ACH pricing strategy for embedded payments

Embedded Payments Pricing Guide for Vertical SaaS Platforms (Part 5 of 6)

This post is part of a series on the optimal product, positioning, and pricing strategy for embedded payments.

SaaS companies can easily miss out on the full revenue potential of embedded payments because the payments implementation or go-to-market strategy is a little off.

This series will highlight the different factors in building a successful payments strategy and help you determine the best path to success for your particular platform.

ACH processing pricing structures

Up to this point, we’ve focused on card processing because that’s where platforms tend to earn most of their payments revenue. But that doesn’t mean we should neglect ACH.

Credit card interchange fees are a percentage of the payment, which forces card processing fees into a percentage-based model.

In contrast, most banks charge flat ACH fees, which enables payment providers to charge flat ACH fees, and gives software platforms more options for how they price and monetize ACH payments.

These are the most common ACH pricing structures, their strengths, and when to consider each.

Flat

Flat fee per ACH payment,
e.g. $1
Revenue tracks to number of payments
Most revenue for small average transaction sizes
May be required in industries where merchants are already accustomed to flat-fee ACH processing

Percentage

Fixed percentage of payment, e.g. 3% + $0.30 or 1% + $0.30
Revenue tracks to overall payment volume
Most revenue overall but in some verticals, merchants may push back on uncapped ACH volume fees
Works well in industries where getting paid is viewed as more important than optimizing cost

Percentage with cap

Percentage, up to a maximum fee,
e.g. 1% + $0.30, capped at $50
Revenue tracks to overall payment volume until cap is reached
Works well in industries where merchants are particularly sensitive to processing fees on larger ticket sizes

Determining the ACH pricing

Merchant willingness to pay percentage-based ACH fees will vary widely between industries. Most will fall into one of three scenarios:

1. Finance (and finance-adjacent), utilities, and some high-ticket B2B

In industries where ACH is dominant, merchants are generally accustomed to paying flat ACH fees. These merchants are less willing to pay percentage-based ACH fees. In these industries, embedded ACH may not be a significant revenue driver for the SaaS platform, but may help overall adoption. Unified reporting, deposits, and reconciliation can be a significant value-add for these types of businesses.

2. B2B and high-ticket B2C

In industries where merchants receive most of their payments via card, merchants are already accustomed to paying volume fees. However, for higher-ticket purchases, merchants will be vigilant about volume fees. Platforms who serve these industries often see success with volume fees in the 0.5% to 1.5% range, with a cap around $5 or $10 per payment. You may also want to include a small per-item fee (e.g. $0.20 or $0.30) to make sure your costs are covered in the case of small transactions that don’t generate a significant volume fee.

3. Low-ticket B2C

Low-ticket B2C merchants who receive nearly all of their payments via card have already accounted for card processing fees in their own pricing structure. For these industries, it’s common to see an uncapped ACH volume fee of 0.5% to 1.5% along with a small per-item fee of $0.20 to $0.50. In some industries, ACH is such a small portion of overall payment volume that the card processing fee can be extended to all payment methods (e.g. 3.0% + $0.30 for all payments, regardless of payment method).

How can SaaS platforms shift volume from ACH to card?

In general, aim to make ACH less appealing and less convenient.

You can make ACH less appealing by offering longer deposit timeframes (e.g. T+4 for ACH vs T+1 for card) and applying an additional fee.

You can make ACH less convenient by presenting the card payment option first and requiring a few extra clicks to get to ACH.

If you have multiple tiers of your core SaaS product, you can also make ACH exclusive to only your highest-tier customers.

Indirect ACH monetization

In B2B use cases where ACH is a significant portion of the total processing volume and merchants might be more sensitive to ACH volume fees, you might explore additional monetization options.

1. Win the card volume

Card payments will generate more revenue for the platform, so think of ACH as a toehold to help you win the card volume.

Sell the value of easy reconciliation thanks to a single daily bank deposit for all payment methods (ACH, card, and even Apple Pay), penny-perfect reports, and in-context payments data.

Depending on the exact card vs ACH mix, effectively monetizing the card volume might be enough revenue to make lower-margin ACH “worth it”.

2. Apply a SaaS fee

This can be positioned as a “module fee” for the online bill pay and invoice communicator capabilities.

For example, the module could be unlocked with a $5,000/yr annual subscription fee. This allows the platform to keep a sustainable margin even with flat or capped ACH fees.

3. Embedded lending and cashflow acceleration

B2B use cases with high ACH utilization tend to have a relatively large average transaction size. In construction, for example, large transaction size is one of the reasons ACH is so prevalent.

Large transactions often mean that the merchant would really like to get paid, and the buyer would love to delay their payment a bit.

Embedded lending and cashflow acceleration help the merchant get paid right away, the buyer to delay payment, and the platform to pick up a few basis points.

Next post: Go-to-market strategy