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Recurring payments are getting increasingly popular as subscription-based businesses are soaring. According to Business Wire, there is a 437% growth in revenue of the subscription businesses in a decade as consumer buying preferences shift from ownership to usership.
Previously, the subscription model of business was mainly reserved for magazines and gym or club memberships. Also, it was exclusive to large merchants. Now, businesses of all sizes and sectors are picking up this model to drive their growth.
Ed-tech startups, e-newspapers, OTT platforms, SaaS and utility firms are some examples of businesses that are already thriving on recurring revenue.
Gartner predicts that amongst the SaaS businesses, 80% of the existing vendors and all new entrants will offer subscription-based business models by 2020.
Customers become subscribers when they purchase a product or service for the first time and authenticate regular billing for repeat purchases. For the subscription to continue, the customers must pay the bill amount at pre-defined intervals.
It becomes tedious if customers have to re-enter the payment information each time to pay the bills. But with recurring payments, the bill payments are automated. The money is deducted from the customer’s account via the payment method which is agreed upon by the customer.
Customers can enable recurring payments through UPI auto-pay, net banking, digital wallets, BNPL/Postpaid and cards.
Let’s walk through how recurring debit card payments can help businesses to have more subscriptions!
Benefits of Recurring Debit Card Payments
Well, recurring payments on debit cards or even through other payment modes are efficient and time-saving. Let’s have a look at the advantages that a subscription-based business can have with recurring payments-
- Saves time for both merchants and customers!
The business merchant need not chase customers for recurring payments as it is automatic. Likewise, the customers need to bear in mind to make the payment or re-enter the credentials after one-time authentication
- With automatic billing and recurring payments, there is less chance of missing out on payments. Charging a late fee ruins customer relationships while missed payments impact the business. Therefore, the cash inflow remains intact
- Merchants can predict their monthly revenue by counting on their subscribers or recurring payors. They can analyse how the business is doing and plan for expansion
- Maintaining accounts and generating invoices become all the more easier and accurate when businesses know that they will receive a fixed recurring payment
- Simplicity optimizes the customer experience!
Recurring payments require customers to share credit card details and authenticate the payments one time. Owing to this fact, it becomes a hassle-free process and hence, customer retention is high
- Businesses will know of their loyal customer bases. In case, some customers drop off their subscriptions or cancel their recurring payments, merchants can initiate a dialogue. They can find out what went wrong and enhance their products and services to retain old customers and acquire new ones. This will lead to improvisation and better customer service
- You know what works best for your business and thus, you can personalize recurring payments as per your business requirements. Billing cycles can vary from monthly to quarterly to yearly or include multiple options for customers to choose from. Likewise, the amount can vary and you can give discounts and offers
RBI Guidelines for Recurring Auto-Payments on Debit Cards
Although recurring auto-pay on debit cards has multiple benefits as we discussed above, customers have faced cyber fraud and unwanted auto-debits. In view of this, the RBI laid down some guidelines which are important for businesses to know-
- All card-issuing banks need to comply with the norms of the RBI. Otherwise, the recurring debit card payments or any standing instructions will fail. Thus, your customers must be the cardholders of a bank that is compliant
- The customers must be given a pre-debit notification at least 24 hours before the deduction via mail or SMS. This is to keep the customers informed about the debit card auto-pay or auto-pay through any payment mode
- If the amount of the recurring bill payment on a debit card is more than Rs. 15,000 then the customer needs to do Additional Factor Authentication (AFA). the customers need to approve the payment through an OTP sent to them
Which Businesses can Use Recurring Debit Card Payments?
Businesses of all types and magnitudes can use recurring debit card payments. In fact, they need not limit themselves only to debit card auto-pay but enable all other payment modes.
Apart from subscription businesses like Hotstar Premium or Grammarly Premium, membership businesses can also use recurring payments. For example, membership in co-working spaces, social clubs, organizations, etc. Zomato Gold or Flipkart Plus membership offers free deliveries and extra discounts to its members
Likewise, banks or financial firms can use recurring payments to collect SIP, insurance premiums, loans, etc. Similarly, government bodies, municipalities or other such utility-based organizations can collect recurring payments from customers. For instance, they can collect bills for electricity, piped gas, LPG cylinders, broadband, etc.
Telecom and Recharge Industry can automate recurring payments on debit cards or other payment modes from customers’ accounts. They can receive automatic payments for DTH recharge, mobile prepaid or FASTag and customers can enjoy uninterrupted services.
E-commerce businesses, travel apps, SaaS companies and many other kinds of businesses are enabling recurring payments. For customers who do not pay the total upfront costs at once but choose EMIs or BNPL, merchants can use recurring auto-payments to collect the same.
Why Should Businesses Integrate with Cashfree’s Recurring Payments?
If you are looking out for the best recurring payments solution, then it is Cashfree Payments!
Well, you wonder why? Because-
We offer a one-stop recurring payment solution for your business. Our subscription is built for OTT platforms, ed-techs, insurance providers, NBFCs, digital lending apps, investment forms, e-commerce companies, etc.
Cashfree’s auto-payment collection model is customised for every business depending on the kind of billing model. We have tailored solutions for fixed, variable and usage-based payment models.
We have best-in-class success rates for automated debits across all payment methods and irrevocable mandates on UPI PSPs to cover.
Moreover, we make compliance easy with our complete solution for digital lending. NBFCs and Fintechs can use Cashfree to disburse credit or co-lend and then collect repayments.
They can lend and recollect loans, BNPL EMIs, and postpaid credit collections being compliant with the RBI’s digital lending guidelines. Merchants can automate bank account verification for e-KYC and validation before disbursing credit, and track collections from designated accounts.
We connect the merchants to multiple existing current or escrow accounts and switch between them. Thus, our multi-bank support helps you avoid downtimes.
Branch, ACKO, TalentEdge, and Faircent.com are some of the merchants that use Cashfree’s Subscription APIs to collect auto-payments.
So, do you want to generate a steady stream of revenue for your business with loyal customers? Then, automate the recurring payments for your business.
How does recurring payment differ from one-time payment?
Customers make a one-time payment for a single immediate order. If they wish to keep purchasing that service or product periodically via repeated payments, they go for recurring payments. They will not have to pay each time for every order but the payments will be automated.
Will changing the debit card stop recurring payments?
No, in most cases. The card networks usually send the updated details to the merchant and the bank and standing instructions for auto-debit continue. In case, payments fail then reach out to the customers to update their card details on the app or the site.
Is recurring payment the same as Auto-Pay?
Yes, as recurring payments are approved for automatic deduction by the customers, it is also called auto-pay. If customers enable recurring payments on a debit card, it is a debit card auto-pay. Likewise, they can enable UPI Auto-Pay.
What is an automatic payment limit? What is the limit for recurring debit card payments?
The auto-debit processes easily up to Rs. 15,000 and above this limit, customers need to authorize it through an OTP. For UPI, transactions up to 1 lac are allowed for auto-debit or any payment in a day.
The limit for recurring debit card payments depends on the transaction limit set by the bank on the card or the bank account of the cardholder.
Can customers stop auto-debits by contacting the bank?
Yes, they can stop auto-debits by contacting the bank, if they visit the nearest branch or through net banking.