Gym memberships. Utility bills. Streaming service subscriptions. Whether we realise it or not, we use recurring payments daily. Understanding the different types of recurring payments can help you understand how to best implement this service into your business.
To fully take advantage of the benefits of recurring payments, we will help you master the basics of this payment option, including what it is, how it works, the types of recurring payments, and what kinds of businesses can best utilise it. By the end of this blog, hopefully you'll have a strong enough grasp of the basics to maximise customer retention and boost your bottom line.
This blog kicks off our educational series on recurring payments. Stay tuned in the coming weeks to discover why you should use this payment option, as well as how you can effectively integrate it into your business.
Understanding recurring payments.
There are two main types of recurring payments: regular or fixed recurring payments and irregular or variable payments. These can be further separated into subscriptions and instalments.
Regular recurring payments refer to when the customer gets charged the same amount every time, such as with newspaper subscriptions. Irregular recurring payments' amount changes based on the customers' usage of the product or service, such as with utility bills.
Subscriptions refer to payments charged to a customer on a regular basis with no end date. This is best used for customers who register for an ongoing service that you are offering, such as streaming services, gym memberships and so on. As there is no cut off date, your customer will continue to be charged for their subscription until they cancel it.
Instalments split larger payment amounts into smaller, fixed amounts to be paid over time. These are usually divided evenly across several months or years. Some common examples of instalments include mortgages, vehicle loans or credit card purchases. These payments have a fixed start and end date, thus the customer will no longer be charged once the full instalment has been paid off.
How does it work?
After a customer provides you with their payment information, the funds are collected automatically from their bank accounts via their credit or debit cards. For your business to be able to claim these funds, you would need a merchant account under a payment provider like senangPay.
Depending on the type of recurring payment, the buyer may also choose their preferred schedule (e.g. monthly, quarterly or annually). The specified amount will be debited from their account and credited to your merchant account, then transferred to your business's bank account.
As a payment provider, senangPay helps you process these recurring payments seamlessly. With our services, you can rest easy knowing that recurring payment collections, processing, depositing, and settlements are all handled by us.
Which industries benefit the most from recurring payments?
While obviously, any business can utilise recurring payments regardless of size or industry, there are some that benefit from it more than others. Institutions that provide regular, ongoing services can consolidate their systems by implementing this payment system for their customers.
Utility providers
Any organisation that provides utilities like water, electricity or internet—including condominium or apartment building managements—that collect payments regularly would benefit from having automatic payment collections. This would not only simplify things for your customers as they wouldn't need to manually pay their bills, but it would also reduce missed payments and late payment fees, making it a win-win situation for you and your clients.
Gyms and fitness centres
Whether you run a gym, badminton court, yoga centre, or swimming school, it is likely that your business has an ongoing membership model alongside any one-time packages like day passes. With a recurring payment system established, your customers can set up their payments and not have to worry about being denied entry to your centre due to a lapse in membership payments again.
Financial services
Personal financial services like insurance, fixed loans and investments benefit greatly from utilising recurring payments. By using this payment option, you no longer have to manually follow up with customers for debit amounts every month. Once a customer agrees to the payment terms, their bank account will be automatically debited.
Recurring payments might seem complicated to set up at first, but it's guaranteed to streamline ongoing payments for both you and your customers. Once it's in place, you can begin reaping the benefits such as reducing late repayments, automating payment workflows and improving customer relationships.
If you would like to start streamlining your instalments or subscriptions, be sure to check out senangPay's offerings to see how our recurring payments can evolve your business today!
Tune in for our next in our recurring payments education series to gain a better understanding of how this payment system can level up your payments.
