The Top 10 Challenges of Recurring Payments For SaaS Businesses

For more than a decade, SaaS businesses in India have been facing billing problems pertaining to on-time payments with least manual intervention from customers. This helps firm in increasing their revenues, liquidity, increase in lost collections and decreasing their manpower required for collections. With  RBI and NPCI relaxing norms around recurring charges via debit cards, net banking and more, the billing problems of firms are finally getting resolved

Less than 2 years ago, any SaaS business operating in India was only able to collect recurring charges via credit cards. This was because 2-factor authentication was mandatory when payments are made via debit cards. That all changed, when NPCI issued a circular last year, stating that via eNACH mandates customers will be able to authorize their debit cards and net banking accounts to incur automatic debit. Further with RBI’s approval for eMandates, there has been a dynamic increase in acceptance of API eMandates for recurring payments.

In fact, the new rollout plans of UPI 2.0 being used for recurring payments, recurring payments will become even easier. 

This blog talks about the top 10 challenges in recurring payments for SaaS and how one can overcome it. 

1. Usage and Data-Driven Billing

SaaS businesses usually have a large number of users, each with an agenda that keeps varying over their lifecycle. At times SaaS businesses fail miserably to keep track of their users usage-based and consumption-based billing. Partnering with an inept payment partner only adds to the problem.

The right partner would be able to help with tracking of service activations — acquisitions, service upgrade, downgrades, additional value-added services, and others — and automatically charge your customers based on their activities. 

2. Dynamic Adjustments in Billing Plans

Given the fast-paced growth of SaaS companies, scaling payments could be a hindrance to the growth rate. Customer demands are subject to change, depending on their growth rate, change in requirements, increase in team sizes and so forth. 

For example, a SaaS company might use Slack’s tier-1 plan, that’s about $2.76 per month, initially. Due to the size of their company, the plan is adept for their usage requirements. Fast forward to a year later, the same organization is witnessing rapid growth in terms of team expansion as well as cash-flow. Due to the demands, the company leaders decide to move to a more feature-rich tier of their slack subscription and upgrades it to the tier-2 plan, which costs $5.

Now Slack’s payment processor or gateway has to take into account the change in plan and start charging them with a changed value. Apart from that, the billing provider also has to account for the pro-rated expense when the change took place and bill the organization split into two halves, one before the upgrade and one after.

The good bit about this entire flow is, the billing change doesn’t affect Slack. Slack’s payment partner is smart enough to automatically account for the change in the payment plan via an API call.

Similar to the example, your business should also look forward to partner with payment solutions that offer such flawless accommodation for any change in billing from the customers’ end.

3. Payments with Flexible Billing Frequency

When subscriptions come to our mind, we often relate to Netflix, Spotify-Esque flat billing plans, where a user is charged a flat rate for unlimited usage per month. In SaaS, recurring billing needs to be a lot more flexible, as customers might want different or at times exclusive terms. Therefore SaaS businesses need a payment partner that will enable them to receive recurring payments in any given frequency, reconcile and manage them as demands change. 

The solution must be able to create invoices based on terms agreed with the customer and keep in touch with the changing terms over time without much effort. 

4. Transaction Management: Failed and Missed Payments

In a recurring payments model, payments are periodic in nature. Swift and efficient payments are the very-first reason behind adopting a recurring model. But, due to the nature of the model, payments are far more frequent and therefore tracking every transaction is critical for a SaaS business. 

Recognizing a failed transaction, missed deadlines, or alerting your customers when their payment method might expire, automatically will save a lot of time. As it will be inefficient for you and your customer experience to manually go through each and every account, and approve or alert customers about any payment related anomalies.

The ideal payments partner should automatically manage your customers’ failed transaction and provide you and them with reminders to check payment details before risking account deactivation or a premature closure. 

5. Payment Options and Shopping Cart Integrations

There are two major factors that as a business you should take into consideration.

Firstly, the payment options that you could provide your customers with. With the rollout of API eMandates via debit cards and net banking as a part of the subscription economy in India, firms need to select the right payment partner with an option for customers people to subscribe via debit cards or net banking.

Secondly, your preferred payment solution should provide integration with your eCommerce platform, whether it’s Shopify, WooCommerce or Magento. At the same time, if you run an in-house developed cart, the situation shouldn’t be different. Class-leading payment gateways ensure that no matter the platform, it’s never too hard to get started with it. 

6. Multi-Currency Support

If your SaaS product caters to different businesses around the world, it would be a good idea to accept payments in multiple currencies. Businesses and users are more comfortable paying in currencies that they are familiar with. For example, European customers would prefer to pay in Euros (€) rather than Dollars ($). 

Most of the leading payment providers in India do provide multi-currency support in their recurring billing solutions. Firms should ensure to opt for such a partner.

7. Secure Payments and Information Processing

Customers should feel safe while sharing their payment details over the internet for debit cards or credit cards. Though credit Cards historically have had easier ways to file for an unauthorized transaction, debit cards have a long process flow to file for card frauds.

Hence, it’s important for firms to ensure that their payment solution is compliant with all security norms and compliant with PCI DSS standards.

8. Churn Management

SaaS ecosystem, in general, is a cutthroat environment. Every SaaS product has at least 9 competitors according to the latest statistics. This is why today, most leading businesses are focusing on lowering customer churn by continuously engaging with customers. 

And talking of churn, one of the issues is expiring subscriptions. The ideal payment facilitator should be able to communicate simultaneously with the customer and the account managers to ensure proactive action from both sides.

While selecting the right partner for recurring payments, ensure that the organization that you work with offers notifications over email and webhooks to your team for at-risk customers. Timely notifications can help your team engage retention tactics and reduce customer churn.

9. Promotion, Discount and Trial Management

To acquire customers, and scale your business, you need to get customers first. Then come the upgrades and premium features. For example, let’s look at Basecamp, used by hundreds of thousands of businesses and individual around the globe. And to get started with Basecamp, all you have to do is sign up for a trial account – all the features, no strings attached trial period – free for 30 days. 

And, once the trial period is over, you can upgrade to a premium plan to keep using Basecamp.

The billing platform that works on behalf of Basecamp offers a trial period to the customer and only charges the customer after the trial period is over.

This is a preferred mode of engagement with a billing partner.

A smart payment platform should be able to have multiple pricing plans, whether a discounted plan, a trial inclusive plan or a plan for non-profits. 

10. Pricing Challenges 

One of the biggest reasons a lot of SaaS fail is incorrect or flawed pricing. Price your product too high and you’ll ward off your customers, place it too low and you’ll impact your bottom line negatively.

Sounds worrisome?

Don’t worry, when you structure a pricing plan, think of it as a range. If you have the right payment partner, you would be able to provide your customers with a wide spectrum of pricing during the experiment. Once the data starts coming in, you will be able to see the pattern and recognize which pricing tier works best for you. 

Once that is identified, all you have to do is go live with the prices and automate your payment provider to accept payments for those plans.

Recurring payments, especially for Indian SaaS businesses could be a headache. But with the recent developments and class-leading payment solutions like Cashfree, one could have an efficient, highly reliable and scalable collection payment platform for subscriptions.

These are the challenges that we have seen SaaS businesses in India face in their day-to-day operations. Which are the challenges that you had faced and overcame? We’d love to hear your story in the comment section below.