A guide to choosing the best subscription payment gateway for SaaS

Choosing the right subscription payment gateway is crucial for any SaaS business. This guide provides a framework for evaluating key factors and making an informed decision.

You'll also learn:

• How subscription payment gateways work
• The benefits of usage-based billing
• Key considerations for SaaS businesses
• Why Orb is the ideal billing platform that integrates with your chosen payment gateway

Before sharing the key factors to consider when choosing a gateway, let’s explain what these payment gateways are.

What is a subscription payment gateway?

A subscription payment gateway is a solution that lets companies accept recurring payments. It’s the mediator between your customers and your bank account, facilitating the processing of subscription payments for your SaaS offerings.

In essence, it's the technology that makes your recurring billing model possible.

How does a subscription payment gateway work?

It starts with your customer subscribing to your SaaS offering and entering their payment information. This information can include credit card details, bank account information, or a digital wallet.

The subscription payment gateway captures this sensitive data. It then encrypts it and transmits it to the subscription payment processor for authorization and settlement.

This process is called “subscription payment processing,” and it’s the backbone of your SaaS revenue stream.

It automates the recurring billing cycle. This automation ensures that your customers are charged automatically at predetermined intervals. These intervals could be monthly, annually, or according to your chosen billing frequency.

Automation also saves you valuable time and resources. It provides a smooth experience for your customers, encouraging long-term loyalty.

A robust subscription payment gateway offers several key benefits:

• Automated recurring billing: It takes the hassle out of managing recurring payments. It does so by automatically generating invoices and sending payment reminders. You’re minimizing late payments and maximizing revenue collection.
• Support for many payment methods: You can accept a wide range of payment methods. Think traditional credit and debit cards and international currencies. This flexibility caters to a diverse customer base and expands your market reach.
• Security and compliance: A good subscription payment gateway adheres to industry security standards. It helps you safeguard sensitive customer data and mitigate the risk of fraud.

Beyond subscriptions: Embracing usage-based billing

For SaaS businesses looking to offer more flexible and tailored pricing, subscription payment gateways can seamlessly integrate with advanced billing systems, such as usage-based billing.

Usage-based billing can be thought of as the "pay-as-you-go" model for SaaS. Instead of charging a flat fee, you bill customers based on their consumption of your service. Consumption could be anything from the number of API calls made to the amount of data stored.

This model is particularly attractive for businesses with variable usage patterns. It allows them to align costs with actual consumption. It also helps in providing a more transparent and fair pricing structure for their customers.

Subscription payment gateways can also accommodate a wide range of other billing scenarios. These billing scenarios include:

• Tiered pricing: Offer different subscription tiers with varying features and pricing to cater to different customer segments.
• Hybrid models: Combine elements of subscription and usage-based billing to create a customized pricing structure.
• One-time charges: Incorporate one-time charges for setup fees, onboarding, or premium features alongside recurring subscriptions.
• Discounts and promotions: Easily apply discounts, coupons, and promotional offers to attract new customers and reward loyal ones.

By integrating with these billing models, subscription payment gateways empower SaaS businesses to:

• Increase revenue: Capture the full value of your service by charging for actual usage.
• Keep customers happier: Offer flexible and transparent pricing that aligns with customer needs.
• Gain a competitive edge: Set your offering apart from others with pricing models that cater to specific market segments.

Key factors to consider when choosing a subscription payment gateway

Selecting the right subscription payment gateway impacts your revenue and operational efficiency. To help you make an informed choice, let's explore the key factors you should consider:

Factor 1: Supported payment methods

Offering a variety of payment options is a must. Your chosen subscription payment gateway should support major credit and debit cards. It should also support ACH payments and widely used digital wallets like Apple Pay and Google Pay.

You should also consider the specific needs of your target audience. Do you have customers in regions where alternative payment methods like SEPA Direct Debit are prevalent? Make sure your gateway can handle these region-specific preferences.

Pro tip: Research the preferred payment methods in the regions where your target customers live. Offering familiar options can improve conversion rates and reduce cart abandonment.

Factor 2: Integration with your billing system

A seamless flow of information between your gateway and your billing system is key for accurate financial reporting. Real-time data sync ensures accurate invoices and payment processing. It also tracks revenue. The right gateway also eliminates the need for manual entry, reduces errors, and saves time.

Beyond basic integration, look for a gateway with a flexible API that allows for deep customization and automation.

A flexible API lets you tailor your payment workflows to meet your specific needs. You can automate billing, manage dunning processes, and integrate with critical business systems.

Pro tip: Focus on gateways that offer pre-built integrations with your existing billing platform. The gateways should provide API documentation and support for a smooth integration process.

Factor 3: User experience and ease of use

A frictionless payment experience is essential for customer satisfaction and retention. Choose a subscription payment gateway with an intuitive interface that is easy for your customers to navigate.

Simple onboarding processes, clear instructions, and self-service options for managing subscriptions are key. These features empower your customers and help reduce support tickets.

A streamlined checkout process, with minimal steps and a clear call to action, can impact your conversion rates. Offer guest checkout options and guarantee the process is optimized for all devices.

Pro tip: Test the checkout process yourself and gather feedback from users to identify any areas for improvement.

Factor 4: Security and compliance

Protecting sensitive customer data is non-negotiable. Make sure your chosen subscription payment gateway complies with all relevant security standards. PCI DSS compliance — which sets stringent requirements for handling cardholder data — is vital.

Look for features like encryption, tokenization, and fraud prevention tools. These features can help identify and mitigate suspicious activity. Security updates are also key to staying ahead of threats and maintaining compliance with regulations.

Pro tip: Don't just rely on the gateway's security features. Put strong security practices in place across your entire organization. By doing so, you're safeguarding customer data and protecting your reputation as well.

Factor 5: Cost structure and pricing transparency

Subscription payment gateways usually charge fees for their services. The fees can vary depending on the provider and the specific features you choose.

You should carefully analyze the pricing structure. This structure also includes transaction fees, setup costs, monthly fees, and any hidden charges.

Consider whether a fixed pricing model or a percentage-based fee structure is better for your business model. It's also key to assess the gateway's pricing in relation to your revenue goals. You'll want to make sure that the costs are aligned with your growth projections.

Pro tip: Don't be afraid to negotiate pricing with different providers. Negotiation is critical if you have a high transaction volume or specific requirements.

Factor 6: Scalability and flexibility

Your subscription payment gateway should be able to scale along with your company. It should accommodate increasing transaction volumes and evolving business needs.

Look for a gateway that offers a wide range of billing options. These options should include subscription management, one-time payments, and usage-based billing. Your gateway should support custom pricing models, volume discounts, and even hybrid models. This flexibility is essential for adapting to market changes and customer preferences.

Pro tip: Choose a gateway that offers a modular architecture. Such an architecture allows you to add or remove features as needed. It also provides a robust infrastructure to handle peak transaction loads.

Factor 7: Analytics and reporting capabilities

Data-driven decision-making is essential for optimizing your payment processes and maximizing revenue. A robust subscription payment gateway should offer reporting and analytics capabilities.

What you need are insights into key metrics like transaction success, churn, and customer lifetime value. Use this data to address issues, improve processes, and optimize your payment strategies.

Pro tip: Use the reporting features to recognize patterns in failed transactions. These features can help you spot potential problems with your checkout process or customer payment methods.

Orb: An ideal billing platform to integrate with payment gateways

In this guide, we've explored the key factors to consider when choosing a subscription payment gateway for your SaaS business. From payment methods and security to scalability and reporting, finding the right gateway can be a tricky process.

Connecting your payment gateway with your billing infrastructure is essential, but it can be tricky. You need to ensure smooth integration with invoicing, subscriptions, and revenue recognition.

This is precisely what Orb offers.

Orb is a billing platform that integrates with leading payment gateways to handle transactions. Orb acts as the central hub for managing all aspects of your subscription billing. We cover everything from pricing and invoicing to reporting and analytics.

Companies like Perplexity and Vercel trust Orb to power their billing engines and support their rapid growth.

Here's how Orb streamlines your SaaS billing:

• Effortless integration with payment gateways: Orb connects with popular payment gateways. We allow you to accept payments from customers worldwide without the hassle of complex integrations.
• Real-time data and flexible billing: Orb empowers SaaS businesses to implement a multitude of pricing models. With Orb you can also track customer usage in real-time, adjust pricing, and tailor your billing to your customers' specific needs.
• Reporting and analytics: Gain a complete 360 view of your billing performance with Orb's in-depth reporting. Track key metrics, spot trends, and make data-driven decisions to optimize your revenue and reduce churn.
• Security and compliance built-in: Orb prioritizes the security of your customers' data. With built-in PCI-DSS compliance and encryption, you can trust Orb to handle your sensitive data with the utmost care.
• Scalability and customization: Whether you're a startup or an enterprise, Orb scales with your business. Customize your billing logic, manage complex pricing models, and adapt to changing market demands with ease.

Ready to unlock the full potential of your SaaS billing with a platform that integrates with leading payment gateways?

Give Orb a try and explore our 30-day free trial to experience the benefits firsthand. Make sure to also check out our flexible pricing options and find a plan that fits your SaaS company’s needs and budget.