The events of the last few years have revealed a trend towards digital transformation and predictability of income. More and more businesses are either initially created or are taking on a subscription model. Therefore, recurring payment is currently one of the most convenient, effective and promising ways of interaction between the customer and the business. However, aspiring entrepreneurs may face difficulties caused by little experience and knowledge in this field.
What is a recurring payment?
Recurring payment is an automatic fixed payment with regular intervals for various services and goods. Thus, you can pay for subscriptions, utility bills and even donate to volunteer organizations, receiving only a notification of funds being debited.
Benefits of recurring payment for a client
- The one-time deal on the terms that the client chooses themselves, and its cancellation is possible at any time.
- There is no need to devote time and effort to a repetitive billing routine.
- No risk of missing the payment and losing the needed service or getting a fine.
- An automatic payment settled for a long period often involves a small monthly discount.
Suppose that a potential client’s hobby is listening to audiobooks and in search of a suitable application he finds two options: an annual subscription of $ 119 or a monthly payment of $ 9.99. A one-time, rather large purchase of a new product will scare off the customer, but a small amount and a short period with the possibility of cancellation will seem much more attractive. It is in the interests of the app owners to make the client’s use of it as comfortable as possible. Regular interruption at the end of the payment cycle and the need to fill in all the data again and again will not leave pleasant impressions and most likely soon the client will want to look for something new.
Benefits of recurring payment for business
- The ability to predict cash flow. Business can count on revenue from automatic payments in advance with a high degree of confidence.
- This payment method helps to improve customer relations and allows to retain more customers, since the business offers different plan options that are convenient for the client.
- With the help of the recurring payments tool, the business automates the payment acceptance process.
- The business minimizes the risk not only of not receiving payments on time, but also of various fraudulent transactions.
- Ease of accounting for customer payments, as there is a single record of all their payments and payment information automatically flows into the right systems.
Let’s look at the example above from a business point of view. The owners of the audiobook app have 2 ways: sell the boxed version for $ 119, search for customers for a long time and make a deal 1 time without having regular income, or connect customers by subscription for $ 9.99 every month. The second option is more cost-effective because each client will bring 9.99 * 12 in a year, therefore, the more loyal the client is, the longer they stay, the more profitable it is for the owners of the app. And the merchant can use a stable income flow to support and improve his product.
What businesses can use recurring payments?
Considering all the perks, more and more business areas are choosing a recurring payment as a pattern of billing clients. However, it is necessary to understand for which business the realization of this type of payments will be most organic.
- Membership businesses
Recurring payment is the most convenient option for membership-based businesses. This is a business model in which the client gets access to the use of the property or content of the business: from gyms to co-working spaces and libraries, from learning courses to meetups.
- Subscription businesses
A recurring payment option is widely used by the type of business that provides various kinds of content, which includes music and video streaming services, electronic libraries, various media platforms, SaaS products, and so on.
- Financial services
Companies that provide financial services to clients on an ongoing basis, such as accounting services, insurance services, financial consulting, and etc, can also get paid with the use of recurring payments.
Recurring billing processing
This process is maximally simplified for both sides of interaction – business and client.
The client chooses a recurring payment from the proposed payment methods, studies the terms and agrees to them, enters his data and agrees to save it within the business’s invoicing software. This and all subsequent payments are made without the direct participation of both parties, but only through the payment processor, which contacts the acquiring bank, the client’s credit card network and the issuing bank. The client only receives a notification about the withdrawal of funds, and business information in the database about the transfer of funds.
To set up this process, a business needs recurring billing.
What you should consider when choosing a recurring billing platform
- Make sure that the chosen billing platform has the necessary functions and features.
- Check the security of the platform, its compliance with the data protection laws of your country.
- Choose a recurring payments platform that provides regular reports so that you can track the growth or decline in sales of services or goods.
- Look for a billing system that uses churn metrics to determine competition and will help you understand your churn rate and how to manage it.
Wrap Up
The recurring payment system is a convenient, reliable and modern way of interaction between customers and businesses. Fast and efficient management of recurring payments will help strengthen customer relationships and reduce the likelihood of churn, since it is easy for the client to set up their payment details once, and then use the product or service without making a single effort to pay again. The business, in turn, has a stable cash flow, more reliable projected revenues and savings on staff and administrative resources.
If your business model involves receiving recurring payments from the same customers with a certain frequency, you should try the system that offers user interaction management, payment gateways, multiple payment forms and a simple billing system.We can help
Rainex billing and subscription management platform offers an affordable and secure payment system that has everything for successful acceptance of recurring payments.
The system helps you create flexible pricing plans, create subscriptions and track your customers, set up notifications and invoices for your customers in any language of the planet, connect multiple payment gateways and much more. All the needs of your business in one platform.Find out how Rainex can help you in accepting recurring payments.
