What Is a SaaS Payment Scheme?

A payment scheme is a set of procedures for moving money between a customer’s bank and a merchant’s bank. It describes how banks, payment processors, and merchants should handle the authorization and settlement of payments, as well as disputes and related fees.

In the context of SaaS, the payment scheme is the framework within which your subscription billing operates. It is not your payment processor, gateway, or bank; it encompasses all of them, and you choose the rules that determine how transactions are approved and reversed, as well as how penalties are levied.

Although often used interchangeably, “scheme,” “system,” and “network” refer to distinct functions within payment infrastructure:

A scheme outlines the operational guidelines and rules for transactions. The network serves to transfer data according to these rules. In this context, a payment system refers to the collective set of components and participants that interact within this framework. For SaaS businesses, the scheme has a noticeable influence on underlying costs and the structure of the customer payment experience.

In SaaS companies, payment scheme management is not addressed directly until their direct influence on business processes, such as renewals and associated processing costs, is encountered.

Payment schemes matter for three main reasons. First, they determine the interchange and assessment fees, which reduce gross margins of each transaction. Second, they establish authorization procedures that affect how recurring billing events are processed, which basically determines whether a charge succeeds or declines. Third, they outline chargeback rules – losing a dispute under a card scheme’s framework costs both the revenue and a penalty fee.

SaaS subscription businesses rely on recurring billing cycles, which means each recurring payment is subject to established guidelines for stored-credential transactions, retry logic, and authentication requirements.

Most established payment schemes can be described across four primary areas:

• Rules and governance. This includes who may participate, related compliance obligations such as PCI-DSS, and the outlined dispute resolution processes that apply to all involved parties.
• Technology standards. Standards cover how information is exchanged, such as ISO 8583 for card schemes and ISO 20022 for newer bank transfer rails, as well as the use of authentication and tokenization technologies.
• Fee structures. These detail the interchange fees for issuing banks, as well as scheme assessment fees paid directly to Visa or Mastercard, and additional surcharges, which can differ depending on location, card type, or the merchant’s category.
• Settlement timing. This specifies the timeline for completing fund transfers. For example, ACH typically completes in one to two business days, SEPA Credit Transfer operates on a next-business-day basis, and the PIX system in Brazil is structured to process transfers on a rapid timeline.

Evaluating these features can help clarify how different payment schemes operate beyond just the base transaction cost.

Scheme fees are included as part of the total costs for SaaS billing. Each standard card transaction combines three components: 

• interchange (the largest portion, paid to the issuing bank)
• scheme assessment fees (paid to Visa or Mastercard, typically between 0.10% and 0.15% of the transaction value)
• additional charges from the payment processor.

In case of cross-border billing, companies may encounter some further administrative steps. Card schemes may include charges related to currency conversion and cross-border surcharges, usually ranging from 0.40% to 1.00% per transaction, whenever the card issuer is located in a different country than the merchant account. For SaaS businesses operating with international customers on a subscription model, these charges may accumulate across all the monthly renewals.

One possible approach to decrease overall scheme costs in such cases is to use payment methods that are widely utilized in local markets. Examples such as SEPA Direct Debit in the Eurozone, ACH in the US, BACS in the UK, and PIX in Brazil all result in lower fee structures compared to cross-border card transactions, and may influence transaction authorization rates with local customers.

Here is an overview of the major payment scheme:

In general, card schemes have greater acceptance worldwide than bank transfer schemes. However, bank schemes are often associated with being cheaper to process and with less fraud. Direct ACH authorization for payments requires a signed mandate from the customer, and bank transfer schemes offer limited flexibility when managing failed payments.