Recurring payments are the way of the future. Subscriptions are exploding in the e-commerce sector!
According to Shopify, one of the world's largest e-commerce platforms, "the subscription e-commerce market is expected to reach $473 billion by 2025." With statistics like these, it's easy to see why so many people are shifting their online stores to sell subscription products and accept recurring payments. Shopify also reported that 15% of Americans signed up for recurring subscriptions to obtain a product.
This figure is increasing by the day, and soon every business will be offering subscriptions.
The definition of recurring payment is simple and straightforward. Consider those monthly or yearly payments for practically everything conceivable, set up by a user from their desk or laptop, credit card in hand, and then mainly disregarded.
And when it comes to payment alternatives, there is a lot to do right and maybe just as much to go wrong. For example, recurring payments in relation to this topic. Regarding this topic, we've compiled a list of dos and don'ts.
The Do's and Don'ts of Recurring Payments
- Due Diligence
- Payment Processor Feature
- Reduce Bill Collection
- Multiple Payment Gateway
- Don't ignore churn rates
- Don't invest in a recurring payment system with a high initial cost
- Don't overlook reports
- Don't underestimate the impact of recurring billing on client retention
When looking for a recurring payment platform, do your homework. You want a subscription provider that follows Payment Card Industry (PCI) standard payment security protocols. Another key aspect of dealing with today's cybercriminal threats is built-in fraud prevention.
Payment Processor Feature
For example, if you need to accept payments in foreign currencies, make sure the platform you're using has this capability.
Reduce Bill Collection
Recurring payments provide a consistent monthly income, but they also eliminate the need to allocate staff time (or engage more bill collectors) to pursue delinquent accounts. Even when bill collection initiatives provide a favorable outcome, the cost of pursuing non-paying customers reduces the return on client interactions.
Recurring payments in the healthcare industry result in speedier settlement of outstanding amounts than traditional invoicing. Many healthcare insurers and providers now allow you to set up recurring payments for services given and premiums payable during the coverage year.
Multiple Payment Gateway
This includes taking all major credit cards and having AutoPay connections with major financial institutions.
Don't ignore churn rates
The annual percentage rate at which your consumers cancel your subscription service is known as the churn rate. The business's yearly growth rate (new customers) must exceed the annual churn rate in order to succeed (customers terminating the relationship).
Churn rates vary from industry to industry. They are critical in businesses where subscriptions constitute the majority of a business's revenue. The telecommunications business is an excellent example of one in which the rate of churn is critical to profit margins. The telecommunications business includes cable, satellite, internet service providers, and telephone firms. They utilize churn rates to see how they compare to other businesses in this highly competitive industry.
Don't invest in a recurring payment system with a high initial cost
This covers any recurring payment platform that necessitates a major integration effort or increased investment. Going at it by yourself without a subscription service might entail any of these things.
Don't overlook reports
You need to monitor your transactions and churn rate. Recurring billing systems should generate reports to help you understand how your recurring billing is aiding your business growth.
Don't underestimate the impact of recurring billing on client retention
Many customers appreciate the set-it-and-forget nature of recurring billing on their monthly invoices. They appreciate the option, especially for invoices that have the same amount each month and are due on the same day each month.
Customers don't want to remember to pay and manage invoices every month. They enjoy that recurring payments provide them with the assurance that they will pay their bills on time, every time unless they are terminated.
Are there any disadvantages to recurring payments?
Because payments are processed automatically through recurring payment processing, any incorrect invoices might be more difficult to deal with. Rather than resending the bill, you'll need to negotiate for a refund, which will take extra time. You may also need to prorate the amount, which may be a time-consuming and complicated process. On the other hand, choosing the correct recurring payment system can mitigate several of these possible drawbacks.
- When a business uses recurring payments, it automatically deducts a customer's payment on a regular basis.
- Any product or service to which a consumer subscribes with regular payments may be a strong candidate for recurring billing.
- Recurring payments may be required by business providers, and some providers may offer discounts when recurring payments are employed.
- Recurring payments benefit business providers by lowering account receivable risks.
- Customers may benefit from recurring payments as well; they just need to sign up and supply payment information once.
Try out Blinksale today for free and enjoy generating simple online invoices and recurring invoices for your business. Quickly bill, manage, and automate all of your payments in one simple tool so that you can focus on growing your business.