What does recurring mean: what is a recurring transaction

Most often, recurring payments are automatic transactions that take effect on a set date after you subscribe. Other common uses of recurring payments, such as magento 2 subscription extension, include memberships, utility payments, online lessons, and so on. Most inevitably, because they are recurring transactions, they operate on a predetermined schedule dictated by the customer.

As a variety of business models prepare to flourish around the world, there is a need to simplify the billing process. Regular payments make business convenient for both sellers and buyers. As a startup, getting your business to have regular customers who consistently pay for your goods or services is difficult.

The fact is that regular payments within merchant services are completely unavoidable. As a consumer, you have to be guilty of allowing recurring payments at some point in time.

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Let’s use an illustration to get an idea of what I’m trying to suggest.

Trend-setting streaming services like Netflix, Amazon Prime, HBO, and Spotify allow customers to virtually pay for their monthly plans. In the same way, software companies allow recurring companies to expire your package at any time. This subscription-based model is stunningly central.

What kind of business needs recurring payments

  • Adult entertainment
  • Nutritional supplements
  • Web hosting
  • Cell phone operators

One of the main goals of this payment model is to make the payment process more convenient. The customer can consume services without worrying about the monthly payment. However, convenience can turn into a disadvantage. After all, such a payment model often involves a high degree of risk.

Why are recurring payments high risk 

Once a cardholder has agreed to a recurring withdrawal from his or her account, there are increased risks in the payment model.

 

  • First, the customer may forget that he or she signed up for a service and consented to a recurring withdrawal.
  • When a provider charges such a customer for a service, he or she will ask for a refund or even quarterback. If the number of chargebacks exceeds a certain threshold, the business risks paying a serious penalty to the payment system (Visa and Mastercard closely monitor chargebacks in retail).
  • Payment systems offer to secure merchants by spelling out all the details in the chapter “Terms and Conditions”. However, not all clients read this part carefully before clicking on the button “Accept Conditions”. And even if they do read it, there is a possibility that they will forget about the agreement and will be very surprised by the fact of the withdrawal of money from their account.
  • Secondly, if you make a mistake, it cannot be corrected.
  • In the case of a one-time payment, an error in the amount or other inaccuracies can be quickly corrected. In the case of a recurring payment, the consumer will be forced to pay for the service, and only after that will he demand reimbursement. This, in turn, will reflect badly on the service provider’s chargeback history.
  • Therefore, PowerSync emphasizes that the recurring payment mechanism is the most rational to use for those providers, the cost of which does not change, and the payment is made on the same schedule.
  • Thirdly, a client may want to terminate an agreement.
  • Often, recurring payment agreements are open-ended. Therefore, to stop paying for the service, the customer will have to terminate the agreement, first figuring out exactly how to do so. This, too, can lead to complaints and a negative attitude toward the brand in the future. Therefore, it is better to discuss all conditions of recurring payment with the client in advance and spell them out in the agreement.
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What do vendors expect when choosing a recurring payment provider?

Flexible payment terms

Vendors want to be able to change the terms and conditions of recurring payments. For example, marketing agencies want to charge immediately after a client has used a package of services, not necessarily at the end of the month.

Ability to create an unlimited number of package plans

Providers are looking for a payment system that allows them to create an unlimited number of bundled plans and align them with recurring payment terms.

Ability to “Retry”

In the event that the initial payment fails, this is an extremely important option. The service provider is interested in this option, especially with the ability to retry without contacting the customer.

Types of recurring payments

  • Regular recurring payments.

These payments are made on a specific schedule. For example, you pay for certain services at the beginning of each month. The same goes for weekly, quarterly and annual payments.

  • Irregular recurring payments

These payments are made according to a certain principle. Your provider does not charge your account once a month or once a week, but only as services are provided.

Benefits of recurring payments

Customer retention

A customer who subscribes to your service is more likely to become a regular customer.

Saving time

Customer payment details are requested only once, saving a lot of time for the service provider and the user.

Revenue forecasting

By analyzing the number of customers with a subscription, the merchant will be able to forecast future revenue.

Increasing cash flow

A recurring payment mechanism is one of the best ways to maintain a steady source of revenue.

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Recurring payments

 Solutions for business

We create the most effective payment solutions. The PowerSync services portfolio includes ready solution packages for both standard e-commerce products and customized offerings for lending institutions, educational projects, ticket and booking operators, and Internet and hosting providers.

These tools were selected taking into account the individual characteristics of the business, highly rated by our customers. Our decisions are not the first, our solutions are the best. Because we strive to understand our customers’ business, provide quality service, help them create effective processes, and solve specific problems.

To summarize

Recurring payments are a great solution for your business but don’t forget the pitfalls. Make every effort to achieve full transparency and convince customers to read all contract terms carefully. Offer many options and diverse packages for goods and services, and try to make the payment process simple and convenient.

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