What are Automated Recurring Payments and Why should you Use them?
In today’s world, making online payments is no longer a hassle, as a customer has various modes of payment available to him or her at disposal. Payment gateways should be smooth, fast, secure, and trustworthy, as it plays an important role in the buying experience of customers. Automated Recurring payment is one such recent mode of payment that is extensively used by the customers for making online payments.
The Automated recurring payment method is a kind of mechanism that enables a charge on a customer’s card regularly without involving either the customer or the merchant. It is a perfect solution for making all kinds of subscription payments, like Netflix, Amazon prime, Dollar Shave Club, etc. Here the customer authorizes a particular merchant beforehand to charge them repeatedly for any goods or services. This can be either done on a weekly, monthly, or yearly basis. It saves the customer from the hassles of making payments of such subscriptions at the expiry of the stipulated period.
This mode of payment allows the customers to be neither physically nor virtually present for the transactions to take place. Once a one-time consent is given by the customer along with their bank details, the amount will be automatically deducted on an ongoing basis. It will continue to be so until and unless the customer decides to terminate the subscription or until the recurring payment plan expires.
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How do Recurring Payments work?
The simplest way to make recurring payments is through the help of payment service providers. These services completely handle all aspects of e-payments. They collect and process the recurring payments on behalf of the customers, as well as take care of the payment security. Here are the following steps that a customer can follow to make a recurring payment:
- A customer visits a merchant’s website or his/her subscription account and picks his preferable recurring payment option from the list.
- A customer has to accept the given terms and conditions of the billing desk during the checkout process. He also needs to agree to the recurring payment structure, schedules, and expiration date before completing the process.
- Once the above formalities are done, the customer enters his payment details and saves them for future use within the invoicing software.
- For the transaction to take place, the payment processor contacts the acquiring bank, the client’s credit card, and an issuing bank. This process is quite similar to the general credit card transactions that are regularly done. After seeking the approval of all three parties, the payment is finally released into the merchant’s account.
- Once this approval by the customer is given to process the charges, the recurring billing is done automatically at the scheduled time. After the payment is completed successfully, the customer receives a notification confirming the same.
Benefits of using Recurring Payments
- Hassle-free: Recurring payments are gaining popularity extensively in today’s technologically advanced world, especially in the world of e-commerce. It has simplified the entire billing process to a great extent. Making subscription payments is no longer a hassle because of its automatic nature. It saves the customers from undergoing the tedious process of entering their payment data every billing cycle.
- Speeds up Transactions: Recurring payment, being automatic in nature and, since it’s done electronically, requires little or no maintenance. It is, therefore, extremely beneficial for the merchants as well. The self-enabled nature of the system saves their time from creating invoices, thus speeding up the sales cycle.
- Saves time: Recurring billing saves a lot of time for both the customer as well as the merchant. It minimizes the time spent in making payments to a great extent. A customer’s service time and costs are also reduced as well.
Therefore, implementing recurring payment options can help both the customers as well the merchants. Businesses can maximize their revenue potential and have a more consistent flow of cash to a great extent and maintain a good relationship with the customers. Thus, it’s an essential mode of payment nowadays.