How do SaaS platforms handle payments?

SaaS platforms handle payments by integrating third-party payment processors and subscription management systems. These systems automate recurring billing, securely process transactions, and manage customer payment data. Developers typically connect their SaaS application to services like Stripe, PayPal, or Braintree via APIs. For example, when a user subscribes, the platform collects payment details (credit card, ACH, etc.) and sends them to the processor. The processor validates the payment method, handles encryption, and returns a token for future transactions. Subscription logic—like monthly vs. annual billing—is managed through the processor’s API or a middleware layer (e.g., Chargebee). Failed payments are retried automatically using predefined rules, and invoices are generated programmatically.

Security and compliance are critical. SaaS platforms avoid storing sensitive payment data directly, relying instead on tokenization provided by payment processors. For example, Stripe.js securely collects card details in the browser and returns a token that the SaaS backend uses for subsequent charges. This approach minimizes PCI DSS compliance scope. Platforms also handle multi-currency and tax calculations. Stripe and Adyen support dynamic currency conversion, while tax services like Avalara automate VAT or sales tax based on the user’s location. Developers must ensure the payment flow complies with regional regulations (e.g., GDPR in Europe) and provides clear receipts.

Beyond processing, SaaS platforms implement dunning management to recover failed payments. Tools like Stripe’s automatic email reminders notify users of payment issues and prompt updates to payment methods. Analytics dashboards track metrics like monthly recurring revenue (MRR) and churn rates, often integrating with tools like Metabase or Looker. For testing, developers use sandbox environments provided by payment processors to simulate transactions without moving real money. For example, Stripe’s test mode allows validating edge cases like expired cards or 3D Secure authentication flows. Webhooks are configured to sync payment events (e.g., successful charges, cancellations) with the application’s database, ensuring real-time updates to user access or billing cycles.