Merchant services have traditionally been considered an additional benefit provided by a third party, such as an ISO, on many software-as-a-service platforms.
In recent times, software-as-a-service platforms have become aware that merchant services can become not just a revenue stream for third parties but a substantial revenue stream for themselves. In that case, the embedded or integrated payment logic would have to be implemented. The added benefit of this is that they will be able to monetize the payments as an extra benefit to their core offerings.
Further, it is now evident that embedded payments are not only a tool for payment monetization but also a means to increase competitive advantage, customer retention, and churn reduction. In some cases, you are able to add certain essential features to the platform. As a result of these features, your platform will be able to thrive alongside other payment systems available on the market.
What are the possibilities for monetizing payments through a SaaS platform?
Payment functionality is one of the most important features of a SaaS platform since it enables it to provide merchant services to its users. It can thus make some money from collecting its rightful share of merchant service fees and payment processing fees. It was usually the ISO that received this money under the traditional merchant services model.
Hence, in addition to the platform’s core product or service, which generates revenue, other monetization methods can be implemented. Both of these mechanisms are capable of generating additional revenue streams from payment processing as well as motivating customers to utilize the merchant services that this platform offers.
A markup-based method of monetizing payments
Markups are the most common method of monetizing payments. Thus, SaaS platforms can give merchants incentives to process more through their platforms through their pricing policies. For example, it may offer discounts to merchants who have consolidated processing volumes that exceed a certain amount. Merchants are, therefore, motivated to consolidate payments as a result.
Using pricing plans to monetize payments
There are certain fees associated with every software-as-a-service platform. Customers usually have the option of choosing between two or three service plans. Typically, there are three levels of service: basic, standard, and premium. Users may be motivated to choose more advanced service plans if the platform offers payment logic within its offering.
Taking advantage of advanced features to make money
SaaS platforms can offer more advanced payment processing functions in addition to basic payment processing functionality. In addition to decline recycling and account updater functions, chargeback management is another example of such features. Due to this, these advanced payment features can be added to the fees that payment software companies and SaaS platforms charge.
Making Money Through Merchant Funding Service
Payment is typically made to merchants within two business days after a merchant’s transactions have been processed. To give an example, merchants receive payments from Monday’s transactions on Wednesday or Thursday after they are processed.
A merchant may need the funds before or after the transaction is processed in some cases. A merchant that collects monthly payments on a specific date may benefit most from this feature.
Consequently, payment platforms may be able to release some of the funds before the billing date or speed up the funding process at an extra cost. Of course, the platform must have adequate funds at its disposal.
Revenue Generation through Advanced Reporting and Customer Monitoring
Merchants may need additional information in order to reconcile funds and analyze profitability on a daily or monthly basis. It was traditionally only possible to access this information through cumbersome legacy reports. Processing companies usually provided these reports through ISOs, who were entrusted with managing the payment relationship. Payment platforms can now offer this functionality directly and charge additional fees for it due to advances in payment technology.
An approach to monetizing franchise services through payment
It is well known that franchise businesses generate the majority of their revenue from franchising fees. It follows, therefore, that if your platform provides services to franchise businesses, the franchising fees can be collected directly from the merchant proceeds. Consequently, the franchisor will not be responsible for collecting the franchising fees. The integration of payments and funding allows SaaS platforms to deduct these fees from merchant deposits without any additional effort. It is reasonable for software platforms to charge additional fees to support this feature since it simplifies the process significantly.
A payment monetization method based on hardware leasing or terminal leasing
Similar to cable broadcasting companies, payment hardware leasing is an increasingly popular method of leasing equipment. A modest monthly fee is charged to customers as rent for modems, decoders, and cable boxes. In most cases, accumulated fees cover the cost of the hardware device after a year. As a result, the provider receives net revenue from all subsequent fees.
More importantly, due to Android payment terminals’ availability on the market today, the model has become particularly relevant. This is due to the fact that Android-based payment hardware can run other Android apps in addition to processing payments. In particular, restaurant software, point-of-sale systems, or paperless document management apps fall under this category. These terminals are, therefore, more appealing to merchants, thereby motivating them to purchase/rent them.
Charging for the use of additional gateways
In most cases, a software-as-a-service platform is integrated with a single major payment processor. Nevertheless, there may be certain payment types for which merchants would prefer to use another payment gateway.
By charging third-party gateway users fees for using the SaaS payment gateway, providers of SaaS payments can generate additional revenue streams from payments. In other words, a SaaS platform may offer its sub-merchants the option of processing through other gateways at a surcharge.
Bonus: Revenue Generation from Savings and Indirect Costs
We usually focus on increasing the number of revenue streams when we consider payment monetization services for platforms. Still, it is a well-known proverb that every dollar saved is a dollar earned. It is important to note that integrated payments not only enable you to grow your revenue but also help you to reduce your expenses. Therefore, you are able to allocate more funds to the development of your core products.
A flexible payment solution such as UniPay Gateway allows you to onboard your users instantly and frictionlessly. In this way, it is much easier, faster, and less resource-intensive. Besides this, the platform is also able to get detailed information about the batches it processes and the transactions it processes.
Feel free to contact our experts if you have any questions or need more information.