Background
An established SaaS platform had several payment integrations with referral-based providers, resulting in only a small revenue share from payments volume. To increase earning potential and offer a more cohesive, easy-to-use payments experience, they sought to replace these providers with a fully embedded, platform-branded payments solution with merchant onboarding, payments processing, and reporting.
The Challenge: Tech debt and multiple integrated payment providers
The SaaS platform has a large, complex codebase, more than a dozen checkout flows, and thousands of merchants spread across 6 different integrated payment providers. They knew that both technical implementation and merchant migration would be complex, so they wanted a partner who would guide them through both.
Hands-on project management and migration support
Rainforest provided hands-on project management including on-site support, working groups, and ongoing communications to ensure stakeholder alignment.
Rainforest’s suite of embedded merchant onboarding, payments, and reporting components helped the SaaS platform complete their implementation and launch their platform-branded payments product in less than 4 months.
As the launch date approached, Rainforest’s Customer Success team worked closely with the platform to segment merchants so they could be migrated in waves, assist with a communications plan for the migration, and advise on the go-to-market strategy for the new platform-branded payments product.
Additionally, Rainforest’s simple passthrough-plus buy-rate pricing model eliminated the revenue share and enabled the platform to earn more revenue on day 1. At the same sell price, the platform increased their gross margin from 23 basis points to 33 basis points just by moving from referral-based partners to Rainforest.
But we didn’t stop there.
Reducing costs with interchange optimization
This SaaS platform services businesses in multiple verticals, resulting in a broad card mix, including business and corporate card transactions that are eligible for level 2/3 interchange reductions.
Level 2/3 data is additional information sent in the transaction message that Visa and Mastercard use for enhanced risk management. As a result, the interchange fee is reduced when a merchant passes this information to the issuing bank.
With Rainforest’s guidance, the SaaS platform implemented processes to transmit the necessary data for qualifying transactions.
27% of the platform’s volume was eligible for level 2 or level 3 data. Implementing level 2/3 data reduced interchange costs on this volume by 75 basis points on average.
This equates to an overall interchange cost reduction of 21 basis points for the platform.
Payments margin increased from 23 basis points to 54 basis points
Since the platform partnered with Rainforest through an embedded model with transparent passthrough-plus pricing and no revenue share, the interchange savings flow through to the platform’s gross margin. This means the platform added 21 basis points to their gross margin, bringing the total margin to 54 basis points on payments volume.
In contrast, platforms earning through a revenue share only realize a fraction of their interchange savings because the payment provider keeps the rest.
For every $100m in processing volume, the platform is now earning $540k – more than double the $230k they were earning with referral-based integrated partners.
