Top 10 Challenges of Recurring Payments for a SaaS Business
An important metric for a SaaS business is the ARR or the Annual Recurring Revenue which further breaks down to MRR or the Monthly Recurring Revenue. This essentially is the yearly and the monthly subscription revenue for the company. SaaS companies need to have a robust payment gateway to enable their users a seamless experience as the business model itself is based on recurring payment.
Not very long ago setting up a payment gateway in India was a gigantic task, as compared to what it is today. SaaS businesses in India were able to collect recurring charges through credit cards only until two years ago.
The National Payments Corporation of India (NPCI) recently made some changes to automate recurring payments in order to enable customers to authorize their debit cards for payments. (Read our article on What is a Payment Gateway and how does it work)
Recurring or subscription payments have many advantages however there are challenges too. Let’s look at few of the top challenges:
1. Scalability and flexibility: A customer can carry out several transactions and it’s totally DIY (Do It Yourself). For example if he wants to modify the current billing plan and move to another plan by either upgrading or downgrading, it’s possible to carry out those at a click of a button. Imagine dealing with such changes for thousands of customers? Tracking such changes and keeping up with the payments cycle can be cumbersome manually for big and small SaaS companies.
2. Customer Experience: Product quality is important, but the process to manage customers is equally important. Long wait time while making payment through a gateway just builds up anxiety or frustration. One can’t afford to lose subscribers in the SaaS business because of bad customer service. It is imperative to keep a track of customers queries and work on resolving them quickly.
3. Robust gateway: There are various ways for the customers to process a payment including credit/debit card, UPI, bank integration or even through wallets. However, having the technology to enable flexibility in payment cycles while adopting the changes for fast transactions is important. Having a gateway that allows multiple payment options with speedy transactions would be among the biggest concerns for SaaS companies.
4.Invoicing: Sending invoice for each transaction can be very hectic and time-consuming. Checking the services, products, and all the small details in order and charging correctly without any errors is necessary for good customer service. This can easily be achieved by a platform that automatically generates invoices to clients after purchase or renewals.
5.Secure Payments: In recent times online transactions have become popular but so have the number of ways customer information can be leaked. Data has become very vulnerable. Customers will feel secure sharing their information, only when they are sure their information will be secured with a certain business. This is possible when a secure payment gateway is available.
6. Secure Payments: In recent times online transactions have become popular but so have the number of ways customer information can be leaked. Data has become very vulnerable. Customers will feel secure sharing their information, only when they are sure their information will be secured with a certain business. This is possible when a secure payment gateway is available.
7. Transaction Management: Quick and efficient payments are the reason behind adopting a subscription-based model. Tracking every transaction is critical for a SaaS business. It is practically impossible to track each recurring payment manually for a failed transaction or missed deadlines etc. Getting alert or identifying these automatically will save a lot of time. To have a reliable payment partner that can manage this will help save time and provide superior customer experience.
8. Managing multi-plans: While some people want to pay for a subscription for the entire year, others want a monthly transaction as they are happy with smaller payments. For SaaS business, it is important to accommodate different packages as per customer needs. You might have four products but the customer doesn’t need all four at a certain price. They are happy about taking or paying for only one or two services. Payment gateways have to be built to manage these multi-plans and pricing.
9. Multi-currency: SaaS businesses are present around the world and it’s necessary to give the option to make payment in their local currency and a big consideration when choosing a payment gateway. You must also consider the challenges of paying in local currencies.
10. Pricing Challenges: Pricing the product right has been the biggest challenge for any business, more so for Saas businesses with so much competition around. Therefore, having a price range gives a broad spectrum. Having the flexibility to give an indication of price for the particular product and thereafter give the actual billing based on the actual data at the end of the cycle, reduces the hassle of high or low pricing. Besides, the option to manage discounts and promo codes which is common for SaaS should be part of the payment gateway.
Reducing Customer Churn: In SaaS businesses, one of the issues that lead to customer churn is expiring subscriptions or not having the latest update of the customer’s details. Timely notifications can help to reduce customer churn.
These are the challenges that SaaS businesses in India face in their day-to-day operations. Kredpay can manage all the above easily with an efficient, highly reliable, and scalable collection payment platform for subscriptions.