Today, it is possible to subscribe to more and more goods and services. As a result, recurring payments have become one of the most commonly used online payment models. B2C companies from various industries charge for their services (video streaming, food delivery, various types of insurance, mobile phone plans, cable subscriptions, electricity distribution services, etc.) in a way that involves a regular fee. The B2B market has also seen growth in businesses that involve service subscriptions, such as SaaS and rental of IT devices, components and smartphones. This kind of automated billing brings many advantages. Above all, it saves time, improves customer satisfaction and ensures that businesses receive subscription revenue regularly and on time.
What Is a Recurring Payment?
Recurring payments are payments that repeat on a regular basis. These can be payments for subscriptions (Netflix, Spotify, YouTube, etc.), memberships (fitness studio) or insurance.
What Is the Difference Between Recurring Payments and Recurring Billing?
Recurring billing or invoicing, also known as subscription billing or invoicing, means that an invoice is automatically sent to the customer at regular intervals and the customer has to settle the payment manually. Recurring payments, on the other hand, automate this process by automatically charging the customer’s chosen payment method, e.g. a previously registered payment card, when the payment is due.
How Does the Automatic Recurring Payment Process Work?
When a customer opts for automatic recurring payments, the process usually follows these steps:
- The customer selects recurring billing from the list of payment methods and accepts the merchant’s terms and conditions.
- With the first payment, the customer enters their payment details (card details), which are stored on the AllSecure Payment Gatewayand will be used for future payment transactions
- When the next payment is due, the customer receives an invoice from the merchant with all payment details
- The payment transaction is executed automatically, and the bank approves the transaction.
- The collected funds are transferred to the merchant’s account.
- The customer is notified of the payment status of that obligation.
- Subsequent payments are automatically debited from the customer’s account according to a pre-agreed schedule.
How Can Orchestration Support These Recurring Payments?
Payment platforms such as the AllSecure Payment Gateway can help merchants process recurring payments optimally by offering a wide range of payment options tailored to local markets. Customers’ payment card details are securely stored and tokenized directly on the AllSecure platform to enable repeat payment for each subsequent transaction.
What Are the Main Challenges of Recurring Payments in the B2C Segment?
- Failed payments: Expired cards or changes to existing customers’ card details can lead to declined transactions. A solution such as AllSecure Card Updater can solve this problem by automatically updating card details if and when a change occurs. Of course, a payment transaction can also fail if the customer does not have sufficient funds on their card.
- Technical issues on the bank/acquirer side: Issues on the side of the payment service provider (bank/acquirer), such as a loss of communication (connection) with the bank’s processor, can cause an increased number of declined transactions or transaction delays.
- Disputes: For this type of payment, efficient dispute management saves merchants time and money.
- Data storage and tokenization: Secure and redundant data storage is a must to ensure uninterrupted transactions and high customer satisfaction.
- Regulatory compliance: PCI DSS-compliant software, such as the AllSecure Platform, provides a high level of security for merchants of all sizes and across various industries.
- Fraud:: Risk detection and management tools enable flexible fraud avoidance strategies.
- International merchants: Global companies operate in different currencies that need to be taken into account.
- Different payment methods: Regional market preferences or regulations must be taken into account when planning and implementing recurring payment services.
What Are the Main Benefits of Recurring Payments for Merchants?
Offering different payment options is attractive to both customers and merchants. From the customer’s perspective, recurring payments save time and money, improving customer satisfaction. For merchants, recurring payments mean fewer late or missed payments, making payment processes more predictable and less prone to errors.
Why a Robust Payment Gateway Is Important for Recurring Payments
A robust payment infrastructure provides the foundation for the entire billing process. Merchants need to be able to store and tokenize payment card data securely, as well as to have payment transactions processed reliably and efficiently.