The unique position of SaaS companies working closely with their merchant clients provides them with inherently better data than any traditional ISO. How so? Often, the SaaS platform holds customer data, product purchasing and pricing, customer longevity, delivery or product details, and more. This data on merchant reliability is half of the risk equation — the other half being customer/consumer payment reliability — and can give SaaS companies an advantage when negotiating terms and rates.
Risk is a substantial part of the cost of doing business for payment processors, and their fees reflect that. Beyond the legal necessity of following anti-money laundering (AML), know your customer (KYC), and know your business (KYB) regulations, the more a processor knows about a business and its transactions, the better it can evaluate risk.
As a vertical SaaS company, you are well-positioned to know as much as possible about the merchants you serve. This should translate into lower processing rates for you as a SaaS payment provider, but only if you know how to put that information to use. With over 50 years of combined payments industry and Fintech expertise, PayEngine provides white-glove, custom payment solutions with the knowledge, assistance, and connections that SaaS payment companies need to succeed.
How Do Payment Processors Approach Risk?
Payment processors approach risk in terms of data and probabilities, and the more data they have, the better they can judge the potential risk of fraud, chargebacks, or regulatory non-compliance. Without data showing a business is low-risk, processors will set rates based on the assumption it is not.
Fraud thrives on a lack of details — it's much easier to get away with a robbery if no one sees your face. Conversely, the more that is known about a business, its customers, and its transactions, the easier it is to evaluate the risk involved. If you were making an expensive purchase, would you choose a business you’ve never heard of or one that you know its history and reputation? When setting rates, payment processors are making a similar choice.
At the most basic level, a merchant's industry will impact the risk level processors assign them. Processors will also want documentation such as business licenses and proof of ownership — including information showing who the ultimate beneficial owners are — to evaluate legitimacy and stability.
Processors and independent sales organizations (ISOs) won't dig much deeper into details such as transaction history and patterns, types of products sold, or demographic information about a business's customers. The data burden is simply too high. However, if you can provide that information, it can help demonstrate a business's reliability.
Of course, past performance is always the best indicator for predicting future potential. Businesses are more likely to successfully negotiate better rates with a processor after working with them for some time. A business that can demonstrate its creditworthiness from the start with thorough and reliable data is already a step ahead.
Processors need to ensure KYC for regulatory compliance. That also means ensuring the businesses they work with comply with KYC regulations. However, details and data beyond those that regulators require are often the most valuable in assessing the cost of doing business with a merchant.
Managing Chargebacks
Actions do not have to be criminal to be a problem. Chargebacks, whether legitimate or not, cost processors both time and money. A merchant may have frequent chargebacks due to confusing return or cancellation policies, unclear or misleading product descriptions, or even failures to validate transactions properly. You already know the businesses you serve. This unique position allows SaaS companies to provide processors with chargeback data that eliminates the guesswork and can justify a lower processing rate.
Overall Risk Reduction
The more that is known about a merchant, the easier it is to set fair and accurate rates. From assessing the creditworthiness of owners and partners to understanding the merchant's reputation and transaction history, each piece of data provides a more complete picture for processors to evaluate. Unfortunately for most merchants, processors can only know so much about them before they work with them. It can take years for merchants to establish a sufficient history to assure processors that they are low-risk and should be provided more favorable rates.
The SaaS Payment Platform KYC Advantage
Processors have multiple reasons to prefer SaaS payment processing. SaaS verticals have a relatively uniform and predictable risk profile across merchants. Payment processing for SaaS also offers a better profit-to-cost ratio since processors gain access to all the merchants you represent rather than one merchant at a time.
Perhaps the most significant advantage SaaS payment solutions provide processors is the data and history you already have. SaaS companies possess rich data sets that characterize clients' risk profiles. A SaaS platform's customer relationship management (CRM) component can even give demographic insights about the customer base in that vertical. Processors have every reason to want your business, but you still need to know how to present those advantages to them.
Unleashing the Cost-Savings of KYC-Driven SaaS Payment Processing
A successful SaaS payment system needs to capture and analyze all the data from merchant transactions. It needs automation to simplify transaction monitoring and provide real-time interventions for SaaS online payments without stifling merchant activity. It also needs experienced payment specialists who can turn data into useful insights.
SaaS payments offer processors many advantages, but processors are not out shopping for SaaS companies to work with. You need a partner that understands processors and can route transactions to ensure the best rates. Your data and industry knowledge make you a perfect candidate for processors to work with, but you need a partner able to show processors why that is.
Realizing Your SaaS Payment Processing Goals
PayEngine provides everything you need to capture the best SaaS credit card processing rates. Our white-glove, custom-label solutions have all the advantages — and more — of owning your own payment processing business. Our best-in-class buy rates and ever-expanding processor roster give you bargaining power and flexibility. Our analytical tools provide rich transaction data, customized reports, and targeted analysis. We even handle regulatory compliance and real-time transaction monitoring with advanced ML and AI solutions. Most of all, you get all of this with scalability and unparalleled support.
To learn more about the advantages of having your own custom-label SaaS payment platform, reach out and schedule a demo with our team.
