Multicurrency Approach for Recurring Billing and Payment Processing!
Are you a SaaS business looking to go global and increase your customer base? If so, adopting the multi-currency approach is a critical step toward scaling your business to new frontiers and geographies. This approach ensures that customer transactions are much easier, transparent and very convenient. For subscription businesses, recurring payments are a major source of revenue. It allows customers to make payment in their local or preferred currency. This can easily increase customer satisfaction, improve loyalty, and reduce churn.
It is also observed that customers tend to stay loyal with businesses that allows them to make payments in their familiar and domestic currencies. On the flipside, the lack of the multicurrency option, often leads to lost customers and missed opportunities.
This technique makes it convenient as well as important in expanding the reach of your business to international markets. This blog explains why the multi-currency approach is important for SaaS businesses and how it enables them to reach out to global customers.
What is the Multicurrency Support?
Multicurrency support is all about enabling customers from across the globe to be billed and to make payments in their own domestic or preferred currency, ensuring that they have a smooth experience. This kind of approach has a great positive influence on the business’ sales and transactions. In this approach, businesses need not have to expect customers to make payments in the standard, global currencies like USD or EUROS. Instead, they can offer customers the option to pay in their own local currencies.
Multicurrency and its Impact on Revenue Growth
Recurring revenue is a critical driver of growth for SaaS businesses as it provides predictable and consistent revenue over time. To maintain and expand these revenue streams, it is important to focus on customer convenience. And one way to ensure this is by giving the customers the choice to make transactions in their preferred currencies.
Below are some of the most important reasons on why multicurrency support is relevant to SaaS subscription businesses’ billing and payment processes.
1. Seamless Transactions in the Customer’s Preferred Currency
A successful SaaS business is largely about keeping merchants and their customers happy and satisfied. One way to get to this, is by allowing them to experience a smooth and transparent payment process. The multicurrency support in SaaS businesses can enable this experience by allowing them to view prices, subscribe, and make all transactions in their very own local currency. This way, all concerns related to currency conversions are eliminated, making the payment process smooth, transparent and hassle-free.
2. Fewer Cart Abandonment Rates
With the multicurrency approach, cart abandonment rates can be minimized as the payment experience of merchants and customers are more transparent and straightforward. This approach allows the merchants and customers to see and pay in their own preferred currency. Consequently, it removes all the uncertainties and confusions of currency conversions and fluctuating exchange rates that may arise when it comes to using a single foreign default currency. It gives customers a clear understanding of how much they need to pay, thereby boosting their confidence and encouraging them to complete the transaction. This way, the SaaS businesses will experience stark reduction in cart abandonment rates.
3. Eliminating Extra Charges from Currency Conversions
Unexpected charges in currency conversion might be frustrating to both merchants and their customers. Without the support of the multicurrency feature, they may experience high conversion rates leading to dissatisfaction and eventually a loss of trust. In such cases, both merchants and their customers may view the SaaS business as less transparent or unreliable. The presence of multicurrency support can easily alleviate these concerns and boost their confidence.
4. Unlocking global reach
Think of multi-currency and the probable thought that can pop in your mind is the global reach it enables. Implementing this approach means that your SaaS business is no more limited to a specific demography alone. It is now global and anyone from anywhere can purchase your product or service using their local currency. It simplifies transactions by removing the complexities involved in currency conversions and ultimately boosting sales and transaction success rates. This is the power of the multi-currency approach and it will help to scale SaaS businesses effortlessly.
5. Balancing risk across currencies
By operating in multiple currencies, SaaS businesses can reduce the risks associated with fluctuations in currency exchange rates. This risk (inflation or market volatility) is typically more pronounced while relying on just a single default currency for transactions. It can be reduced by spreading the adverse impact of exchange rate changes across multiple currencies. This way, a dip in the value of one currency is easily balanced by stable or appreciating revenues from other currencies. Thus, the multicurrency approach protects the SaaS businesses from the negative impacts of unfavourable currency fluctuations.
6. Localized pricing for a better customer experience
This is a strategy where prices are tailored based on the economic conditions of each region. It includes factors like purchasing power, competition and market conditions. Here, customers from different regions get to purchase the product or service in their local currency. This is likely to result in slight variations in the prices charged across the different regions. It is more like a custom-fit solution rather than a one-size-fits-all approach where prices are aligned with local demands. This way, SaaS businesses can attract more merchants and customers while maintaining the profitability in each market.
7. Simplified Payment Processing
This is all about making transactions effortless and transparent by allowing merchants and their customers to use their local currency to complete their transactions. This way, they are free from all the complexities involved in currency conversion rates making the checkout process very smooth. It also opens the merchant’s business to customers and transactions from across the globe. Many payment gateways (e.g., Stripe, PayPal, etc.) support multicurrency billing allowing merchants and customers to process their payments seamlessly. Thus, this makes it a win-win solution for both merchants and customers.
Challenges of Implementing a Multi-Currency Approach
Although multi-currency approach in subscription businesses is considered novel and advanced, it does come along with a whole range of challenges. Implementing this approach by overriding these complexities can lead to transactions that are totally simple, seamless and transparent. Let’s explore a few of the hidden hurdles that deter SaaS businesses from adopting this approach. However, by having the right strategies in place, these challenges can be easily turned into cornerstones for future development. Without further ado, let’s check out the challenges.
1. Exchange Rate Fluctuations
This is all about the change in the value of one currency in relation to the other. This may happen due to various regional and economic factors. In SaaS businesses, this can affect revenue consistency when converting the payments received in the foreign currency to the base currency of the company. Additionally, these exchange rate fluctuations can make the business look either more affordable or more expensive to the customer depending on the exchange rates at the time of transaction. These fluctuations can make it challenging for the business to maintain a stable revenue and profitability for the business.
2. Technical Complexities in Implementation
Implementing the multicurrency functionality might look good and appealing on the client-side but it is a enormous challenge for the business offering providing this feature. It is much more than just simply displaying the available currencies and allowing clients to do transactions in the specific currency. It is more about having a robust back-end system that can handle all the financial, technical and regulatory complexities involved. Once the businesses have implemented the systems that can address these technical complexities, they can move forward confidently and focus on growth. Having a robust system in place for handling multicurrency is definitely a significant achievement for any SaaS business.
3. Higher Transaction Fees for Cross-Border Payments
Here again, while the client gains the convenience of paying in the local currency, the business ends up paying the additional transaction costs incurred in these scenarios. Therefore, we can infer that this approach is not ideal for businesses, which must shoulder high transaction costs to keep their customers loyal and satisfied. While clients enjoy the convenience of paying in their local currency, businesses bear the consequences of the transaction fees, including fees such as currency conversion charges, cross-border fees, and foreign bank charges.
4. Compliance with Local Tax Laws and Regulations
Supporting local currencies in each region involves navigating intricate regional tax regulations. This requires compliance with their local tax laws and regulations which adds further complexity to implementing the multicurrency functionality. Each country or region imposes different tax rates such as VAT, GST and Sales tax. The subscription business must report the tax collected to the relevant authorities. This further complicates the multicurrency process implementation. Regular audits along with automated tax compliance solutions, can help identify and resolve discrepancies, ensuring compliance with local tax laws.
To Sum it Up!
The multicurrency approach is key for SaaS businesses looking to grow exponentially across continents and geographies. However, it is not easy to set it up or even maintaining it. Implementing it in a SaaS business is highly complex and requires expertise. It requires in-depth understanding of the front-end and backend processes when payments are made in the customers' local currency. It also requires a clear understanding of the tax laws of each region and how it affects the multicurrency approach of saas businesses. Although it seems like a simple and straightforward concept, it is a functionality that requires meticulous planning to be implemented successfully. Although the multicurrency functionality offers clients a smooth payment and billing process, it has its own set of drawbacks. However, addressing these challenges can result in a SaaS business meeting global standards.
Reach out to Saaslogic Billing if you are looking for a SaaS subscription management platform that can provide you with seamless multicurrency support.