paid. It’ll also automatically handle failed payments with retries. This helps you reduce churn, save time, and avoid mistakes.  

Airwallex also offers powerful APIs to integrate with your existing systems and workflows such as accounting integrations, which can remove manual reconciliation.

2. Stripe

Stripe’s recurring billing and revenue management allows you to manage subscriptions, trials, upgrades, and downgrades. On top of its payment processing solution, Stripe enables customers to self-manage plans with a pre-built customer portal. This feature can help reduce churn and retain revenue with smart recovery tools.

However, if you’re looking at expanding to emerging markets, Airwallex may offer better support for accepting less common currencies. That’s a strong advantage for SaaS businesses looking to expand internationally.

3. Braintree

Braintree is a payment processing solution owned by PayPal, so you’ll need a PayPal account to accept payments with Braintree. Apart from accepting payments from major card schemes, Braintree also helps businesses accept payment methods from PayPal and Venmo.

Braintree offers a customisable checkout experience, allowing businesses to tailor the payment process using their ready-made Drop-in UI or Custom UI.

While Braintree has some key features to support SaaS businesses, the PayPal company requires you to have a PayPal account to get started. It also doesn’t service all business categories, so you’ll need to confirm eligibility.

4. Chargebee

Chargebee is a subscription lifecycle management and recurring billing platform. While it has many typical features of a SaaS payment processor such as subscription billing, Chargebee stands out with its pricing experiments feature. This feature lets you test-run different pricing models and plans to figure out the most attractive fit for profits and customer appeal.

However, if your SaaS business has a broader global reach, supporting payments in more countries and regions is a critical deciding factor. Airwallex accepts payments in 160+ payment methods, which can help boost checkout rates by letting customers pay with their preferred payment methods.

5. GoCardless

GoCardless offers a secure, international payment processing service for subscription businesses, with recurring payments collection in over 30 countries and eight currencies⁶. GoCardless also has a payment intelligence feature called Success+ that predicts and manages payment failures to help businesses recover failed payments.

However, it's important to note that it only accepts direct debit payments bank-to-bank. This limitation could potentially mean losing customers who prefer to pay via cards.

Increase conversions with streamlined SaaS payment processes

SaaS billing can be complicated, but the right SaaS payment processor should let you accept cross-border payments without the operational hurdles.

These benefits also include tracking payments, reducing failed payments, and improving cash flow. If you want to expand internationally, Airwallex’s payment solutions lets you reach new global audiences with a great user experience and reduced costs.

Airwallex lets you accept multiple currencies and supports over 160 payment methods to enhance the customer experience and support conversions. You can also save on FX conversion fees with like-for-like settlement, and access competitive processing fees for domestic and international transactions.

Sources:

1. https://www.americanexpress.com/en-us/newsroom/articles/amex-for-business/uk-smes-reveal-2023-international-expansion-plans-but-challe.html

2. https://stripe.com/gb/use-cases/saas

3. https://www.braintreepayments.com/features/recurring-billing

4. https://www.chargebee.com/saas-billing/

5. https://gocardless.com/en-us/features/rpp-recurring-payments-page/ 

6. https://gocardless.com/faq/merchants/international-payments/