From streaming services to SaaS, all companies offer subscription services to customers to realise recurring income and deliver products regularly. Customers love the convenience of subscriptions, especially when they need to purchase products /services repeatedly. The services make life easy for the customers. Subscription payments are automatic payments or recurring payments made on a schedule, a scheduled money transfer that is done automatically. Subscription payments service charge on a monthly or annual plan till the customer cancels the subscription. The customer authorises the business to draw funds from their accounts at regular intervals.
One-time payment model makes businesses constantly attract new customers to earn revenue. Subscription payments provide a predictable income because customers make payments regularly. One-time purchase is not a recurring payment because it is a single payment. Recurring payments are long-term, and it is not limited to a single service or product. Recurring payments are collected from customers over regular intervals like weekly, monthly, quarterly, or yearly.
Businesses such as gym or in fitness that are interested in steady cash flow opt for gym membership software. They receive the payments on time and cut down on administrative costs. The customers using this service make payments through credit cards, debit cards or bank transactions. They enjoy this convenient service because it deducts money automatically, avoids late payment penalties and saves time.
Types of recurring payments
Regular or fixed recurring payments: In regular payments, the customers are charged the same amount each time. Gym memberships and magazine subscriptions are regular payments.
Irregular or variable payments: The amount charged changes each time, depending on the customer’s usage of the service or product. Electricity bills and other utility bills are irregular payments.
Which businesses use recurring payments
Utility providers: Customers can use recurring payments to pay electricity, gas and phone bills.
Membership businesses: Customers can utilise recurring payments to pay for gyms, coworking spaces and learning courses.
Subscription businesses: Customers can use recurring payments to pay the subscription fees for newspapers, magazines and streaming media.
Financial services: Customers use recurring payments to pay insurance, mutual investments and loan repayments.
How recurring payments benefit businesses
Reduce late payments
Late payments are bad for businesses because it affects their revenue. With recurring payments, the charges will be collected automatically from the customers based on a predefined schedule. Businesses save time by not chasing customers to make payments. They get more time to focus on more critical tasks.
When payments are automated, it reduces the cost and effort involved with manual invoicing and payment processing. After establishing a payment plan, human intervention is necessary only when there is a change in the mode of payment.
Better customer relationships
Customers prefer recurring payments because they are convenient, and they need to enter their billing information only once. Payments are deducted from their bank accounts on the specified billing dates. Reminders to pay outstanding bills and the need to provide payment details each time are eliminated. It helps to create better relationships with customers.
Protection against fraud
The payment gateways that process recurring payments store the customers’ payment information securely in their servers. They protect against fraud and defend the funds of their customers. It develops a trustworthy image of the business in the customers’ minds. It saves the resources and the time spent on resolving fraudulent transactions.
A subscription payments service enables businesses to engage with their customers through campaigns and monthly newsletters. Customers engage with the products or services consistently, and it helps to build a strong relationship with the organisation. The recurring payments give a stable cash flow to the businesses. Also, companies can scale up or down to suit the customer’s needs. Subscription services help customers make frictionless payments and enjoy regular delivery of products/services.