So how do recurring payments work? Are they the same as subscription payments? And how do they add value to a business? These are some of the questions we explore to help you navigate the wild wild west of payment solutions.
Spurred on by the pandemic, recurring payments are no longer a luxury. They are an integral piece in running a successful operation. According to Chargebee, recurring billing is the 'new black' in the digital economy. The global subscription market is set to double to almost $8,000 million by 2025.
The move from cash and cheque to digital and real-time payments is here.
“Recurring B2B payments are pushing firms to modernize their payments technology, with 60% of respondents saying their firm is planning to upgrade/invest in a recurring payment provider."
Forrester 2020
When a business charges a customer for a product or service at a predetermined interval, we call it a recurring payment. The customer authorizes the merchant to pull funds from their account on demand. This process continues until such a time as the customer chooses or if repayments are complete.
This all works behind the scenes, weaving ease into the billing structure to deliver customer experience. With integrated billing and payment processing Slack can focus on what they do best while maintaining a positive customer journey throughout each recurring payment cycle.
A recurring payment process begins when a customer subscribes to a product or service, such as a monthly cell phone service. The merchant, with a payment service provider and a merchant account in place (an account specifically for business purposes where companies can make and accept payments), will bill the customer. The charge is then collected automatically from the customer's bank account by payment card or directly through EFT, e-Transfer or Pre-Authorized Debit. Customer funds are then first deposited into the business's merchant account until this process becomes a "fait accompli" when the funds land into the merchant's own business account. The recurring payment life cycle completes until the end of the agreed subscription term.
Subscription payments like Netflix are a fixed amount, whereas recurring payments could fluctuate, such as a utility bill. Both options deliver seamless payment processing with fewer touchpoints and less interaction.
The recurring revenue model is popping up everywhere, with propelled growth in various industries.
Companies look to this method for repeat collections, be it utility bills and loan repayments or rent and tuition. Recurring payments have become the solution for the time-consuming manual task of following up when a payment is due.
Expect significant savings on administrative, manual tasks as well as transactional costs.
Manual processes - According to a Forrester report, more than 60% say the most time-consuming tasks can be eliminated.
Predictable Cash Flow - A consistent payment date ensures no surprises for accounting. It also allows for better forecasting and potential scale.
Better operational efficiency and cash flow - Decision-makers expect improved efficiency. Reducing Days Sales Outstanding (DSO) by 44% and payment reconciliation by 34%. Not to mention reducing the time it takes to chase unpaid invoices by 40%.
Improved payment success - Recurring payment will reduce payment failure and increase sales. While more than 40% of survey respondents feel they will support customer retention.
International expansion - 36% of US business leaders see recurring payments as a market entry in new countries.
Increased Security - Customers' payment information remains secure on payment gateway servers. Different methods like tokenization and bank account verification tools protect against fraud.
Customers expect a smooth operation from start to finish. This means businesses need to adapt and make it as easy as possible for clients to pay. It also means meeting them with their preferred payment type.
In a connected world, moving money from country to country, bank to bank, is getting easier every day. Look to the future to meet today's expectations. It is vital to keep ahead of the game.
At VoPay, we are seeing SaaS companies look to account-to-account payments (A2A). Companies are starting to forego credit cards. Businesses are avoiding the "high cost" processing fees and the headaches caused by credit card expiry dates and card limits. This is how A2A payments excel, and transferring money between accounts is a snap of a finger. We can expect to see A2A payments account for 20% of all e-commerce payments in Europe by 2023. This surpasses both credit and debit cards.
The recurring payment system is convenient for both customers and businesses. Recurring payments reduce the friction of repeated manual payments and remove the delays in getting paid.
Not only does it enhance a positive customer experience, but it also ensures a stable cash flow for the business.
If you run a business that collects payments repeatedly from the same customers, this solution makes it worthwhile.
Integrate recurring payments and collections using our data-driven platform. With our intelligent iQ11 EFT solution, recurring payments become digital and automatic. End-users connect to their bank using a custom payment link debited throughout the payment lifecycle.
VoPay offers many account-to-account collection flows, personalized to suit your business model.
To schedule a demonstration or speak to a specialist, connect with us today!
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