With the rise of subscription-based services, recurring payments have emerged as a crucial lifeline for businesses and a gateway to unrivaled consumer convenience!
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Companies enjoy consistent and predictable revenue, while consumers benefit from the comfort of uninterrupted use of products and services.
In this blog, we will explore various recurring payment examples, shedding light on how recurring payment is used in different industries and sectors and how it benefits businesses and consumers.
Let’s dive in!
What Is A Recurring Payment?
A recurring payment (also known as recurring billing) is a method where customers permit businesses to charge their accounts at regular intervals. Once the customer approves, recurring payments do not require manual intervention or processing, as the money is automatically deducted from the customer’s account to pay for the product or service.
Types Of Recurring Billing
Recurring payments, as defined by Investopedia, fall into two main categories:
- Fixed recurring billing
- Variable recurring billing
These categories largely depend on whether the billing amount varies within the payment cycle or remains constant.
Let’s describe each of them:
Fixed Recurring Billing
The same amount is deducted from the customer’s account in each payment cycle in fixed recurring payments. This billing is prevalent in companies that provide subscription services for a fixed price.
Examples of this payment model include a monthly subscription fee for a video streaming service like Netflix or a fixed monthly payment for a gym membership.
Variable Recurring Billing
In variable recurring payments, the amount deducted may change in every payment cycle. Customer usage of the product is tracked to create a new dynamic billing each month.
Usage-based billing is a recurring billing method in which customers are charged according to their usage of the service.
How Do Recurring Payment Systems Work?
Recurring payment systems use billing systems that provide payment solutions for businesses and customers.
What Can A Recurring Payments System Do?
They have business operations components that are used to schedule jobs that automate business processing such as billing, invoicing, and reporting – these jobs ensure recurring billing works seamlessly.
Below is a simple breakdown of how it works:
- The merchant creates a billing job by providing a name, description, and a billing job schedule.
- This job is scheduled to recur on a particular cycle and bill any customer who should enter a new cycle.
- Invoicing job is configured to generate the corresponding invoice for any bill(s) with the billing status. The invoice is a visual representation of the bill the customer can pay.
- The payment collection job is configured to collect payments for any due invoices automatically. It can be chained as a part of the billing process or scheduled as a standalone job.
- Finally, the finance reporting job is set to collect all the financial journals for a designated period. It benefits the business for easy and convenient financial reporting.
Advantages Of Recurring Payment Systems?
The advantage of recurring payment systems is that they can be integrated with third-party systems that perform various operations such as payment, taxation, notifications, Customer Relationship Management (CRM), and Enterprise Resource Planning (ERP) gateways.
This seamless integration with external systems ensures the payment processor’s efficient handling of recurring payment operations.
How Do Recurring Payments Benefit Businesses And Consumers?
Recurring payments offer compelling advantages to businesses and customers, making it a preferred payment method.
Here are some of the key benefits:
Recurring Payments Benefits For Businesses
- Predictable revenue: Recurring payments give businesses a predictable and steady cash flow, allowing for better financial planning and budgeting.
- Reduced administrative burden: Recurring payments eliminate costs associated with manual payment processes. It simplifies the billing and invoicing process, saving the business time and resources.
- Customer retention: The convenience of recurring payments encourages customer loyalty by providing a seamless and hassle-free payment experience. Recurring billing leads to higher customer retention rates, reducing the need for constant acquisition efforts.
Recurring Payments Benefits For Consumers
- Seamless service continuity: The customers enjoy uninterrupted use of the products or services as long as the recurring payments are active. Consumers don’t have to provide their payment details every time the bill is due since this is handled by the payment processor after the initial setup.
- Improved customer experience: Recurring payments eliminate the need for manual payment processes, saving the customer time and effort. Consumers can handle missing payment deadlines or remembering to initiate payments.
- Improved financial planning: With fixed payment amounts and predictable billing cycles, consumers can better manage their finances and plan their budgets effectively.
7 Recurring Payment Examples Across Different Industries
Recurring payments have become popular in various industries, making payments simple and convenient.
Software & Saas: Unlocking Its Full Potential
Here are some of the examples of recurring payments:
Telecommunications
Telecommunication service providers offer monthly subscriptions for mobile plans, internet services, and cable TV packages. For instance, the providers offer a monthly mobile package that gives customers a set amount of talk time, text messages, and data while customers pay regularly. By setting up monthly recurring payments, customers can enjoy uninterrupted access to these essential services while providers benefit from consistent revenue streams. The service providers’ payment plan enables consumers to utilize their services while staying within their budgetary constraints.
Media & Entertainment
Recurring payments have revolutionized transactions done by streaming service providers. Video and audio streaming platforms like Netflix, Spotify, and Amazon Prime Video rely on recurring billing to offer their subscribers unlimited access to their vast libraries of movies, TV shows, and music. Recurring billing is also used by digital news agencies (e.g., The New York Times, National Geographic, Vogue, etc.) that provide subscription-based magazines and publications. Content creators can also use regular periodic billing to provide subscription-based content to their consumers and boost their growth.
Software & SaaS
Software companies and Software-as-a-Service (SaaS) providers often offer subscription-based products. They allow customers to access the software product, its latest updates, technical support, and additional features while enjoying the convenience of seamless monthly or annual recurring payments. Some of the products offered include automated billing software (e.g., Tridens, Zuora, Chargebee), cloud-based project management Tools (e.g., Trello, Asana), web hosting and domain registration Services, cloud computing services (e.g., Amazon Web Services, Google Cloud Platform), etc.
eCommerce
The rise of eCommerce businesses with subscription-based services or products has been a game-changer in the industry. For instance, Amazon’s Subscribe & Save program allows customers to subscribe to regular deliveries of commonly used household products. Automatic payment ensures that customers receive their desired products regularly without the hassle of manually placing orders each time.
Health, Fitness & Recreation
Service providers in this industry are adopting recurring payments to give their customers the peace of mind they so much desire. Recurring payment solutions are commonly used for services such as gym memberships, fitness class subscriptions, wellness programs, and more. Customers can enjoy continuous access to facilities and services, while businesses benefit from stable revenue streams.
Take Away
Recurring payments provide convenience, customer satisfaction, revenue predictability, and enhanced financial planning.
Most industries have adopted this payment method due to the rise of the recurring revenue model.
By embracing regular payment, your business can enjoy a competitive edge while providing consumers with a hassle-free experience.
We hope you like our recurring payment examples – let us know what you think in the comment section below.
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