More and more goods and services are provided on an ongoing, periodic basis. Recurring payments have thus become one of the most frequently-used payment models. B2C companies from a wide range of industries offer movie streaming services, food delivery services, insurance, phone plans, electricity etc. that incur a regular fee. The B2B market has also seen growth in subscriptions with services such as SaaS and leasing services for laptops and smartphones.
Automated billing has many advantages, saving time, improving customer satisfaction and ensuring enterprises regularly receive subscription revenues on time.
What is a recurring payment?
Recurring payments are payment that are incurred on a regular basis. These may be payments for subscriptions (Netflix, Spotify etc.), membership fees (fitness studio) or insurance.
What is the difference between recurring payment and recurring billing?
Recurring billing or invoicing, also known as subscription billing or invoicing, means an invoice is automatically sent to a customer at regular intervals and the customer needs to settle the payment manually.
Recurring payments automate this process by charging the customer’s chosen payment method, e.g. credit card, bank account, Paypal etc. when payment is due.
How do automatic recurring payment processes work?
When a customer chooses a recurring payment service, the process generally follows these steps:
A customer chooses recurring payment from a list of payment methods and accepts the merchant’s terms and conditions.
For the initial payment, the client enters their payment details which are saved in the payment gateway for subsequent transactions.
The customer receives an invoice with all the details of the recurring payment.
The acquiring bank, credit card scheme and issuing bank approve the transaction.
The recurring payment is executed, and the funds transferred to the merchant account.
The customer receives information before the next transaction and its status. Further payments are automatically debited from the customer according to the predetermined schedule.
How can a payment orchestration platform support recurring payments?
A SaaS payment solution like IXOPAY can help merchants handle recurring payments by offering a wide range of payment options suited to the local market preferences. Customers' payment details can be stored securely and tokenized directly on the platform to allow the payment details to be re-submitted with each transaction.
IXOPAY offers individual plans for adapting payment platform to the specific needs of merchants' payment schedules and billing setup.
What are the challenges of recurring payments in B2C?
Failed payments: Expired cards or changes to card details of existing customers can lead to failed payments. A solution like IXOPAY's card updater can solve this problem by automatically updating card details when they change. Payments may also fail if the customer has insufficient funds.
Payment provider failure: Issues with the PSP such as a loss of connection to the payment provider can cause loss of data or transaction delays.
Chargebacks: Efficient chargeback management saves time and money for enterprises.
Data Storage: Safe and redundant data storage is mandatory to provide smooth transactions and ensure high customer satisfaction.
Regulatory compliance: PCI DSS compliant software such as IXOPAY delivers high security for enterprises of all sizes and across all industries.
Fraud: Risk management tools enable flexible strategies to avoid fraud.
International enterprises: Global businesses operate in multiple currencies which need to be catered to.
Multiple Payment Methods: Regional payment preferences or regulations must be taken into account when setting up recurring payment services.
What are the benefits of recurring payments for businesses/merchants?
Offering a wide range of payment options is attractive for customers and merchants alike. From the customer’s perspective, recurring payments save time and money and improve customer satisfaction.
For customers and merchants alike, recurring payment means a decrease in late or missed payments, making the payment processes more predictable and less error-prone.
Why is a solid payment infrastructure important for recurring payments?
A solid payment infrastructure provides the basis for the entire invoicing process. Merchants need the ability to store data securely and for transactions to be processed reliably and efficiently.