What Are the Online Payment Methods for Automated Recurring Payment Processing and How Do They Work?
If you are running a subscription business or offer SaaS on a recurring basis, it means recurring billing is your business model and it streams the recurring revenue growth by collecting the recurring payment.
In the Realm of Online Payment Methods for Automated Recurring Payment Processing…
Recurring payments are the payments subscription or SaaS merchants receive after every interval into their accounts.
Today, the subscription business is a huge market. Every day thousands of merchants process millions of recurring payment transactions worth billions of dollars.
What do you think?
How do they do it?
How do they manage recurring billing and payment processing without messing it all?
The answer to all these queries is Subscription Management Software.
Subscription Management or Recurring Billing Management is a complicated system of charging the same customers again and again for a pre-defined term, managing the changes in their billing as per their usage, dealing with the compliance for taxation, and accordingly generating the invoices.
And, to collect the recurring payments against the invoices, the subscription management system offers automated solutions for recurring payment processing directly into the merchants’ accounts in the form of payment gateway integrations supporting particular or multiple payment methods and currencies.
Recurring payments are commonly used by businesses such as subscription businesses, SaaS, online courses, education services providers, gyms, salons, internet service or cell providers, insurance companies, payday loan companies, or any other.
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The Automated Recurring Payments
The Automated Recurring Payments refer to the digital authorization provided by the customer to the subscription or SaaS merchants that permits them to charge the recurring payments through their payment methods for the subscription length or until the customer cancels the arrangement.
Based on customer preference or merchant’s payment methods or gateway obligation, customers can choose and provides details for any of the online payment option to process recurring payments.
The Mechanism of Automated Recurring Payments
Automating the recurring payment processing is the best way to manage the subscription billing without many complications.
It all starts when the subscription services provider or merchant configure the subscription management software with the payment gateway or payment services provider based on their preferred payment method or currency. A payment gateway can also be choosen for any other reason like payment processing support for a specific region or a particular type of industry, security, etc.
The payment gateways allow merchants to collect the payment method details from the customers, encrypt, and store them securely to make recurring payment transactions, later, without seeking further authorization from them.
The automated recurring payments enable merchants to deduct the invoiced amount from the customer’s account using the customer’s provided and preferred payment method through the payment gateway connected with the merchant’s account and integrated into a recurring billing platform.
Also Read: The Online Payment Security Obstacles—Learn How SaaS Businesses Can Easily Overcome Them
What Are Payment Methods?
Payment methods are the ways through which merchants can collect payments from their customers. They can be online and offline as well.
For automated recurring payments, online payment methods are used as they can process payments easily as well as automatically.
Each payment method has its own pros and cons. Some are safer than others, some are faster, some of them are disputable while some are not, or some costs processing charges, etc.
Popular Online Payment Methods for Recurring Payments
The most common and leading online payment options include
- Credit Cards
- Debit Cards
- ACH Payments
- Digital Wallets or E-Wallets
- Wire Transfers
- Mobile Payment
- Many more
Under each payment method, you may find dozens of more payment options.
Let’s discuss a few of the widely-used payment methods that are being used across the subscription industry to facilitate recurring payment processing.
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Credit/Debit Cards
Credit card payment refers to the payments made online by using credit cards that allow the consumers or users to make purchases or pay online for services using borrowed money credited to the credit card account holder up to an established limit.
Instead of cash, a credit card provides access to the loan, digitally, to a certain limit which can be pay off at the end of the month.
Customers wisely used credit cards to make payments for their subscriptions as they are considered the most secure, faster, and cheaper ways to make recurring payments.
Credit Card offers more protection against online payment frauds and chargebacks threats to the online and eCommerce subscription merchants. Accepting credit card payments brings more opportunities for collecting recurring payments, in addition, to add extra layers of security to avoid online payment frauds.
On the other hand, a debit card is owned money. It works similarly to the credit card but is not identical in terms of security and protection against unauthorized use of the card to make payments.
By giving the debit card information to the subscription services provider or merchant, a customer permits them to take money from their account using that debit card number. As per the agreement the company has the right to charge the customer, instantly.
Debit cards can incur a huge loss of money to the customer and are not disputable at all.
Debit Cards are good to be used in person or online to purchase items or pay bills.
The most popular credit and debit card providers are
- Visa
- MasterCard
- Discover
- American Express
- CitiBank
- Barclays
- UnionPay
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ACH Payments
ACH stands for Automated Clearing House. ACH Payments are the electronic funds transfer in batches, from one bank to another without using checks, credit card networks, wire transfers, or cash, and through the Automated Clearing House Network (ACHN).
ACH Payments are considered the most secure mode of the online and automated recurring payment. They are disputable to some extent and can be reversed in case of any fishy transaction.
ACH Payments are processed in two to three working days. The processing time varies with the ACH Payments types. These are of two types:
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Direct Deposits
The ACH Direct Deposits can be made using Paychecks, Government Benefits, Tax Refunds, Interest Payments, and others.
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Direct Payments
Paying a bill online, sending money from one bank account to another, sending payments via PayPal, Stripe, Braintree, and other social payment apps, and more are the prime examples of ACH Payments.
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Digital Wallets
Digital Wallets or E-Wallets are the payment methods associated with electronic devices, online services, or application. They are used to make electronic funds transfer from one party to another party. They are the digital versions of the credit or debit cards.
Digital wallets do not require a bank account with a physical branch. They enable wider financial inclusion.
Digital Wallets can also process digital or cryptocurrencies.
Some of the payment services providers also serve as payment aggregators and offer merchant’s accounts. PayPal, Stripe, Braintree, and some others are the leading examples.
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Mobile Payments
Digital Wallets when working with mobile payment system, they are called mobile payments. They use mobile wallets and mobile money transfers through mobile devices.
Mobile Wallet service allows its users to store digital cash on their phones. Customers can spend this online at businesses that accept mobile payments.
Some of the leading examples of mobile payments are Apple Pay, Samsung Pay, Ali Pay, Google Pay, Amazon Pay, and some others.
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Wire Transfers
This is the most costly, unsafe, undisputable, but faster and instant way to make the recurring payments when they are international.
A wire transfer refers to the electronic transfer of funds for people based in different regions to make the transaction to other locations.
With the rise of digital wallets and mobile payments, wire transfer is not as effective and efficient as it was considered earlier.
How to Choose Online Payment Method for Automated Recurring Payments?
How does a merchant choose the payment method for automated recurring payments? Does he select one or use multiple payment methods? Why should he select one or multiple payment methods?
All these concerns can be resolved if these factors are considered before making any decision:
- Setup Fee/Processing Charges
- Customer Ease
- Payment Protection
- Flexibility for Payments, Currencies, Banks, or Financial Institutions
- Supporting Payment Gateways
- Payment Processing Speed
- Dispute Reliance
No single payment method can serve all the purpose.
Some payment methods facilitate certain currencies in specific regions, some do not cater to digital currencies, whereas some offer support to cryptocurrency. No single payment methods can serve it all.
The appropriate way to entertain a wide range of customers is to offer more payment options supported by multiple payment gateways.
Customers using multiple payment methods as per their convenience and select their mode of payment and authorize the merchant to auto to deduct recurring payments for their subscriptions.
How To Use the Online Recurring Payment Processing with SubscriptionFlow?
SubscriptionFlow is a highly sophisticated, flexible, and scalable subscription management SaaS platform that automates the whole recurring billing business from price optimization to recurring invoicing and prorated subscription billing to recurring payment processing,
SubsrcriptionFlow allows merchants to integrate multiple payment gateways that can support multiple payment methods available on a single platform. Multiple Payment Options attract more and more customers to connect with the subscription business with easy and automated payment options.
Automating the credit card, ACH payments, and other payment options are also equipped with timely and automated notifications and reminders for the customers to stay updated with their transactions.
Easing checkout with multiple payment options is the best way to acquire as well as retain more customers.
To learn more, talk to SubscriptionFlow’s Subscription Management Gurus and walk through the demo to understand the benefits of multiple payment gateways and payment methods.
