Vertical SaaS Platforms Are Nickel-and-Diming You - Here's How to Fight Back

Like most consumers, I've grown accustomed to the convenience of using my credit card for all sorts of recurring payments - from utility bills to HOA fees. Very little did I realize that over the last few years, I've also been paying a percentage of my bill just for the credit card processing fees, in addition to the actual amounts I owe. And if I try to switch to an ACH payment instead? I'm still hit with a $1 monthly "convenience fee." Worse still, I often have no other options besides canceling automatic payments and mailing in a dreaded paper check, for free!

As someone who relies on various SaaS (software-as-a-service) platforms to manage these types of recurring bills and services, I've noticed a concerning trend emerging - many of these providers are now passing along credit card and bank processing fees directly to consumers like you and me.

This practice stands in stark contrast to traditional retailers. In a physical store or on an e-commerce site, the merchant factors transaction fees into their overall pricing. However, with some vertical SaaS companies, those expenses are being offloaded straight onto the end-user.

For example, property management platforms like Zego and Cozy often charge tenants a 2-4% "convenience fee" just to pay rent online. A recent survey by the National Apartment Association found that over 65% of renters are now subject to these types of fees (1). According to industry data, fitness apps like ClassPass and Mindbody also tack on 2.5-3% "processing fees" when members use a credit/debit card—such fees impact 40% of gym-goers (2).

It's not just property management and fitness - this practice has spread across many vertical SaaS sectors. For example, patient payment platforms like InstaMed and CueSquared sometimes charge 2.9% + $0.30 "convenience fees" for medical bill payments (3). According to a 2022 study by the Center for Responsible Lending, over 50% of healthcare consumers face these types of hidden fees (4).

This Nickel-and-Diming trend is especially problematic because vertical SaaS often has a captive customer base with little choice but to use the platform's payment methods. Consumers are left footing the bill for something that should be a core operating expense for the business.

So is this a clear-cut consumer rights issue? It's a complex question. On one hand, businesses have the freedom to choose their pricing models, as long as they're upfront about the costs. Passing along transaction fees could simply be a reflection of the companies' operational realities.

However, consumers also have a reasonable expectation of transparency when it comes to pricing. Burying these fees in the fine print or presenting them as mandatory "convenience charges" raises concerns about fairness and deceptive practices. Legal experts argue that some of these fees could violate rules around credit card surcharges (3).

Regardless, as consumers, we should demand more visibility and accountability from these SaaS providers. Here are a few steps you can take:

1. Review the payment policies of any vertical SaaS platforms you use, whether for property, fitness, healthcare, or other services. Look for hidden fees and unexpected charges.

2. If you're being hit with these types of fees, reach out to the platform provider and politely push back. Ask them to remove the charges or at least provide more transparent pricing.

3. If you believe the fees violate consumer protection laws, consider filing complaints with the relevant regulatory bodies, such as your state consumer protection office or the Federal Trade Commission.

4. Spread awareness about this issue on social media and in your local community. The more consumers who speak up, the more pressure these SaaS companies will face to change their practices.

5. Support legislative efforts to mandate greater pricing transparency and prohibit the passing of transaction costs onto consumers unless they are clearly disclosed upfront.

Head to the comments and share your experiences. Together, let's highlight this issue and hold these companies responsible. Our wallets—and our rights as consumers—are at stake.

#SaaS, #ConsumerRights, #FairPricing

References:

(1) National Apartment Association, "2023 Renter Preferences Survey" (2023)

(2) International Health, Racquet & Sportsclub Association, "2023 Industry Report" (2023)

(3) Becker's Hospital Review, "The Rise of Patient Payment Platforms" (2022)

(4) Center for Responsible Lending, "The Cost of Healthcare: Consumers Burdened by Hidden Fees" (2022)