The “growth at all costs“ phase of the SaaS market is over. Nowadays, companies are in a phase of building customer retention and brand loyalty. Since income is no longer just pouring in, it’s only natural for companies to focus on cutting costs.
While AI features and tools can help, SaaS companies should also take a closer look at their own payment operations. Data shows that involuntary churn (failed payments) accounts for 20% to 48% of all SaaS churn.
The good news is that nearly half of the customers you lose due to failed payments still want your product; their bank just said no because of an expired card, a 3DS2 pop-up they missed, or an international flag.
Solve these three payment-related problems, and your bank account will be happy again.
1. Smart Routing to Local Acquirers
Cross-border transactions are the #1 cause of involuntary churn, because banks are inherently suspicious of international transactions. The lack of standardized data between international banking systems increases the difficulty of detecting fraud, leading to higher precautionary decline rates to avoid legal penalties.
Then there are the cross-border fees and often a currency conversion markup. When you process a payment internationally, card networks (Visa/Mastercard) and processors charge you between 1.5% and 3% per transaction.
In short, you’re losing clients and revenue simply because your business operates globally. Now, that’s not fair, is it?
Luckily, there are ways to fix such issues. One solution is a scalable checkout infrastructure with a multi-acquirer payment gateway. Such a solution connects to various international acquirers (banks) and routes payments so they won’t be flagged as cross-border.
2. Account Updaters and Network Tokens
For a SaaS company, the cost of customer acquisition is high. If you lose a customer with a lifetime value of $2,000 simply because their card expired in August, that is a massive financial failure.
Yet, it happens more often than you know. The good news is that SaaS companies can mitigate risks with tools like Account Updaters and Network Tokens.
An Account Updater is a service provided by card networks that makes the process of updating a client’s payment details seamless. The service pings the card networks via your payment gateway, and if a new card number or expiration date is detected, it is updated automatically.
A Network Token is a digital proxy for the client’s card that remains lifecycle-persistent. Even if the physical plastic card is replaced and the number changes, the Token remains valid. Since the transaction is more secure, approval rates are higher and interchange rates lower.
3. 3DS2 Exemptions
3DS2 (3-Domain Secure 2.0) was designed to make online payments safer. However, for a SaaS company, the challenge pop-up can be a conversion killer. Exemptions allow the transaction to follow a frictionless flow, where the bank approves the payment in the background without the customer ever seeing a pop-up.
Exemptions are not easy to get, though. Your company has to fit one of these scenarios:
- Recurring transactions
- Merchant-initiated transactions
- The customer whitelists your company with their bank
Protect Your Revenue
The SaaS market has been changing for a while, and the best move you can make right now is to fortify your position. Keep existing clients happy and ensure your payment operations are on point to avoid losing money and paying customers.
