Payment Pulse – Ep. 31

Static payment models can limit SaaS growth. Learn how flexible, adaptable payment strategies improve adoption, margins, and long-term revenue potential.

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Episode Transcript

 

Shannon:  Hey everyone. Welcome back to the Payment Pulse podcast. I’m Shannon.

Michelle: And I’m Michelle. Today, we’re diving into a topic that comes up constantly in conversations with software companies exploring embedded payments, and it’s the idea that the first step is choosing the right payments model.

Shannon: Yeah, so a lot of platforms think that they need to choose one payments model and stick with it.

Michelle: Usually the conversation starts with, “Should we be referral, hybrid, or PayFac?” Like, that’s the big strategic decision they need to make.

Shannon: Mm-hmm. Right. And while that seems like a logical place to start, we actually think that mindset creates problems pretty early on because the real issue usually isn’t that a company chooses the wrong model, it’s that they assume that they need to choose just one model and lock into it.

Michelle: Exactly. The strongest SaaS companies don’t think about payments as a fixed infrastructure decision. They think about it as part of their broader growth strategy, and that means their approach changes and adapts over time.

Shannon: Yeah, so that’s really the core idea that we want to talk about today, because a lot of companies approach payments like it’s a one-time decision. You pick your model, launch it, and move on. But in reality, the best performing platforms revisit and refine their payment strategy as they grow.

Michelle: That’s important because payment strategy directly impacts revenue adoption and margins. It even affects how your sales team positions your offering.

Shannon: Exactly. And when companies lock into one static model too early, what often happens is they optimize for the wrong thing upfront. So a lot of teams jump straight into asking, “How do we maximize our rev share?”

And they do this before they figured out some of the more foundational questions like, “Can we drive adoption? Can our sales team sell this effectively? And can we support the operational complexity that comes with it?”

Michelle: Revenue potential only matters if customers are actually using the solution. If adoption is low, it doesn’t matter how great the margins look on paper.

Shannon: Yeah, and that’s one of the biggest misconceptions we see because companies often assume that the highest margin model is automatically the best option, but that’s not always true.

Michelle: Not at all, because the model with the highest theoretical upside may also come with more complexity, more operational lift, and more responsibility than the platform is ready for.

Shannon: Exactly. So instead of improving performance, it can actually slow things down. So for example, it can create friction in the launch process. It can make onboarding harder, it can create challenges for the sales team, and ultimately it’s something that can hurt adoption.

Michelle: And that leads to the bigger issue with static models. A fixed payment model creates a ceiling over time.

Shannon: Mm-hmm. Yeah, that’s right. Because your payments model doesn’t just determine how transactions are processed, it determines how much revenue you can realistically capture long term.

Michelle: At first, that ceiling may not be obvious. Everything might seem fine. Revenue’s coming in, sales are moving, customers are onboarding- but underneath the surface, growth may be flattening because the strategy isn’t flexible enough to support different customer types or deal structures.

Shannon: Mm-hmm. Yeah, you’re right. So when the same model gets applied to every customer, regardless of size, segment, or value, eventually you start to lose efficiency because not every customer should be approached the same way.

Michelle: So a small business customer has different needs than a mid-market customer, and both are very different from enterprise.

Shannon: Yeah, so SMBs often care most about simplicity and speed. They want easy onboarding and minimal friction.

Michelle: Whereas enterprise clients may support more customized or strategic payment structures that allow for stronger margins.

Shannon: Mm-hmm. So if you’re forcing one structure across every deal, you’re almost certainly leaving opportunity on the table somewhere.

Michelle: That’s why one of the most successful SaaS platforms optimize payments at the deal level. They think about what makes sense for this customer, this segment, this opportunity.

Shannon: And they also understand that strategy evolves over time. So early on, the priority may simply be speed to market, getting launched, and generating initial revenue.

Michelle: Then the focus shifts to adoption. How do we get more customers using payments? How do we improve attach rates? How do we make payments easier for the sales team to position?

Shannon: And then eventually, once adoption is established, the focus shifts toward optimization. So that’s improving revenue per customer, strengthening margins, refining how payments fits into the broader product and pricing strategy.

Michelle: That progression matters, because the highest performing companies understand you don’t need to optimize everything at once.

Shannon: Exactly. You build toward it over time. So let’s make that practical for a second. So imagine you have two SaaS platforms. Both are processing $10 million annually in payment volume. So you’ve got the same volume in a similar customer base.

Michelle: But one platform uses the same static model for every deal, and the other tailors their strategy by segment and progresses over time.

Shannon: So even with identical volume, those two businesses could generate dramatically different payments revenue, potentially even hundreds of thousands of dollars.

Michelle: And that’s without changing the product or the pricing, and without adding more customers. Just by structuring payments more strategically.

Shannon: So for anyone listening, if you’re evaluating your own payment strategy, here are a few questions worth asking: “Are we using the same payments approach across all customer segments?”

Michelle: Has our strategy changed or evolved in the last 12 to 24 months?

Shannon: Does our payments model reflect how our sales team actually sells?

Michelle: And can we adapt our strategy without creating operational friction?

Shannon: Because if the answer to those questions is no, there’s a strong chance your strategy may be leaving revenue on the table.

Michelle: And that’s the really big takeaway here. The future of embedded payments isn’t about picking the perfect model on day one.

Shannon: Yeah, it’s about building a strategy that can evolve.

Michelle: Because the platforms that went long term aren’t the ones that made the perfect initial decision. They’re the ones that stayed flexible and adapted over time.

Shannon: Exactly, and that’s why payments should be treated as part of a growth engine and not just infrastructure. And when you approach it that way, it becomes a meaningful growth lever for revenue retention and long-term scale.

Michelle: For sure.

Shannon: So thanks for joining us for this episode of The Payment Pulse, brought to you by Xplor Pay.

Michelle: If you enjoyed listening to this episode, we have more resources like this on our blog at xplorpay.com. That’s X-P-L-O-R pay dot com.

Shannon: Thanks for listening and we’ll see you next time on Payment Pulse.