For merchants selling goods or services billed in instalments or on a subscription basis, recurring billing is a necessity.
Recurring billing is when a merchant sets up a prearranged schedule to bill a cardholder for specific goods or services. Once the merchant has permission from the cardholder to collect future payments, recurring payment processing does not require anything further from them. The scheduled charges continue until they withdraw their permission.
Recurring payment processing helps lower collection and billing costs. This is done by eliminating the need to send paper bills and automating some of the tasks typically handled by Accounts Receivable. Even the most responsible customer can sometimes forget to make a payment. Scheduling charges ahead of time will also eliminate the need to “chase” people for overdue payments, freeing up collections employees to do other tasks. It increases satisfaction and loyalty by making it more convenient for the customer.
There are many uses for recurring payment processing. Any good or service that customers purchase regularly or on a subscription basis (monthly, quarterly, or annually) can benefit from recurring payments. Examples include gym and club memberships, website content subscriptions, utility bills and mobile phone bills.
In the hospitality and travel industry, recurring payments are gaining traction. Many resorts, hotels and hospitality merchants are using recurring billing to process dues, reservations, memberships (including loyalty programs), and subscriptions automatically.
Recurring payment processing is crucial in the utility industry, where customers are most often billed monthly for their services. In the case of utilities, customers are often happy to authorise automatic billing. Allowing them to save time and effort and need to organise billing dates for individual companies each month. It is a practical and convenient option for both merchant and customer.
When implementing a recurring billing service, there are a few best practices to keep in mind:
- Offer multiple payment methods
Recurring billing itself is a huge convenience for customers, but the offering will fall short if a customer’s chosen payment method is not accepted. Accepting multiple options - various credit and debit cards - broadens the available customer base, and makes it easy for them to pay however they prefer.
2. Be clear about offering and terms
By being clear about terms such as billing date and services rendered, customers will have more trust and loyalty for the merchant company. When expectations are set up front, customers will relax knowing what they are getting and how they will be billed without their intervention.
3. Communicate with reminders and updates
Despite the pre-authorisation for payment, it is best to send customers a courtesy reminder ahead of the due date about just how much will be charged to their card. This gives them a record of invoices, avoiding questions or surprises on their side. Within these reminders, it is nice to include a message about how much you appreciate their ongoing business.
The primary advantage for both merchant and customer when using recurring payments, is convenience. Instead of communicating sensitive identity and card information repeatedly, payment processing is automatic and therefore more secure. The unnecessary hassle of providing the same information to the same merchant for the same service over and over is eliminated. The burden of tracing due dates is also relieved.
Merchants also see increased loyalty, decrease in operational interaction for Accounts Receivable, and Collections as well as Customer Service, and create a highly dependable bottom line by being able to anticipate payments.
As a payment processor, DPO offers recurring billing options to merchants, allowing their customers to make purchases via installments or layaway.