Unlocking steady sources of revenue has always been an aim for businesses, and recurring payments or subscriptions assist the merchants right there. Subscription payments are not just beneficial to the merchants, these are equally useful to the customers. Let's learn about recurring payment in detail:

What Is A Recurring Payment?

Recurring payment is a financial process where the payer or the customer authorizes a merchant or a business to charge a particular amount after a specific interval. So, the merchants can get a steady

income from the customers who have opted for subscriptions for a certain time without approaching them daily to purchase. Indeed, the merchants need to tempt the buyers with some more lucrative plans/offers to convince them for a subscription upgrade. On the other hand, buyers can enjoy the service, or keep receiving their favorite products/services after a specific interval without the hassle of paying every time.

Types of Recurring Payments

Based on the nature of service or products the customer receives in return for the recurring payments, there is a segregation:

1.Fixed recurring payment:Here, the amount of monthly deduction remains fixed until the customer changes the plan.

2.Variable recurring payment:Here, the payable amount depends on the usage – the more usage, the higher amount – the less usage, the lesser amount.

How Do Recurring Payments Work?

The process of recurring payments initiates when the merchants set up different subscription plans for the customers to avail these. The next steps are:

1. Customer selects a plan while shopping with the merchant and accepts the terms & conditions.

2. Customer signs an agreement and authorises the business to deduct a sum after a specified duration.

3. Payment solution records the customer's card details after tokenizing them.

4. The payment service provider processes the automated payments on the specified date.

5. Customer receives the confirmation.

6. Merchant receives the amount.

For each recurring payment, the customer will receive an invoice with all details of the transaction.

Why Should You Accept Recurring Payments?

Now, you might be wondering what benefits will recurring payments bring to your business. We are answering that too!

The benefits of recurring payment include:

Revenue Stability: The number of subscriptions taken shows a clear picture of revenue for the coming month for the merchant. Even if non-recurring transactions fluctuate, merchants will still generate revenue streams through these subscriptions.

Predictability: Merchants can predict the financial health of their companies with recurring payments because they already know the amount they will collect from these subscriptions.

Prevention of Late Payments: Customers often delay payments for unavoidable reasons, which can result in interrupted service. Recurring payments automate the process, ensuring uninterrupted service for customers. This enhances the customer experience and increases retention rates.

Enhanced Cash Flow: With recurring payments, transactions are prompt. Since there is a low chance of payment failure due to typing mistakes, fewer transactions fail, resulting in healthier cash flow.

How Does A Recurring Payment Benefit The Customers?

Recurring payments help consumers as well to avail their favourite products/services as long as they need without repetitively opening an app, searching for invoices, and paying for them. All they need to do is authorise the subscription to enjoy automated payments. They neither need to go to a store to renew their expiring plan nor visit any website – all will be automatic.

It saves them from the effort of manually entering payment details (like card number, UPI ID, etc.), so no possibility of typos. Also, the subscription plans are sometimes cheaper compared to ordinary plans. So, it is like a win-win deal for customers.

Which Businesses Should Opt For Recurring Payments?

Recurring payments are ideal solutions for any business where the customers either need to renew the plan to continue getting a service/product or pay bill after a certain time as per their consumption.

Some examples of recurring payments or subscriptions at present are utility services (like water, gas, electricity bills, etc.), taxes, telecom services (like mobile bills), entertainment services (like Netflix, Amazon Prime, Spotify, eBook/magazine, etc.), gym or club memberships, home delivery services, etc.

So, if you are into any of these, you should offer recurring payment facilities.

What Are The Challenges In Recurring Payments?

A dominant risk in recurring payments is cancellation. Today, customers have several alternatives – hence, they are prone to shift from one business to another for better plans. Even after agreeing to a subscription, they may cancel it on finding a better deal – in that case, merchant does not even receive one recurring payment. Altogether, it increases the churn rate which is a threat to the company.

Recurring Payment or Subscription: Best Practices

To incorporate recurring payments with your business, you need to follow some tips; such as:

1. Flexibility with payment options

2.No compromise with safety and security

3. Card tokenization

Accept Recurring Payments With PayG Subscriptions

India's subscription market is growing – Netflix, Spotify, gym memberships, etc are showing many possibilities. A prime reason behind this growth is that users want uninterrupted service.

Keeping this in mind, PayG payment gateway offers subscription facilities to all the onboarded merchants so that they can meet their customers' expectations. So, no matter which industry you are in, PayG is there for you.