Recurring payments

What are recurring payments?

Recurring payments are also known as subscription billing or auto payments. After the purchaser's consent, these payments are automatically charged from their bank card.

How do recurring payments work?

Imagine a client entering into a subscription to a music platform, which costs $9.99 per month. The client enters the necessary information on a payment page and pays by card, giving consent that this amount will be debited monthly. The merchant automatically debits money from the client's account a month later. The procedure happens again after a month, and so on, until the client decides to unsubscribe.

So, the scheme of recurrent payments is quite simple and can be described as follows:

  • While paying for a service on the website, a user enters his bank card details (cardholder's name, card number, expiration date, and CVV/CVC code).

  • The user is suggested to consent to the automatic debiting of funds.

  • After that, the user's card is linked to their account on the site.

  • All the payment information and card details are partially stored on the secure servers of the acquiring bank and PSP. The seller, i.e., the company that owns the website, usually cannot access this data.

  • After the end of the paid period — a week, a month, or a year, money is automatically debited from the card linked to the client's account (subject to the availability of funds).

  • Funds are recurringly debited until the client cancels the subscription.

Pros of recurring payments for businesses

Automatic charges allow clients to eliminate the headache related to timely service payment. For business, it is a way to increase profits and retain customers.

The subscription billing model brings several significant benefits, allowing businesses to:

  • Boost the revenue;

  • Reduce customer churn;

  • Forecast the profit.

SaaS, services, online banking and mobile operators have long tried recurring or subscription payments — these types of business need to receive monthly payments without unnecessary reminders to the client. Recently, online stores, media, educational platforms, and other companies that do not want to lose subscribers due to their forgetfulness have started accepting recurring payments.

Tricky point of recurring payments

If you implement them without following specific rules, recurring payments can have one significant drawback. Repeated charge-offs can cause negative feedback and resistance from customers. To avoid this, you must describe the whole procedure unambiguously, focus on the charge-off intervals, and give a convenient and straightforward opportunity to unsubscribe.

Still, despite the obvious warnings and explanations about the subscription model, some customers get 'surprised' when merchants debit money from their cards again after some time.

It is essential to inform your customers who sign up for subscription payments as detailed as possible about the following:

  • Recurring billing limitations;

  • How is this service activated;

  • How is money debited from their card;

  • The procedure of unsubscribing or cancelling the service;

  • And even how to get their money back.

Sure, the details depend on your business specifics. But usually, it is recommended to notify the customers of the date and amount of the next planned payment monthly. Even if they've changed their mind and want to unsubscribe from your service, such notification will serve as a reminder to do it.

Accelerate transactions with recurring payments

Recurring payments may be of great use for online cinemas and other streaming services, developers who implement online games by subscription, insurance companies, credit institutions, service providers, etc. That is, those whose services people use continuously over a certain period.

The recurring payments feature allows customers to receive the service uninterruptedly since there is no risk of forgetting to pay on time. The only obstacle is the absence of funds in the customer's account. In such cases, the attempts to debit a card can be repeated several times; after that, clients receive a reminder to top up their card.

How can Corefy help?

We at Corefy assist our clients with thoughtful planning, implementation, and recurring or subscription billing management. Our team is eager to help you avoid possible difficulties and benefit from the implemented solution to the fullest extent.

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