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Subscription-based model of business is making its way into every industry. In this model, businesses charge their customers at pre-defined intervals for continuing the services or products they provide.
Netflix, Spotify, LinkedIn Premium, Amazon Prime and HubSpot are some of the leading examples. The subscription economy is expected to become USD 1.5 trillion market by 2025 with an average annual growth rate of 18%.
But what is fuelling the growth of subscription businesses?
All thanks to the recurring payments!
Recurring payments mean regular payments to the business merchants at a pre-arranged schedule that the customer approves of. Customers allow businesses to automatically deduct the payment amount from their accounts.
The customer agrees to the auto-debit of money via a payment method which can be card payment, UPI payment, or net banking.
In this blog, we will discuss how can you set up recurring credit card payments for your business. As recurring payments are automatic, it is also referred to as credit card autopay.
How do Recurring Credit Card Payments Work?
A business can automate payments from the customers’ accounts once they subscribe and authorize the recurring payments. For enabling recurring payments on credit cards, the customer needs to provide the credit card details to the merchant for automatic billing and debit of the payment.
Some of the basic steps to set up recurring payments for subscribers are as follows-
- The customer decides to subscribe to the service or product from a business site or app. S/he goes through terms and conditions, payment schedules, fee structures, etc. Master and Visa card networks support recurring payments on credit cards
- During the checkout process, the customer selects a payment option from a list of recurring payment modes. Then, they share their payment credentials for the regular withdrawal of funds. For example, credit card information for recurring payments on credit cards and likewise, bank account details for net banking transactions
- The business merchants secure all this information for invoicing and recurring billing purposes. Businesses can then share this information with payment service providers (PSPs) who will connect with the acquiring bank, issuing bank and the card network for auto-payments
- Approval from all three parties results in a successful transaction, pulling funds from the customer’s accounts and releasing them into the merchant’s account
Note: For recurring payments on credit cards, the cardholder needs to authorize the payment to the specified merchant through a 2FA process. The 2FA or Two-Factor Authentication is an extra layer of security to ensure the authenticity of the user and their account.
A cardholder while authenticating the merchant, needs to do a one-time transaction. This is also the first transaction in which businesses enable auto-deduction.
What is the Limit of Recurring Payments on Credit Cards?
If the amount to be debited from the customer’s account is less than Rs. 15,000 then the auto-debit mandate is processed. However, in case the amount is higher than Rs. 15,000 then as per the RBI guidelines, the customers have to approve through an OTP.
The RBI added AFA (Additional Factor Authentication) if the e-mandate for the recurring payments is higher than the said amount. This applies not only to recurring payments on credit cards but also to debit cards, prepaid payment instruments and UPI.
RBI’s New Guidelines on Recurring Auto-Pay
The RBI’s AFA guideline regarding approval of e-mandate transactions via OTP by the customer was effective from October 1, 2021. However, previously the limit was Rs. 5,000 which the RBI hiked up to Rs, 15,000 in June 2022.
The banks also need to send a notification to the customer at least 24 hours before they process the auto-debit payment. The customers can be notified through email or SMS. It will contain all information like the amount of the recurring payment, the merchant details, the date of auto-payment, etc.
This is to keep the customers posted about the e-mandate or the standing instructions for automatic recurring payments. They may cancel the payment and end the subscription as well.
Why Recurring Payments are Important for Businesses?
If you are wondering why recurring payments are essential for businesses, then let’s walk through the benefits it offers-
1. Recurring Payments are Efficient
All that a business needs to do is obtain a card or other payment credentials with one-time digital authentication from customers. It saves time for business merchants who need not ask their customers repeatedly for payments.
The merchant receives automatic payments monthly or at regular intervals decided by the customer without any follow-ups.
2. Easy & Seamless Experience for Customers
Other than saving the time and effort of the merchants, recurring payments also reduce the burden on the customers.
If customers have to set a reminder or enter credentials each time, they may miss out on a payment. Owing to this inconvenience, they may consciously discontinue their subscriptions. But with recurring payments, customers will keep enjoying your services or products through the easy and seamless experience of automatic billing.
3. Higher Customer Retention
Recurring payments are repeated payments from the same customers who wish to avail of your services or products. With payments becoming digital and automated, better customer experience results in higher customer retention. Thus, it helps in creating a loyal customer base for your business.
4. Streamlined Revenues
When businesses get recurring payments, there is streamlined revenue flow as chances of late or missed payments are mitigated. There is a steady source of income that helps the growth and stability of the business.
5. Cost Reduction
Paperless invoicing and automatic billing also helps in cost reduction. There is no manual billing, mailing or postage and payments are timely. You cut down on administrative costs by minimizing the legwork once the initial payment schedule is set up. Moreover, it is also easier to maintain accounts and there is more accuracy in the billing process.
How to Set up Recurring Payments or Subscriptions with Cashfree?
Cashfree Payments can boost your business with advanced recurring payment solutions. It is easy to configure and deploy and you can unlock predictable revenue by automating recurring payments.
Our high success rates in mandate creation and auto-debit will convert and retain more customers.
Your business can easily enable repeat purchases and subscriptions by accepting recurring payments on credit cards and delivering uninterrupted service. We enable recurring payments through multiple payment modes. Thus, we have the right payment option for all your customers to suit their likes and needs.
We have tailor-made solutions for different businesses-
- Fixed Model
You can automate recurring payment collection for a particular amount across any predefined interval based on your business needs. For example, OTT billings, ed-techs, SIP and loan recollection can be done through this recurring payment collection model.
- Variable Model
Under this model, you can levy both fixed rental and ad-hoc charges like late fees or limits exceeded based on usage across variable periods. For example, furniture rentals and car-on-hire businesses can use this tailored solution for collecting recurring payments on credit cards or other payment methods.
- Usage-based Model
Opt for this model and charge different amounts over a fixed interval for the product or service subscribed by the customers. For instance, Postpaid or utility bill recollection.
So, if you are looking for an end-to-end solution for recurring payments to enable subscriptions, Cashfree Payments is here!
Cashfree’s subscriptions are built for businesses belonging to different sectors. You can easily integrate with our ready-to-use Subscription APIs to deliver a seamless and branded checkout experience to your customers.
Do away with payment failures and enjoy same-day settlements!
Interested? Contact us!
