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UniPayGateway

May 24, 2022
Written by
James Davis
Written by James Davis
Senior Technical Writer at United Thinkers

Author of the Paylosophy blog, a veteran writer, and a stock analyst with extensive knowledge and experience in the financial services industry that allows me to cover the latest payment industry news, developments, and insights. Read more

Reviewed by
Kathrine Pensatori
Product Specialist at United Thinkers

Product specialist with more than 10 years of experience in the Payment Processing Industry. I help payment facilitators and PSPs solve their various payment processing issues. Read more

Monetizing Payments for SaaS

Key Takeaways

Traditionally, many software-as-a-service platforms considered merchant services an additional benefit provided by some third party, such as an ISO.

Recently, SaaS platforms have realized that merchant services can become a substantial revenue source for themselves and not just for third parties. That is only if they implement embedded payment logic or integrated payment logic. By doing so, they can start monetizing payments as an added bonus to their core services.

Moreover, now it becomes clear that embedded payments not only provide an opportunity for payment monetization but also boost competitive advantage, increases customer retention and reduce churn. Sometimes, they even allow you to add certain critical features to the platform. With the addition of these features, your platform can compete with other alternative payment solutions on the market. 

In the present guidelines, we will provide a list of key payment monetization mechanisms to monetize software-as-service platforms.

Monetizing Payments Through Markup

Examples

Example 1

Let’s assume that the average processing cost amounts to 2.5%+$0.10. The platform charges the merchant 2.9%+$0.25. Residual revenue sharing is the industry’s core principle. So, the platform provider can fully or partially collect the difference of 0.4%+$0.15 per transaction.

Moreover, the markup can vary depending on the particular transaction pricing strategy and service plan.

Monetizing Payments Through Pricing Plans

Any software-as-a-service platform charges certain fees for its services. Usually offering two or three different service plans to its customers. Traditionally, a basic, standard, and premium service. So, availability of payment logic within the platform’s offering can motivate its users to choose more advanced service plans.

Examples

Example 2

Let’s assume a SaaS platform offers some basic service plan that does not include any payment functionality at a price of $14.99 a month. A standard plan for $24.99 a month includes payment processing for 2.99%+$0.25 per transaction. Then, a more advanced (or premium) plan costs $49.99 a month. It includes payment processing for 2.8%+$0.15$ and a “free” payment terminal for card-present transactions.

Remember, that any payment offering consists of various features. These include regular CNP payments, payment terminals for card-present payments, subscription-based payments, and other functions. So, a software-as-service platform can use certain payment features to motivate its subscribers to opt for a more expensive plan.

Monetizing payments: advanced features

In addition to basic payment processing functionality, SaaS platforms can monetize payments by offering more advanced payment features. Examples of such features include decline recycling, account updater, chargeback management, and others. Therefore, payment software companies and SaaS platforms can charge additional fees for offering these advanced payment features.

Examples

Example 3

Let’s assume, a SaaS company X processes recurring transactions (in additional to providing its core service). As customers’ card data (number and expiration date) changes with time, there is a need for its timely updates. So, the platform can offer automated account updater function. As a reward, it can:

Monetizing Payments through Merchant Funding Service

As a rule, a merchant is funded one or more days after the transactions are processed, usually within two business days. For instance, the proceeds from transactions processed on Monday, land on the merchant’s account on Wednesday or Thursday.

In some cases, merchants might need the funds before transaction processing or the next day after it. This feature is especially relevant for merchants that collect recurring payments on certain dates of the month.

Therefore, the platform might be able to advance some of the funds ahead of the billing date or speed up the funding process, charging an additional fee for the service. Obviously, the platform should have the required funds at its disposal. 

Examples

Example 4

Monetizing Payments through Advanced Reporting and Customer Monitoring

In order to perform daily or monthly fund reconciliation and profitability analysis, the merchant might require additional information. Traditionally, this information was only available from limited cumbersome legacy reports. These reports were provided by processors through ISOs, entrusted with management of the respective payment relationships. Advances in payment technology allowed payment platforms to provide this functionality directly, potentially charging an additional fee for the service. 

Examples

Example 5

For an additional fee of $25 a month, a SaaS platform might offer a merchant advanced reporting functionality. Detailed reports might include information about: 

Monetizing Payments: a Strategy for Franchise Services

As we know, any franchise businesses’ main revenue source is the franchising fees it collects. So, if your platform serves franchise businesses, you can collect franchising fees directly from merchants’ proceeds. In this case, the franchisors won’t have to collect the franchising fees themselves. Integrated payments and integrated funding allow SaaS platforms to simply withhold these fees from merchant deposits. This feature considerably simplifies the process, so software platforms can rightfully surcharge additional fees for supporting it. 

Examples

Example 6

Let us assume, a fitness franchise is operating a network of 100 fitness centers in a certain area. It uses the services of a SaaS business and decides to delegate payment experience to this same company. 

The franchisor needs to collect $250 of franchising fees a month from each fitness center. In addition to the standard payment functionality, the SaaS platform offers the franchisor to collect the fees from the franchisees. It will withhold these fees from merchants’ deposits on the 1st day of each month.

 The price it charges for this additional feature on a monthly basis is $9.99 per franchisee (fitness center). So, it means that the platform can increase its monthly revenue by almost $1000.

Monetizing Payments through Hardware/Terminal Leasing

The payment hardware leasing model is similar to the one often used by cable broadcasting companies. Modems, decoders, and cable boxes are rented by customers who pay modest monthly fees. After a year accumulated fees, usually, cover the cost of the respective hardware unit. So, all subsequent fees become the net revenue of the provider. 

Moreover, nowadays, that Android payment terminals are available at the market, the model becomes especially relevant. Reason: Android-based payment hardware can not only process payments but also run other Android apps. Particularly, these apps can include restaurant software, POS systems or paperless document management. Thus, merchants get additional motivation for purchasing/renting of these terminals. 

Examples

Example 7

A SaaS platform is offering merchants payment terminals for rent (or lease). The price of a terminal is $149, while the monthly payment for renting one is $14.99. So, after 10 months of service the platform will start generating profit from every merchant that rents a terminal. If it leases the terminals to 100 merchants, then the profit will amount to almost $1500 a month. 

Monetizing payments through surcharges for additional gateway usage

A software-as-a-service platform usually partners with a single major payment gateway. However, some merchants might prefer to use the services of some other gateways for certain payment types.

So, SaaS payment gateway providers can generate additional revenue streams from payments by charging fees from third-party gateway users. That is, a SaaS platform can provide its sub-merchants with the option to process transactions through other gateways for a surcharge.

Examples

Example 8

Let’s assume the actual processing cost amounts to 2.5%+$0.10 per transaction. The SaaS platform charges merchants 2.9%+$0.25 per transaction if the merchant processes transactions through its primary partner gateway. However, if it processes transactions through another gateway, then the platform charges 4.4%+$0.25 per transaction. Depending on the platform’s contracts with specific gateways, it can either get the whole markup (1.5%) or share it with the respective gateway providers.

monetizing payments

Bonus: Monetizing Payments Through Savings and Indirect Costs

When we think about payment monetization services for platforms, we mostly focus on increasing the number of revenue streams. However, as the proverb says, every dollar saved is a dollar earned. Integrated payments not only help you grow your revenue but also effectively cut down on expenses. Thus, they allow you to allocate more funds to your core product development. 

For instance, embedded payments allow you to reduce the cost of merchant onboarding. Additionally, as merchant statements become more transparent, you are also saving funds on tech support. Clearer statements reduce the number of support calls from the merchants because available reporting data answers all their potential questions. 

If you use advanced flexible payment technologies, such as UniPay Gateway, onboarding becomes instantaneous and frictionless. Consequently, it takes much less time, effort, and resources. Additionally, it allows the platform to get detailed information on transactions and batches processed (in the case of subscription-based payments). When it comes to merchant funding, you can get additional information on specific deposits necessary for payment reconciliation. 

Conclusions

merchant onboarding

If you are a SaaS platform, then you have an opportunity to benefit from payment monetization. For this purpose, you can focus on monetizing payments through both adding features to your product and reducing indirect costs.    

With the right payment partner, such as UniPay Gateway, you can always have the system adjusted to the specific needs of your merchants. Using the licensed open-source-code API, your SaaS platform can develop additional logic and sell it as a value-added feature set.

The flexible white-label payment gateway technology UniPay gateway, already implemented by multiple SaaS companies, can make the process smooth and seamless. Feel free to contact us for details. And don’t forget to watch our shot video guides on monetizing payments for SaaS and embedded payment monetization.

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