Every decision as a SaaS business has far-reaching implications, and choosing the right payment platform is no exception. Today, we want to talk about the opportunity cost of sticking with legacy payment providers. Understanding these hidden costs can help businesses make more informed decisions about how they handle payments—not just for themselves, but for their customers as well.
The Pitfalls and Opportunity Costs of Certain Platforms
Traditional payment platforms, including those that are decades old or more recent creations, often present attractive low-cost deals at first glance. Securing a deal at 8 basis points (bps) might seem like a financial win, but what does that actually get you? Often, it’s just a bare-bones API endpoint. This minimalist approach might seem cost-effective initially, but the true costs—time, lost revenue, and missed opportunities—add up.
Consider a scenario: a software company with $5 million in SaaS revenue and 4,000 customers, each processing about $500,000 in Gross Processing Volume (GPV). That’s a potential $2 billion flowing through their platform. A well-integrated payment solution could conservatively generate $14 million in additional revenue. Yet, many companies chase the lowest processing rates without considering who will help them scale and build a robust payments business.
Six board meetings later, instead of celebrating an additional $15 million in revenue, they’re explaining why payments only brought in $100,000. The reason? The so-called savings from lower bps deals were wiped out by the lack of strategic support and tools to build and sell a successful payments program.
A Comprehensive Solution Approach
A more strategic approach involves looking beyond just the cost per transaction. Here’s a breakdown of what such a solution might involve:
- Program Design: Understanding your market, positioning your payment offerings, and devising a pricing model that maximizes your spread without pricing you out of the market. This includes fallback pricing models for negotiation scenarios.
- Seamless Integration: A platform that allows you to integrate payments in just a few weeks, not months. This rapid setup means you can start generating revenue faster without the lengthy delays associated with legacy providers.
- Merchant Sales and Payment Operations: Acting as an extension of your sales team, promoting your payment solutions to your customers. Educating them on the benefits and cost savings of using integrated payment solutions can ensure high adoption rates and increased revenue.
The Real Value of Modern Payment Solutions
Choosing a modern payment solution means more than just adopting a payment platform, but about unlocking your business’s full revenue potential. With a comprehensive solution, you don’t need a dedicated VP of payments or a large team. The heavy lifting is handled, allowing you to focus on what you do best—building great software.
The ability to offer integrated payments can be the difference between winning a deal or losing out to a competitor. By understanding the hidden costs of legacy platforms and the value of a comprehensive solution, SaaS companies can make informed decisions that drive growth and profitability.
At Forward, most of the software companies we’re adding each week are converting from legacy or DIY platforms because the business side of “integrating payments” failed to meet their and/or their investors’ expectations.
We are a team of ex-SaaS founders/builders that learned the complicated world of payments while inside of a Fortune100 behemoth and we are now leveraging that know-how to help you – SaaS founders – succeed. Reach out to get a no obligation, no strings attached assessment of your current payments set-up.
