If you’ve ever paid for a gym membership, streaming service or software subscription, you’ve experienced recurring payments in action. For businesses, this subscription-based model has transformed the way they generate revenue by ensuring steady cash flow and building a loyal customer base.
It’s worth considering whether your business should offer recurring payments or subscriptions too. Here’s everything you need to know about recurring payments and how they can work for you.
What’s in this article:
- What are recurring payments?
- Types of recurring payments
- What types of businesses use recurring payments?
- How do recurring payments work?
- Benefits of recurring payments for merchants
- Are there any drawbacks associated with recurring payments?
- Recurring payment processing with MuliPay
What are recurring payments?
Recurring payments are automatic transactions processed at predetermined intervals—typically weekly, bi-weekly, monthly, annually or on a custom schedule. They allow customers to pay for services or products on an ongoing basis. This makes things easier for customers since they don’t have to manually process each payment while giving businesses a steady, predictable flow of income.
Types of recurring payments
Recurring payments generally fall into two categories:
- Fixed recurring payments: These payments are consistent in amount and timing, ideal for services where the charge remains unchanged each billing cycle. Examples include monthly gym memberships, streaming subscriptions and insurance premiums. Other examples are software-as-a-service (SaaS) subscriptions or regular consultancy fees.
- Variable recurring payments: These payments fluctuate based on usage or consumption, common in industries where costs vary with the amount of service or product used. Examples include utility bills based on consumption, telecommunications plans with data usage charges and subscription models with tiered pricing based on usage levels or added features.
What types of businesses use recurring payments?
Recurring billing is a versatile payment model that suits any business offering continuous access to products or services. Here are some common industries in Australia that benefit from recurring payments:
- Tech and SaaS businesses: Including MSPs and cloud storage providers, use recurring payments for IT support, data storage and software services.
- Online subscription services: Streaming platforms use recurring billing for continuous access.
- Real estate companies: Property managers automate rent collection and property-related payments.
- Gyms and fitness centers: Charge recurring membership fees for ongoing access to facilities.
- Utility, telecom and insurance providers: Use recurring payments for services like electricity, gas, mobile plans and premiums.
- Nonprofits: Charitable organisations use recurring donations.
- Box subscription services: Deliver curated products like meal kits or beauty boxes with recurring billing.
- Freelancers and consultants: Use retainers and recurring billing for ongoing services.
- Professional associations and cultural organisations: Charge membership fees for continued access.
- Educational institutions: Use subscription-based payments for courses or tuition.
- Digital and print media: Newspapers and magazines charge recurring payments for regular content access.
By adopting recurring billing, businesses in various industries, big and small, can create stable cash flow and build customer retention.
How do recurring payments work?
Different recurring payment processors may have unique workflows, but the general process is consistent:
- Subscription enrollment: The customer selects your service or product and chooses a payment method (e.g., credit card, direct debit).
- Initial payment details: The customer enters payment information for the first transaction, which is securely stored in the payment gateway for future use.
- Transaction processing: Payment intermediaries, including the acquiring bank, credit card network and issuing bank, verify and approve the payment. Funds are then transferred to your merchant account.
- Automated billing: Subsequent payments are automatically deducted according to the agreed billing cycle, ensuring customers don’t need to re-enter their payment details for each cycle, providing a seamless experience.
When choosing a recurring payment system, ensure it meets your business needs and integrates smoothly with your existing setup. Look for features such as support for various payment methods, robust security and flexible billing options. MuliPay offers a comprehensive solution with automated billing and easy integration, making it a strong choice for many businesses.
Benefits of recurring payments for merchants
Recurring payments offer several advantages:
- Stabilise cash flow: Predictable, regular payments help businesses forecast revenue accurately and manage financial planning more effectively.
- Enhance customer retention: By creating ongoing relationships with customers, recurring payments boost loyalty and reduce churn rates.
- Save time and resources: Streamlined billing processes cut down on administrative tasks, allowing staff to focus on growth and customer service.
- Minimise late payments: Automation reduces the risk of missed payments, ensuring timely transactions and maintaining steady cash flow.
- Facilitate scalability: With automated billing, businesses can easily scale operations, manage subscriptions and explore upsell opportunities to drive additional revenue.
Are there any drawbacks associated with recurring payments?
While recurring payments offer many benefits, they can also come with some challenges. Failed transactions due to expired cards or insufficient funds can disrupt cash flow. Additionally, managing prorated bills and billing errors can be complex and time-consuming. However, choosing a robust payment platform like MuliPay can mitigate these issues with features like automatic retries and flexible billing adjustments, ensuring smooth and efficient billing processes.
Recurring payment processing with MuliPay
MuliPay simplifies recurring billing with scalable and flexible subscription plans tailored to your business needs. Our platform automates billing, retries failed payments and sends notifications to both you and your customers, ensuring a seamless payment experience. With MuliPay, you can:
- Customise billing cycles and payment plans.
- Offer various payment methods such as credit cards and direct debit.
- Automate invoices and payment reminders.
- Track payments and monitor revenue in real time.
Ready to integrate recurring payments into your business? MuliPay provides a secure, automated solution to streamline your billing process and boost your revenue. Contact our experts today to learn more about how we can help you launch and scale with ease.