So, you’re a SaaS company that’s starting to implement payment monetization—great! Having payments as a service or feature within your software opens up several potential benefits, including higher annual revenue per user (ARPU), increased customer satisfaction, and faster business growth.
That being said, in order to fully unlock these advantages, you need to ensure that your payment initiatives are successful.
Part of doing that lies in measuring certain KPIs. If you’re offering payments, there are a number of SaaS metrics that can shed light on the performance of your initiatives. They can tell you if your efforts are successful or if you need to correct course.
Let’s take a look at some of the key SaaS metrics that ISVs and SaaS companies should track when providing payment services to software users. Monitoring these key metrics is key for the SaaS model of business, whether you run successful SaaS businesses, or for brand new SaaS startups.
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1. Payment Attachment Rate
One of the fundamental SaaS metrics you should monitor is your attachment rate. This is the percentage of users that signed up for your payment offerings. A high attachment rate means that a good amount of your customer base has payments as part of their contract, while a low figure could mean that not enough people are signing up.
Tracking this metric can give you an indication of how successful your sales and marketing efforts are when it comes to payments.
If you’re dealing a low attachment rate, you could consider:
- Increasing the visibility of your payment offerings on your marketing channels
- Incentivizing your sales team to include payments when selling your software
- Encouraging your customer success team to convert existing software users onto your payment offerings
Whatever the case, the first step to improving your attachment rate is to track it, so keep this KPI top of mind at all times.
2. Number of Users Who are Actually Processing
Already have a good payment attachment rate? If so, the next question to ask is, are the users who CAN process payments actually doing it?
After all, it’s one thing to get your acquired customers to sign up for payments, but the effort will have little impact on the business if people aren’t processing transactions. If you see that you have users who aren’t taking advantage of payments, it’s worth prodding them to do so.
“Typically, we find that if we can get the customer (i.e., the submerchant) to process somewhere between five to seven times, you’re going to get the most value you could ever get out of them,” explains Richard Dunbar, Senior Director of Partner Success at Stax.
“So if their maximum potential is 70% in credit card volume and you can get them to process five to seven times, you’re much more likely to get that 70%.”
Simply put, you will get more value per user faster by encouraging them to use your payment services. That’s why it’s important to encourage your paying customers to keep processing through your platform.
3. Payment User Penetration
Looking at your user penetration rates when it comes to payments will help you forecast the payment revenue you can get from each customer – and determine the customer lifetime value.
As Richard explains, “If a merchant does a million dollars a month in volume, and your average penetration rate is 50%, then you know you’re going to get 500K from that merchant in volume.”
It’s a good way to set benchmarks and goals for your payment initiatives and estimate monthly recurring revenue. For instance, if your goal is to hit $50,000 in monthly recurring revenue through payments, you can work backwards to determine your ideal user penetration and use that figure as your goal.
Just bear in mind that payment penetration needs to be separated into two groups:
- Net new penetration
- Existing user penetration
These segments will have distinctly different payment journeys and your efforts will vary depending on who you’re trying to convert.
As Richard puts it, “When you give me a penetration number, my first question is going to be, ‘Is that your net new or is that your existing book of business?’ Getting a current user to sign up for payments calls for a very different conversation path than when you’re talking to a potential new customer.”
Existing customers may have trouble letting go of their current ways of payment processing – new can be scary, and this will affect the effort needed for existing customer acquisition. Your new SaaS customers have a variety of barriers to get over before they can begin acquiring customers through your SaaS or ISV platform, but may be an easier sale since they are already in a growth and change mindset.
4. Initial Payment Volume
Depending on your SaaS payment processor and application process, your users may be approved for a certain payment volume amount for individual tickets or invoices. For example, a retailer selling T-shirts may have a typical ticket amount of $40 per order, while a manufacturer of medical equipment could have ticket values north of $10,000.
It’s worth paying attention to the approved payment volume amount versus how much they’re actually processing. If there’s a large discrepancy between the two figures, then there might be issues with the account and you need to look into it.
Monitoring SaaS metrics for how much revenue your users bring in, their average revenue, and any discrepancies can alert you to potential stumbling blocks that your customers are experiencing and it can help reduce your customer churn rate. Your customer retention and customer churn rate (and the coordinated revenue churn) have a big impact on your bottom line and your average customer lifetime value.
5. Payment Processing Velocity
It’s also worth looking at the velocity at which your users process payments, as this can open up conversations about the growth of their business.
As Richard points out, “If a customer is processing 10 invoices a month, and then they’re doing 15, and then 20—it’s a good idea to reach out to that customer to have a health check. You can say something along the lines of, ‘We noticed your business is growing. Anything we can do to help you?’”
“It can be a great indicator of business growth,” he adds.
Starting those conversations can lead to opportunities to talk about other software offerings. If a user’s business is scaling rapidly, for example, you could potentially upsell them on a larger plan – which increases your customer lifetime value, and this can also help decrease your customer churn.
6. Percentage of Invoices That Include a Payments Link
By now you know the importance of monitoring payment processing adoption and volume to see if customers are actively using your services.
Aside from the above-mentioned tactics, you can get a further glimpse of your customers’ payment-related activities by checking if they’re adding payment links or embedding payments into their invoices. If you find that your existing customers aren’t doing it yet, remind them about the importance of enabling payments in their invoices.
Educate them on the fact that adding a payment link improves the experience of their customers and allows them to get paid faster—a win-win.
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Final Words About Important SaaS Metrics
Successfully offering payments isn’t just about putting your programs out there and hoping users will sign up. You need to actively market your payment offerings and find ways to improve your attachment rate.
On top of that, it’s also essential to ensure that users who signed up are taking full advantage of your payment services.
Taking the steps above will allow you to maximize your payment revenues and ultimately boost your bottom line.
Here at Stax Connect, we collaborate closely with SaaS companies to ensure their payments initiatives are thriving. When you team up with us, you’re not just getting a service provider; you’re gaining a partner who’s committed to your success. We’ll provide you with the guidance, resources, and support you need to market your payment programs, onboard users, and ensure you and your customers are well taken care of.
FAQs about SaaS Metrics
Q: What are some SaaS metrics that companies should track when offering payment services?
– Payment Attachment Rate: This is the percentage of users that signed up for your payment offerings. It gives an insight into the success of your sales and marketing efforts.
– Number of Users Who Are Actually Processing: This metric checks if the users who have the ability to process payments are actually doing it.
– Payment User Penetration: This metric helps to forecast the payment revenue you can get from each customer and determine the customer’s lifetime value.
– Initial Payment Volume: This measures the approved payment volume amount versus how much they’re actually processing for individual tickets or invoices.
– Payment Processing Velocity: This checks the rate at which your users process payments, which can open up conversations about the growth of their business.
– Percentage of Invoices That Include a Payment Link: This checks whether your customers are adding payment links or embedding payments into their invoices.
Q: Why is the Payment Attachment Rate important for SaaS companies offering payment services?
The Payment Attachment Rate indicates the percentage of users that have signed up for your payment offerings. A higher rate means many of your customers are including payments as part of their contract. A low figure might imply insufficient sign-ups. Monitoring this can give an indication of the success of your sales and marketing efforts for payments.
Q: What can SaaS companies do if they find a low Payment Attachment Rate?
If SaaS companies notice a low attachment rate, they can consider strategies such as increasing the visibility of their payment offerings on their marketing channels, incentivizing their sales team to include payments when selling software or driving their customer success team to convert existing software users onto their payment offerings.
Q: What value does tracking the Number of Users Who are Actually Processing bring to a SaaS company?
It’s fundamental for SaaS companies to understand if the users who can process payments are actually doing so. Users may sign up for payments, but if they aren’t processing transactions, the effort will have little impact on the business. This metric thus plays a key part in assessing the actual effectiveness of the payment system.
Q: How does monitoring Payment User Penetration and Initial Payment Volume help SaaS companies?
Monitoring these metrics helps in forecasting the payment revenue and determining the customer lifetime value. Also, understanding the discrepancy between the approved payment volume amount and the actual processing amount can alert companies to potential stumbling blocks that customers may be experiencing.
Q: How can SaaS companies benefit from tracking Payment Processing Velocity?
This metric is crucial as it can trigger discussions about the growth of a customer’s business. It’s an excellent opportunity to reach out, offer assistance, and potentially upsell based on their growing needs. This engagement can also help reduce the customer churn rate.
Q: What is the significance of tracking the Percentage of Invoices That Include a Payment Link for SaaS companies?
This metric provides insight into customer adoption and usage of the payment services. It indicates whether customers leverage the facility to add payment links or embed payments into their invoices – a feature that eases their customers’ payment experience and allow them to get paid faster.
