Recurring payments have become increasingly popular in India, especially with the rise of subscription-based services and e-commerce platforms. According to a report by RedSeer Consulting, the Indian subscription market is estimated to be worth $500 million and is expected to grow at a CAGR of 12% by 2025. This growth is primarily attributed to the convenience and flexibility that recurring payments offer consumers and the potential for businesses to increase customer loyalty and revenue.
Recurring payments can take various forms, including automatic bank transfers, credit card payments, and mobile wallet transactions. They are used by many businesses, from streaming services and online marketplaces to utility companies and educational institutions. By setting up recurring payments, businesses can streamline their billing processes, reduce administrative costs, and improve cash flow management. Moreover, recurring payments can improve customer retention by providing a hassle-free payment experience, ensuring timely payments, and offering personalized subscription plans.
But what sets recurring payments apart from other payment systems? This blog guide details how recurring payments work and how they can benefit your business beyond automation. Discover how recurring payments can revolutionize your business, from improved cash flow to increased customer retention.
Recurring Payment Meaning
Recurring payments are the future of payments, allowing customers to authorize merchants to automatically withdraw funds at regular intervals for ongoing products or services. This model offers a hassle-free and predictable payment process, benefiting businesses and customers with streamlined payments and improved customer satisfaction. Whether it’s online software or other products and services, recurring payments are a game-changer in today’s payment world.
Understanding Recurring Payments: Definition and Benefits
Recurring payments have become increasingly popular for businesses that provide goods and services regularly. But what exactly is a recurring payment?
In a recurring payment model, customers authorize merchants to automatically deduct funds from their accounts regularly for ongoing products or services. Once the customer authorizes the payment, the predetermined amount is automatically deducted at set intervals until the customer withdraws their authorization or the subscription expires.
Recurring payments offer a host of benefits for both businesses and customers. Businesses can enjoy a predictable cash flow and reduced administrative costs associated with payment delays. At the same time, customers benefit from the convenience of hassle-free payments that eliminate the need to remember payment due dates and avoid late payment penalties.
Businesses can streamline their payment processes and improve customer satisfaction and retention by offering a recurring payment option. With this payment model, customers can focus on enjoying the products or services they receive without the added worry of payment processing.
What are the different types of recurring payments available in India?
Recurring payments are becoming increasingly popular as a payment model for businesses. But what are the different types of recurring payments? Let’s take a closer look.
Automatic Bill Payments:
This type of recurring payment allows customers to authorize merchants to withdraw a predetermined amount from their accounts to pay bills, such as utilities or insurance, regularly.
Subscription Payments:
Subscription payments are recurring payments for ongoing products or services, such as online software or streaming services. Customers authorize merchants to deduct a set amount at specific intervals until they cancel the subscription.
Installment Payments:
Installment payments are recurring payments made for a larger purchase, such as a car or home, that is paid off in smaller, regular payments over time.
Retainer Payments:
Retainer payments are used in professional services, such as law or accounting, where clients pay a recurring fee for ongoing work or services.
Donations:
Recurring donations are a type of recurring payment where donors authorize regular deductions from their accounts to support a cause or organization.
A Guide on How Recurring Payments Work
Recurring payments are an essential part of the payment process for many businesses. But how do they work? Let’s take a closer look at the process.
Recurring payments are automatically collected via payment cards, ACH, or Direct Debit fund transfers from customers’ accounts. The business must have a merchant account and a payment service provider to accept these payments.
A merchant account allows businesses to accept payments from customers’ accounts. The amount debited from the customer’s account is first deposited in the merchant account and then transferred to the business’s bank account.
The payment service provider plays a vital role in payment processing, from collecting recurring payments on behalf of merchants and processing them securely to depositing the amounts in the businesses’ bank accounts.
While the exact workflows may differ between recurring payment processors, the typical process involves the following:
- Setting up a payment plan.
- Authorizing payment collection.
- Processing the payment.
- Depositing the funds in the merchant’s account.
Recurring payments have become popular, offering businesses a predictable payment process and customers a hassle-free payment experience. With the right payment service provider and merchant account in place, businesses can streamline their payment processes and improve their cash flow, ultimately benefiting both the business and the customer.
The Benefits of Adopting Recurring Payments for Your Business
Reduce late payments and collection time:
With recurring payments, payment collection is automated, so there’s no need to chase customers for payment. This frees up time and resources for other important business tasks.
Minimize effort:
Recurring payments save time and money by eliminating the need for manual invoicing and payment processing. Once the payment plan is set up, the software handles payment processing automatically.
Improve customer relationships:
Recurring payments are convenient for customers, who only need to enter their billing information once. This can create a sense of goodwill between the business and the customer, leading to better customer relationships.
Defend against fraud:
Recurring payment systems typically include secure payment gateways that protect against fraud with advanced fraud detection and prevention technologies, such as tokenization and compliance with PCI DSS. It also helps build customer trust and save resources that might otherwise be spent dealing with fraudulent transactions.
The Versatility of Recurring Payments: Solutions for Modern Businesses
Recurring payments are becoming increasingly popular across diverse industries and businesses of every size. Implementing a recurring revenue model not only ensures prompt payment collection but also enhances customer experience and loyalty.
Utility Providers
Utility providers can benefit from a recurring payment option for customers to pay their taxes and utility bills, including electricity, gas, water, and phone bills. With a scheduled auto-payment option, like the one provided by ACI Worldwide payment solutions, US federal taxpayers can make personal or business tax payments to the Internal Revenue Service (IRS) without hassle.
Membership-Based Businesses
Membership-based businesses, such as gyms, learning courses, and co-working spaces, can greatly benefit from recurring payments. These businesses charge a fixed amount for membership at monthly or yearly intervals, providing convenience for customers and ensuring predictable revenue for the business.
Subscription-Based Businesses
Businesses across industries now use the subscription model, from newspapers and streaming media to box deliveries and SaaS products. Recurring payments simplify the payment process for customers, ensuring timely and predictable revenue for businesses.
Financial Services
Recurring payments are widely used in personal financial services, including insurance premiums, loan repayments, and mutual fund investments. With a recurring payment arrangement, the financial service provider can collect payments automatically from the customer’s bank account at regular intervals without requiring manual follow-ups.
For example, UPI AutoPay allows customers to set up electronic payments for insurance premiums, loan installments, and mutual fund investments in India. Customers can select the bank account to be debited, agree to the payment terms, and authenticate the mandate. At periodic intervals, the selected amount is automatically deducted from the customer’s account and transferred to the insurance company.
Conclusion:
Recurring payments are becoming increasingly popular in various industries, from utility providers to subscription-based businesses. They can help businesses reduce late payments, minimize effort, improve customer relationships, and defend against fraud. If you want to benefit from recurring payments, consider offering this option to your customers. It can help you streamline payment processing and strengthen customer relationships, ultimately driving business growth. Sign up for an Easebuzz payment service provider offering recurring payment processing and enjoy these benefits today.
