What are automatic payments?
Automatic payments are payments that are automatically debited from the payer’s bank account on a certain date/period for a specified amount. This billing system was introduced by card networks and banks for convenient payment for services on a regular basis.
Auto payments are vital for all companies that provide services on a recurring basis: internet providers, utilities, online games, educational portals, streaming services, and others. This billing type helps businesses optimise their operational processes and ensure predictable revenue flow.
Automatic payments types
Depending on which service or product automatic payments belong to, we can divide them into three categories:
- Automatic recurring payments: The required amount is automatically debited using the customer's payment method.
- Prepaid payments: The customer pays for a product or service in advance.
- Lines of Credit: The customer gets a monthly bill and pays it at the set time.
Automatic payments provide enough flexibility for both the customer and the business. You can pause the recurring payments, change the frequency of debiting, select the date of the next and last payment, change the amount to be debited, and replace the card details if it has expired.
How do automatic payments work?
After setting up automatic payments, all the customer needs is just to ensure that their bank card has the necessary amount to pay. Let’s see what this process looks like:
- Paying for the service for the first time, the customer registers on your site and enters their bank card details: the cardholder’s name and surname, card number, expiration date, CVV/CVC code.
- They confirm the subscription to your service and agree to a periodic charge. Now the customer's bank card is associated with the user's account in your system.
- The securely encrypted payment information is partially stored on the side of the acquiring bank and partially on the side of your payment service provider.
- The amount necessary to renew the subscription is automatically debited from the linked card at the end of the paid period.
- When debiting funds, the stored bank card data is collected and sent for processing.
- Automatic charges are made until the payer unsubscribes from your service.
Are automatic payments safe?
Payers are always worried about the safety of their money, especially when it comes to multiple charges. However, if the business uses a reliable PCI compliant payment solution, the customer has nothing to worry about. All the sensitive data is securely encrypted and stored on the side of the acquiring bank and partially on the side of the payment service provider the company works with. Encrypted payment data are worthless to fraudsters, so even a data breach will not damage customer cards.
How to stop automatic payments?
Automatic payments allow businesses to withdraw money from their customers' accounts without the client’s participation. However, to avoid a negative payment experience, you should give customers the option to cancel automatic payments at any time.
Keep your customers informed by posting a user agreement on your site with information about the use of auto payments and the timing of debiting funds. Also, post an “unsubscribe” form to reduce the risk of negative reactions if the automatic payments were set by mistake. Provide your customers with the ability to cancel automatic recurring payments through their personal accounts or by phone.
How to receive automatic payments?
From the customer’s point of view, automatic payments are an opportunity to save time. The client only enters the card details once and forgets about the need to visit your site every month, select the service and re-enter payment information. Allowing your customers to activate automatic payments will save them from the risk of being left without access to your service at the most inopportune moment and yourself from losing the client.
The integration of automatic payments usually does not take much time. You just need to contact your PSP, and you’ll be able to accept auto payments within a few days. This procedure usually does not require the signing of any documents.
If you are a large business and need a flexible approach to recurring charges, we recommend integrating automatic payments using the API, which allows merchants to manage automatic billing independently and customise it to their business needs.
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