What is a Payment Cascading System in the Context of SaaS?

An automated, intelligent method of directing subscription payments is called a payment cascading system. The cascading mechanism immediately reroutes a payment to a secondary or even a tertiary processor to try the transaction again in real-time if it encounters an obstacle with your initial payment processor and fails. Here are the steps involved:

1. First Attempt: Your principal payment gateway (Processor A) receives a scheduled subscription payment. 
2. Failure Identification: A “soft decline” is returned by Processor A. 
3. Instant Rerouting (The “Cascade”): The system instantly forwards the same transaction to a different, pre-configured gateway (Processor B) rather than just giving up or waiting for a subsequent retry. 
4. Resolution: Processor B authorizes the transaction based on its distinct risk algorithms and banking links. The customer experiences no disruption and the payment is successful.

A cascading system functions beyond a technical feature; it relates to revenue generation. The benefits are twofold:

• Revenue Recovery Impact: It aims to recover transactions that might not have been completed. A 5-10% shift in payment authorization rates relates to a change in available funds for your business..
• Reduces Involuntary Churn: It prevents customers from being churned out due to temporary technical glitches. Retaining a paying customer is vastly more profitable than acquiring a new one. This system protects your hard-won customer base.

Absolutely. Let’s follow a single transaction for a fictional SaaS company, “CodeStream.”

• Renewal Due: A customer in Germany has a €50 monthly renewal due.
• Attempt #1: CodeStream’s system sends the payment to its primary processor, which is based in the US. A generic “Do Not Honor” soft decline may be returned by the processor’s risk engine if the card’s issuing bank is not recognized..
• The Cascade: Instead of failing, CodeStream’s cascading logic instantly re-routes the €50 transaction to its secondary processor, which has strong European banking partnerships.
• Success! The second processor recognizes the issuing bank, trusts the transaction, and approves the payment.
• The Result: The customer keeps their access to CodeStream without interruption, and CodeStream successfully collects its revenue. The entire process happens in milliseconds.

Cascading is specifically designed to solve soft declines. These are temporary, fixable failures. It cannot solve hard declines, which are permanent failures indicating the payment source is invalid.

Understanding the difference is key to appreciating the value of a cascade.

Historically, yes. This was the biggest barrier to entry for most SaaS companies. You would need to:

• Negotiate and sign contracts with multiple processors.
• Manage separate compliance and security requirements for each.
• Build and maintain complex API integrations for each payment gateway.
• Develop the sophisticated logic to route transactions effectively.

This is a massive resource drain. However, a modern approach may suggest a different conclusion.

A Merchant of Record is one factor that influences the implementation of a payment strategy like cascading. An MoR handles the entire payment lifecycle on your behalf.

Here’s how an MoR makes cascading effortless:

• Pre-built Infrastructure: The MoR involves relationships and technical integrations with a global network of payment processors. You get the benefit of this network instantly.
• A Single Integration: You connect to the MoR’s platform once. They handle all the complex payment routing and cascading logic behind the scenes. No multiple integrations are needed.
• Optimized Logic: The MoR’s system uses programmed routing rules based on factors like geography, currency, card type, and historical success rates, which may influence approval rates on each cascade..
• Business Insights: A unified reporting system gathers transaction data from various payment processors into a central point, which may facilitate the reconciliation process.

Engaging a Merchant of Record takich jak PayPro Global provides a payment cascading system, potentially influencing the resources needed for in-house development. You can focus on your product while your MoR focuses on ensuring you get paid.