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Every merchant knows accepting recurring payments can ease the frustration of dealing with delayed or missed payments. It hinders cash flow, financial plans, and customer relationships. Transactions executed through subscription payment processing are the key to receiving payments from your regular customers on time. While commonly associated with large subscription-based companies, the benefits of recurring payments extend to small businesses, too.
In this blog post, we’ll delve into the advantages of recurring payment processing and explore how it can be a game-changer for businesses of all sizes.
What Are Recurring Payments?
Recurring payments offer the convenience of automatically accepting payments from your customers. This automation can be set to a daily, monthly, or yearly basis. Recurring payments differ significantly from regular payment processing, where customers input their information online or utilize an in-store terminal to pay for products. With recurring payments, the payment gateway securely stores customers’ payment information and uses it for automatic, recurring transactions.
This is how recurring payment processing works:
- The customer signs up for a subscription service offered on your platform through the payment method of their choice.
- After the customer enters the necessary payment information, they must agree to the subscription payment terms and the storage of their payment information on the business’s payment gateway
- Once completed, every payment cycle automatically charges the customer.
What Are the Benefits of Accepting Recurring Payments?
There are many benefits to accepting recurring payments, let’s take a look at just a few of them:
- No Missed Payments: Customers no longer need to remember payment due dates because the system is automatically set to charge customers when the payment date arrives.
- Time Efficiency: Recurring billing saves time for both sellers and customers by eliminating the need for manual invoice creation, payment reminders, and customer follow-ups.
- Ensures Predictable Revenue: Membership and subscription models offer businesses a stable revenue stream since they allow businesses to predict their revenue easily.
How Much Does It Cost to Accept Subscription Payments?
There’s usually no cost difference between accepting payments via recurring payment processing and your standard card-not-present transactions. Besides per-transaction fees, you may have to pay for the recurring billing software. This could be a monthly or a one-time fee. However, other credit card processing fees to keep in mind are setup, monthly, and batch fees for the payment gateway itself.
What Do You Need for Recurring Payment Processing?
When it comes to recurring payment processing, there are two essential components you’ll need: a reliable payment gateway and robust recurring billing software.
A payment gateway is a technology that allows merchants to accept payments on physical and virtual terminals. The best payment gateways on the market offer recurring billing as a feature. They combine robust encryption protocols and PCI industry standards to safeguard sensitive customer information.
Recurring Billing Software
If you find yourself using a payment gateway that lacks recurring billing, it’s time to invest in recurring billing software. Recurring billing software allows you to define billing intervals, set up trial periods, implement pricing tiers, and manage customer subscriptions effectively. By integrating this software alongside your payment gateway, you can customize your billing cycles.
How to Set Up Automatic Recurring Payments in Your Business
As soon as you choose a payment gateway with recurring billing software, follow these steps to implement it into your business:
1. Set up and integrate your payment gateway
A payment gateway acts as a bridge between your website and the financial institutions that process online transactions. Most payment gateways provide features that allow you to integrate a payment gateway into your website or mobile app.
2. Install recurring billing software
Now, you can proceed to install recurring payment processing software. While most gateways offer recurring billing software, you can always opt for integrating a third-party recurring billing software. However, the software would serve as the intermediary link between your payment gateway and your website.
3. Configure recurring billing rules and logic
Next, determine the frequency at which you want to charge your customers. Common options include monthly, quarterly, semi-yearly, or yearly. Consider the nature of your business, customer preferences, and the value of your products when picking the billing intervals.
4. Customize other settings
Besides subscription payment processing rules, you can add information such as product details, pricing models, payment methods, custom messages, and more. Additionally, don’t forget to double-check the functionality of your software in the sandbox once you’re done with all the settings!
5. Utilize automatic emails and notifications for your customers
Finally, automatic emails and messages are a must if you want to keep a long-term relationship with your customers. They serve as a means to communicate important information, provide updates, and engage with customers throughout their journey with your business.
Subscription Payment Processing: Closing Remarks
In brief, recurring payments can bring numerous benefits to businesses, including improved cash flow, enhanced customer convenience, and increased revenue potential. However, it is crucial to acknowledge that recurring payment processing can be classified as a high-risk payment method due to factors such as chargebacks and subscription cancellations.
To navigate this landscape successfully, it is highly recommended to seek a subscription-based merchant account. There’s no better way to optimize your payment process than by utilizing a merchant account dedicated to your specific industry.