Software as a service (SaaS) is growing fast. The market is projected to expand by 13.62%, reaching $1057.8 billion by 2032. As the industry grows, so does the challenge of ensuring reliable subscription payments.
For SaaS businesses, revenue depends on consistent payments. Yet, common payment methods like cards often fail due to expiry or insufficient funds, leading to failed payments and up to 40% involuntary churn. In turn, these disruptions in the payment process can hurt the business's bottom line and limit their ability to scale.
Challenges SaaS companies face with managing subscription payments
To retain users and maintain recurring revenue, subscription businesses need to collect payments at scheduled times. By sticking with cards to process these payments, SaaS companies might experience pain points like:
High failure rates: Payments can fail for simple reasons like insufficient funds, and expired or misplaced cards. This breaks the payment flow consistently, disrupts customers’ access to your service, with additional time spent chasing these failed payments.
Risk of payment fraud: Cards are more prone to payment fraud, as stolen or compromised card details can still be used to make unauthorized transactions.
High transaction fees: Processing fees as high as 3% are common with card payments. This is because they are a lot of intermediaries and card networks involved in the payment process.
Unpredictable cash flow: Delays in payment can cause irregular cash flows, making it harder for businesses to plan and cover operational costs efficiently.
Complex authorization process: Card-based payments often require customers to reauthorize payments whenever their card expires or is replaced. This adds friction to the payment process and increases the risk of losing customers who may find it inconvenient.
To improve the payment experience for customers and maintain a steady flow of revenue, SaaS businesses need a better and more reliable way to manage subscription payments. This is where Direct Debit comes in — delivering the consistency and ease that subscription-based businesses can rely on to grow.
What is Direct Debit?
Direct Debit is an automatic payment method that allows businesses to collect recurring payments directly from customers’ bank accounts. Unlike card payments, which require users to update their card details when it gets expired or missing, Direct Debit eliminates this risk and ensures more reliable and consistent payments.
The process of authorizing a recurring payment via Direct Debit is simple:
The customer set up a Direct Debit mandate on their account, which gives the business permission to collect agreed payment amounts on a schedule. This authorization process is done once.
The mandate is approved by the customer’s bank, ensuring the direct debit transaction is secure and verified.
Payments are then collected automatically at the agreed intervals.
Why Direct Debit is better for collecting subscription payments
Switching to Direct Debit can help subscription-type businesses solve payment challenges and experience great benefits such as:
Reduced churn rate: Failed payments are a common cause of involuntary churn for subscription-based businesses. Direct Debit removes common failure points like expired or missing cards by collecting payments directly from customer’s bank accounts, which do not expire or get outdated. This results in fewer payment disruptions, helping SaaS companies retain customers for longer.
Lower processing fees: Compared to card payments, Direct Debit is more affordable, with transaction fees as low as 1%. This allows subscription-type services to reduce costs, increase revenue, and improve profit margins.
Secure transactions: Direct Debit ensures payments are processed only after the verification of users' account and identity details. This minimizes the risk of fraudulent or unauthorized charges common with card payments.
Improved customer experience: Direct Debit makes the process of authorizing subscription payments easier for customers. They don’t need to worry about updating their card details or experiencing frequent service interruptions due to card expiry or loss. This reduces the chance of involuntary churn caused by failed payments and ensures users stay subscribed while driving more revenue for your business.
Why Mono Direct Debit is perfect for SaaS companies
If you’re ready to start collecting recurring payments with Direct Debit, choosing a Direct Debit provider is the next step.
Mono Direct Debit is the perfect payment solution for subscription businesses. Beyond automating the process of collecting subscription fees, it is more reliable, secure, faster, and cheaper than cards.
Here’s what makes Mono Direct Debit stand out from the rest:
Quick and easy setup: Set up payment mandates effortlessly using the Mono Direct Debit API or the No-code Mono Direct Debit Mandate setup.
Affordable transaction fees: Collect payments with fees as low as 1% per transaction (capped at NGN1,000), which is an affordable alternative to traditional payment methods.
Wide bank coverage: Access to over 20+ financial institutions for seamless payment collection across different customer accounts.
Reduced payment failure: Mono’s smart retrial system automatically reattempts failed transactions, helping to increase payment success rates without requiring frequent reminders and follow-ups.
Flexible payment process: Collect fixed or varying payment amounts across personal, business, or joint accounts, with multiple authorization methods.
Convenient settlement options: Choose between instant or next-day settlements to maintain steady cash flow and meet your business’s financial demands.
At the heart of every SaaS company is the need for consistent and reliable subscription payments to keep operations running smoothly. Direct Debit provides the security, convenience, and dependability that subscription-based businesses require to overcome payment challenges and scale confidently.
With Mono Direct Debit, subscription companies can streamline their payment processes, reduce churn, and maintain consistent revenue. To simplify your subscription billing and grow your revenue, sign up on Mono and check our detailed integration guides to get started.
