Analysing the current era, it has become quite clear that the subscription-based business model is getting huge popularity. In fact, from digital services to software and utilities to magazines- you can see subscription-based business models everywhere. It is good for businessmen and customers. In fact, subscription-based business models always follow a recurring payment system. It is the payment mode that makes this business model more approachable. This type of payment system promotes steady cash flow. Moreover, it helps the businessmen to maintain a positive relationship with the consumers.
Talking about the ecosystem of recurring payment- it is very consumer and businessmen friendly. Yes, the merchants get their payments on time. It reduces the overall administrative costs that have connection with payment delays. On the other side, it works as a time-saving payment option for the consumers. Yes, they do not need to open invoices and make payment at the end of the month. Therefore, they do not need to keep in mind the billing cycles dates. In fact, after setting the recurring payment system, the payment will get debited from the account of the consumers. On the other side, it will get credited to the account of the merchants. In short, a recurring payment system saves late payment fines. In fact, the recurring payment system is not all about automation.
The entire ecosystem is very vast and therefore, here, we will be talking about the important aspects of a recurring payment system. It will help the businessmen to understand why they need to enable recurring payments in their business.
Meaning Of Recurring Payment System
Understanding the meaning of a recurring payment system is very important. It is a special mode of payment where the customers need to do authorization. In other words, customers give permission to the merchants so that they can pull funds from the accounts of the customers at a specific time. Basically, merchants that offer subscription-based services need to pair their business with recurring payment systems. There will be a specific amount that the merchant will deduct from the accounts of the customers. Therefore, if the customers stop availing of the services, they can stop the recurring payment. If you see anything wrong, you can always raise chargeback.
Types Of Recurring Payment System
If you are planning to enable a recurring payment system in your business, you need to understand different types of the recurring payment system. In fact, there are mainly two different types of payments that fall under this recurring payment system category.
- Fixed Or Regular Recurring Payments: In the case of a fixed or regular recurring payment, a fixed amount will be debited from the account of the customers. In fact, magazine subscriptions and gym membership are some examples of fixed or regular recurring payments.
- Variable Or Irregular Payments: If we talk about irregular or variable recurring payments, the recurring payment amount gets changed at the end of the billing cycle. In fact, it depends upon the usage of the product or service. As it is dynamic in nature, it is called variable or irregular recurring payment. Various utility bills such as electricity bills come under this category.
How Recurring Payment Works
Here, we have explained how recurring payment works in order to give you a solid idea about this payment mode.
|The consumer basically selects the recurring payment model from the list provided by the merchant.|
|Then, the customer accepts the terms and conditions. It is connected with the recurring payment system.|
|Customers put the credit card or debit card details. They will have to do it once. After entering the details, it will be securely saved in the payment gateway. After the end billing cycle, the amount will get automatically debited from the account of the customers.|
|The billing date is the predetermined schedule. Therefore, the customers will receive an invoice after the end of every billing cycle.|
|In fact, the recurring payment becomes successful after getting a green signal from the credit card network, acquiring bank and credit card processor.|
|The customer will get a notification after the completion of the recurring payment on the predetermined billing date.|
|The customers do not need to enter their card details at the end of every billing cycle to complete the payment. It is a one-time process.|
Top Benefits Of Enabling Recurring Payment System
There are some key benefits of a recurring payment system. These are as follows:
- Achieve Strong Customer Base: As customers are looking for a recurring payment system in the case of subscription-based service, having this payment option by your side will keep you ahead of others. Yes, it prevents late payment fees and moreover, the customers do not need to take any extra headache for making the payment. It is fully automatic. So, enabling this payment mode in your business will help you to achieve a strong customer base.
- Improve Relationship With Customers: In the case of a recurring payment, the merchants will not have to call the consumers to give them a reminder. In fact, it actually improves the relationship with customers.
Not A Rapidcents Merchant?
Rapidcents is a very well-known merchant processor solution. Therefore, if you want to enable a recurring payment system in your business, you can visit Rapidcents. This is a very reliable platform and it adds full value to your business operation.