With multiple economic indicators trending negative right now, many businesses are taking steps to prepare for the likelihood of a coming recession. That makes perfect sense to Ralph Dangelmaier, CEO of BlueSnap, a global payment orchestration platform. What puzzles him, however, is why so many Software-as-a-Service (SaaS) businesses are overlooking the opportunities that partnering with an embedded payments partner can provide.

“It’s a head scratcher,” he says. “Embedded payments can spur greater revenue growth, enhance customer experience, increase product stickiness, and boost valuations-- all for a relatively modest investment of time and resources. With market caps dropping and a recession coming, it offers an unbelievable way to pivot.”

The term “embedded payments” refers to digital payment options being natively embedded within nonpayment software platforms. For example, BlueSnap partners with SaaS companies such as Snowman Software, Veracross, and Regpack to support the payments functionality within their software, which allows them to accept multiple types of payments methods and currencies and streamlines the payment experience for their end users.

Noteworthy advantages

Embedded payments can make SaaS solutions more valuable and profitable. They enable the platform’s clients to provide a better user experience to their customers. When SaaS platforms can offer that value to their clients, they get loyalty, increased revenue, and better client retention in return. 

The concept is already penetrating industry verticals from real estate and utilities to e-commerce and restaurants. Dangelmaier points to Shopify (a big e-commerce platform) and Toast (a provider of cloud-based restaurant software) as illustrations of just how dramatic an impact embedded payments can have on revenue growth and valuations.

When Shopify’s market cap was around $80 billion in 2021, about 70 percent of its revenues came from payments. “You could argue that at least half its valuation, maybe more, derives from payments,” Dangelmaier says. Toast, which had a market cap of about $10 billion last year, relied on payments for about 80 percent of its revenue. “Toast might have had a valuation of $2 billion rather than $10 billion if it hadn’t embedded payments into its platform,” he points out.

Don’t do it alone

When it comes to jumping on the embedded payments bandwagon, SaaS businesses have two options: do-it-yourself or choose the right partner.

“D-I-Y is really hard,” Dangelmaier warns. “The resource commitment required can be daunting, and you need an ironclad understanding of the multitude of payment rules you may be subject to. Basically, you must become a payments company.”

Rather than reinventing the wheel, it makes sense for most SaaS businesses to partner with an existing payment facilitator. BlueSnap’s embedded payments solutions can help SaaS platforms onboard clients. BlueSnap has been helping merchants accept payments globally for almost a decade. Its platform offers more than 100 global currencies and more than 100 payment types, as well as relationships to banks worldwide, the required licensing in all its markets, and a deep well of technological resources. This means SaaS platforms can get instant global scale in a single, unified account with the advantage of local payment processing. The platforms and their clients can sell in more than 200 geographies with local card acquiring in 47 countries. BlueSnap has migrated all that expertise and experience-- including its broad knowledge of the needs and nuances around vertical-specific payments-- to its solutions for SaaS customers.

Sidestepping technical debt

Another advantage of partnering over D-I-Y is the avoidance of technical debt, which often results when in-house teams try to integrate payments on their own. Actions taken to expedite functionality can result in less-than-optimal solutions that later need to be refactored. “More often than not, SaaS platforms are facing major technical debt,” Dangelmaier notes. Like financial debt, technical debt can lead to serious long-term problems if it is not paid back.

When choosing an embedded payments partner, SaaS companies should focus on ease of onboarding, accommodation of payment types and currencies preferred by customers in all locations, and seamless transfer of funds.

Partnering with an experienced embedded payments provider offers clear advantages over doing it alone. While there is no one-size-fits-all solution, the right partner can help SaaS businesses find their path to owning the payments experience and capitalizing on the improved customer experience and added revenue it provides-- all with the appropriate amount of risk and investment. “Achieving these benefits does require some commitment of time, technology, and financial resources,” Dangelmaier says. “But SaaS companies that have taken this path can tell you that the payoff makes it worth the effort.”