Tag Archives: recurring payments

How to Securely Set up and Accept Recurring Payments?

If you are starting or moving your business to a subscription-based model, you need to choose an appropriate recurring payment plan to accept payments from your customers at regular intervals. Recurring payments, also known as automatic electronic payment, is a payment model where a certain amount from the customers’ bank or selected payment method is deducted every month or year. Customers are asked to complete the authorization form, agreeing to pay the company a specific fee according to a preset schedule to continue receiving the services or membership benefits.

Take Netflix and Amazon Prime, for example. These companies offer live streaming services for movies and web series lovers and charge a specific fee monthly or yearly. Many similarly subscription-based service providers have collaborated with reputable payment processors. Not only do you need to work with a payment processor, but for processing such types of recurring payments, you should use the software system for recording and managing the automatic payments seamlessly.

How Do Recurring Payments Work?

As mentioned above, many software providers offer a wide range of features that enable easy management of payments and billing. Although these systems come with varying price ranges, they offer the same benefits and work in a similar way. Customers sign a one-time authorization form and accept timely payments to continue receiving the specific services.

They sign up for the recurring billing model and are charged at regular intervals, whether it’s a quarterly payment system or a monthly subscription plan. Your customers’ credit/debit card details or other financial information is saved in the system and used for processing automated payments at specific intervals. They don’t need to enter the financial information repeatedly, as the payment is deducted directly from their accounts unless they cancel the subscription. Here are the steps for how the system works:

Customers enter their card details on your website when signing up for the membership or particular service.
Their card details are saved on your device for processing future payments
They are permitted to store this information and deduct a specific amount from their accounts at regular intervals
The saved data is then used to process the recurring transactions

How to Setup Recurring Payment?

First, you need to select a suitable payment method supporting the recurring billing model. PayPal is often the users’ first choice, as it is one of the most reputable payment processing companies. However, PayPal charges a high fee per transaction. Plenty of options exist, and most have the same recurrent billing process. The setup part is also the same for most software systems, but we have used Square to explain it to you in detail.

Square has a secure and robust payment vault where customers can securely save their credit/debit cards and other financial information. You can send the invoice for their purchase through email, and they can open Square’s payment page using the link.

They can process the payment following the link, or the merchant can do it on the customers’ behalf using the virtual terminal. Square and other recurring billing software systems trigger automated payments, where the amount is charged to the customer directly. They don’t have to repeatedly enter their credit card details when renewing their subscription plan. The amount is directly deducted, or they are asked for a confirmation message to decide whether they’d like to renew the membership or end the plan.

The process is pretty fast and convenient. It doesn’t need hectic management or a complex setup. Once you finish the setup part, the system will automatically start storing customers’ financial information and charge them the fees with the add-ons (if they have purchased any).

Benefits of Recurring Payments to Your Business

Recurring payments are becoming increasingly popular in online shopping, and it’s not hard to see why. Subscription payments simplify the entire billing process and provide a seamless checkout experience for your customers.

The main advantage for your clients is convenience. The recurring billing system is completely automated and hassle-free. They don’t have to go through a lengthy checkout process or input payment details every time they’re billed. Once they’ve set up an automatic payment plan, the money will automatically be deducted from their account, requiring no action.

Merchants also benefit from numerous benefits when it comes to recurring payments. Here are some of the most compelling advantages of subscription billing:

Reduce Late Payments

Late payments can harm businesses by impacting revenue and customer relationships. With recurring payments, you set up the system once and trust that payments will be collected automatically according to your schedule. This means less time spent chasing customers for payments and having uncomfortable discussions about late payments, freeing up more time for other essential business activities.

Reduced Effort

With the recurring payment model, businesses avoid chasing late payments or sending reminders to customers every billing cycle. The process is automated, saving the company time and effort.

Similarly, automatic payments lessen customers’ effort. They don’t have to respond to invoicing reminders or deal with the inconvenience of manual payments for their subscriptions. They only need to authorize payments at the beginning, and the rest is handled automatically. Automation also minimizes friction, a common issue with one-off payments where customers must decide for each purchase.

Enhances Customer Experience

Recurring payments provide extra convenience for customers. This model also offers them predictability regarding when and how much they’ll need to pay. By reducing the effort required to access your company’s products, recurring payments give customers the sense of saving both time and money in the long haul.

Protect Against Fraud

Integrated payment gateways handle recurring payments securely and store customer payment information on their servers. They safeguard against fraud using techniques such as tokenization and adhering to industry standards like the Payment Card Industry Data Security Standard (PCI DSS).

These fraud detection and prevention measures shield funds from fraudulent activities and enhance the business’s reputation for trustworthiness among customers. Additionally, they save resources that would otherwise be spent on identifying and resolving fraudulent transactions.

What is the Processing Fee for Recurring Payments?

These automated invoicing apps charge a small percentage of the transaction cost as the processing fee. The fee structure varies from company to company. For example, Square charges a 3.5% fee on every transaction plus 15 cents for all recurring payments. This means a $100 transaction costs you a flat fee of $3.65.

The best part is Square doesn’t charge any additional fee for account maintenance or hidden charges. You may have to pay additional account maintenance costs if you choose other recurring billing systems.

Who Needs the Recurring Payment Model?

The recurring payment model works wonders for any business that charges a regular fee for membership or any service. Let’s see who needs to set up the recurring payment system for their business.

Tuition: You can charge a monthly recurring fee if you offer tuition, fitness training, music or dance classes, yoga classes, or other services.
Service Providers: If you provide house cleaning, lawn maintenance, personal training, therapies, counseling, and similar services, you could charge your customers in batches or individually—whatever suits your preference.
Memberships: Memberships are required for gyms, fitness centers, blogging sites, and other services. A membership is also required to continue using video streaming services. As mentioned above, a subscription-based model is an ideal payment system for such membership plans.

In summary, if you are in any business that requires recurring payments, where customers are to be charged at regular intervals, the subscription-based payment invoicing model is your best bet. These software apps can either group customers into a specific batch or charge each individually. The goal is to make it easier for your customers to process the payments flawlessly.

Things You Need to Start Accepting Recurring Payments

Accepting recurring payments encompasses two primary elements. First, there’s the billing logic, which calculates the costs associated with purchases. This includes calculating purchase prices, considering factors like grandfathering and proration, and requesting customer payments. Second, payment processing is crucial as it involves the actual transaction process. During this phase, the amount is credited to your merchant account.

You can accept recurring payments with just a payment processor if you have a self-built billing engine or use the basic billing engines provided by popular payment gateways. However, as your business grows rapidly, managing payments becomes increasingly challenging.

Factors like extensions, free trials, discounts, evolving pricing tiers, upgrading customer plans, credits, and taxations for different countries add complexity. Recurring billing systems, working alongside payment gateways, automate recurring payments as your subscription business scales. While accepting payments is crucial for any business, it’s also an opportunity to provide a positive payment experience to your customers and build trust. Now, let’s explore some essential elements for starting to accept recurring payments:

Payment Gateway

A payment gateway is a technology that verifies and securely transfers payment information among the parties in a payment transaction.

Payment gateways typically include security features like encryption, tokenization, and fraud prevention solutions. Additionally, they must adhere to strict procedures outlined in the PCI DSS compliance standard. This involves undergoing annual audits and recertifications to maintain compliance. When selecting a payment gateway, you should consider:

Cost: Take into account transaction fees, monthly charges, and setup fees. Your transaction volume and value should influence your choice.
Security: Look for a PCI-compliant gateway to ensure your customers’ payment information stays secure. Features like transaction routing, response verification, and data encryption also enhance security.
Customer Support: Reliable support is crucial for addressing technical issues or inquiries. Check reviews and testimonials to assess their support quality.
Integration: Ensure easy integration, especially for mobile apps used by merchants and developers.
Payment Methods: Choose a gateway that supports various payment modes, such as debit cards, credit cards, digital wallets, and gift cards.

Here are some popular examples of payment gateways:

PayPal
Square
Stripe
2Checkout
Adyen

Recurring Bill Software

Recurring billing software assists businesses in handling their periodic billing tasks for subscription-based products or services. These tools can automate tasks like generating invoices, processing payments, and managing recurring billing schedules. Overall, they streamline the revenue management process for businesses. When choosing a recurring billing solution, consider the following factors:

Determine if the solution meets your billing needs, whether simple or complex.
Check if the solution can seamlessly integrate with your current systems.
Look for an intuitive interface to minimize errors during operations.
Ensure the solution offers strong support for troubleshooting and ensuring smooth functioning.
Assess if the solution can handle a growing number of subscribers and adapt to changing requirements.
Confirm if the solution supports various pricing models, subscription plans, and customization options.
Verify if the solution accommodates transactions in multiple currencies.

Conclusion

Securely setting up and accepting recurring payments is integral for businesses transitioning to subscription-based models. This payment approach, exemplified by services like Netflix and Amazon Prime, offers convenience to companies and customers. Understanding the process—from transaction authorization—is critical. Essential elements include robust payment gateways and recurring billing software. Transparent consideration of processing fees is vital. The recurring payment model benefits various sectors, including tuition, service providers, nonprofits, memberships, SaaS companies, insurance providers, and telecommunication companies.

All in all, the primary purpose of the recurring billing system is to streamline the processing of your customers’ payments. These services are designed for membership or subscription-based service providers. They make it easier for your customers to process transactions with simple clicks and offer you the convenience of managing the payment records most efficiently.

Frequently Asked Questions

What Are the Types of Fraud That Can Result In Chargebacks?

No one wants to think about fraud when dealing with their business plans, but it is a concern that can develop all the same. Fraud can be dangerous, as it can cause someone to request a chargeback because that person didn’t actually do business with you.

You could lose significant amounts of money from fraud. The losses can come from not only losing money from a chargeback, but also dealing with additional fees for bearing with plenty of chargebacks. You could also lose access to your merchant account if you have too many chargebacks, which could be dramatic and significant if you watch what happens here.

The worst part about fraud is that it can come in many forms. Here’s a look at three types of fraud that can occur in your business, with each of these problems potentially resulting in a chargeback.

Merchant Error

The most common fraud type that can occur in your business is merchant error. This problem happens when a merchant doesn’t handle the proper data.

There are many merchant errors that can occur in your work:

There might be an unauthorized recurring payment on a credit card.
The product wasn’t delivered on time, or it might have been damaged when getting it shipped out. The customer won’t be able to use the item, thus resulting in a chargeback on the order.
The customer might be dissatisfied with the customer service one received.
Sometimes an employee might have entered the wrong data when handling an order. That person might enter an excess amount of money, thus resulting in the need for a chargeback to occur.

Criminal Fraud

Criminal fraud is a threat that can happen with many online transactions. The online world has made it easy for people to pretend they are others that they are not. You could experience some significant problems if you aren’t careful enough in trying to manage your funds and keep everything under control.

Criminal fraud can occur for many reasons:

Someone stole another person’s credit card. The person may have a physical card on hand, or that someone might have all the data needed for a transaction. This content includes the CVV and the billing address for the card.
A person could also use a counterfeit card that features account information that was stolen. Magstripe cards are often counterfeited, but an EMV card could also be manually entered in cases where the card isn’t reading on a device.
Someone can also hack a person’s account information to complete a transaction. The hacking typically results in a card-not-present or CNP transaction.

The worst part about criminal fraud is that it doesn’t take much for people to find credit card info. Some people can go on the dark web and download stolen credit card data. They can purchase the data and use it to handle whatever they want to manage.

Friendly Fraud

Not all people who actively commit fraud will do this with criminal intentions in mind. Friendly fraud is a problem that can occur in many situations, and it can be dangerous if not managed well enough.

Friendly fraud is a problem where people are actively engaging in fraud. The main idea is for someone to use a product or service without having to pay for it. While this instance of fraud isn’t as common as what you might find elsewhere, it can be a real concern.

One reason why friendly fraud often occurs is that someone is trying to get around the refund process. A customer might not want to talk with the business, as that might be too complicated. Going through a bank for a chargeback is often an easier process. But even then, the customer might be aware of what one is trying to do and is actively going after the refund.

One other point about friendly fraud involves how many credit card companies offer zero-liability protection. The feature means that a card company isn’t going to declare you responsible for anything that happens if there’s a questionable charge on your card. This feature ensures your protection, but it is also something any cardholder could use to one’s advantage. The person might take the parts to one’s use and try to commit friendly fraud.

Can You Prevent These Problems?

The three types of fraud that can cause chargebacks can be frustrating, but you can prevent them with a few tips. These are all sensible things to see when looking for something that could work in any situation:

Provide the best possible customer service to your clients. Answer whatever questions they have about what you are selling, and make sure they feel confident in whatever you provide.
Real-time resolution services are critical for all disputes. You can provide real-time data to help identify the customer’s order. You can have this data on hand before the dispute starts, ensuring there are no problems with whatever you might manage at any moment.
Be accurate when representing whatever products you sell. Being accurate in what you’re discussing will ensure your customers understand what they are buying.
Keep enough evidence for each purchase to ensure you can confirm someone paid for an item in cases where a customer is actively trying to commit fraud.
Provide an easy to review merchant descriptor on a credit card bill. Make sure the customer recognizes your name when looking at the chargeback and what you’re trying to list here.
Use the proper hardware and software firewalls and protective measures to keep your data secure when going online. You can use these firewalls to prevent outside parties from getting in the way of a setup.

The right measures are critical for ensuring there are no problems with whatever you’re trying to manage at any time. Be sure you look at what you’re getting out of your plans for preventing fraud to ensure there are no concerns coming from any situations that might develop.

What Are Recurring Donations and Why Are They Good For Nonprofits? [2023 Update]

Nonprofit organizations have never been more popular. The average person donates hundreds of dollars to nonprofits each year. But the way people send money to these groups has changed, as most people donate to them by credit or debit card now.

The good news is that nonprofits can adapt to these changes in the industry by accepting recurring donations. These are donations provided to nonprofits that require regular funds for managing their missions and providing support for their causes.

A donor can sign up for a recurring donation program with a nonprofit. The person’s payments will be automatically removed from one’s credit card at the right times. The money will directly go to the nonprofit without having to use a third-party solution to manage the process.

How a Recurring Donation Works

A recurring donation uses a few steps to make it work:

The nonprofit organization will set up a new program. It will provide different donation levels and frequencies for customers to choose online.
The donor will set up an account on the nonprofit’s website. The donor will require the account to facilitate payments and to keep the donations within the website.
The donor will select the specific donation option one wishes to follow.
The person is then billed for the donation at the proper times. The donor is usually billed every month, but it can also be every quarter or year if desired.
The person will continue to be billed until that someone decides to leave the program or that person’s payment method is no longer valid.

The nonprofit will need to provide the proper interface on one’s website to promote its recurring donation program. The system should be easy to review and read as necessary.

Provides Stable Revenue

The best part of recurring donations for nonprofits is that they provide stable revenue that these groups can trust. A nonprofit needs regular revenue to ensure it can stay operational. The funds can also help the nonprofit predict what it will receive each month, providing guidance for whatever operations or fundraising events the nonprofit wishes to run.

Reduce Operational Costs

Nonprofits often spend a while trying to find new donors. It also costs more to bring in new donors than it does to keep existing ones. By offering recurring donations, a nonprofit can get more funds from its existing donors. There’s less of a need for the nonprofit to promote itself or to look for grants or other things for help in keeping the operation running.

The operating costs remain cheap because the recurring donors will stay loyal to the nonprofit group. These donors may contribute additional one-time payments alongside their regular donations, especially if they respect the nonprofit group.

There’s no need to process checks, cash donations, or other things that might get lost. Regular donors will also feel comfortable knowing they’re automatically completing their donations online, as they won’t have to go through the same donation process every year.

No Third Parties Necessary

A recurring donation system also ensures all donations will go through a nonprofit’s website. The nonprofit doesn’t need to utilize a third-party donation site. These third-party websites might charge people for listing their nonprofits there. Some donors may also be turned off from using two different systems when getting through a donation platform. Keeping the data intact will be critical to its success.

Tips For Running a Recurring Donation Program

A recurring donation program can be a lifeline for any nonprofit group, although it works best when run well. There are a few tips a nonprofit can use when getting a program ready:

The nonprofit must have a set goal in mind. It can entail any amount of donors or donations, but it must be reflective of whatever projects the nonprofit wishes to run.
The nonprofit must plan its program based on the donors it wishes to target. The system can include donation values based on the approximate money amounts people are willing to part with each month.
All recurring programs should be marketed well based on the benefits involved with these donations. A nonprofit could promote that a specific monthly donation will provide a unique benefit that the nonprofit can carry out, for example.
A payment processor must help collect credit and debit card payments to make the recurring donation program easy to follow. It should offer reporting tools to help the nonprofit review how effective its program is, plus it should provide ACH support for automatic recurring payments.
Proper incentives are necessary for keeping donors intact. A nonprofit can offer rewards or benefits to people to donate enough funds or stick with a campaign long enough. The nonprofit can put some of its funds aside for this case, but it shouldn’t spend more on this than necessary.

The best way to run a recurring donation program is to ensure the donors see the difference a nonprofit makes. Donors will be more invested in a program when they see where their money is going and how it benefits society. People will be more passionate when they notice they are making a difference with their donations.

How Will Donors Cancel Their Recurring Donations?

Some donors might need to cancel their recurring donations for various reasons. A donor might not have enough money to give, or the donor might not feel comfortable with offering. A nonprofit can offer the choice to cancel one’s recurring donations. The user can go to one’s profile on a website and then click the proper button on one’s payment method to stop one’s donations.

It will likely be easy for nonprofits to keep their donors through a recurring platform. The recurring system provides a simple design for work that helps a nonprofit collect its regular payments. A nonprofit can predict what it will earn, and donors will feel confident in the process, knowing that their funds are going directly to the organization.