
The world is going digital, and as a result, many companies are adopting this new style of operation, where they provide a product or a service and bill the customer on a Recurring Credit Card Processing. Freemium models that rely on credit card processing also bare credit in this regard as they involve payment mechanisms, which recur in the form of charges on the customer’s credit card at specified intervals.
What is Recurring Credit Card Processing?
Recurring credit card processing is an aspect in the payment solutions where through an agreement with a customer, the company is allowed to deduct amounts directly from his credit card in prearranged intervals. Monthly, quarterly, or annual billings are some of the subscription billing models that allow customers to pay for a product without hassle of putting their billing information each and every time they want to purchase the product.
How Does Recurring Credit Card Processing Work?
- Customer Signup:
A subscription is processed and the customer pays the information of their credit card during check out.
- Authorization:
The information of the card in question is stored (for security purposes, it is tokenized and) the payment gateway sends an authorization request to the issuer.
- Initial Payment:
The first payment is made and the customer is allowed to use the service or product or to purchase other services.
- Notifications:
A few systems send electronic messages to the customer prior to billing them with the idea of providing the client with what we may refer to as with an on-off button where the customer can cancel or adjust the subscription.
Benefits of Recurring Credit Card Processing
- Convenience for Customers:
The beauty of the system is that once the customer subscribes he does not have to be reminded to make payment. This convenience results into customer retention and loyalty.
- Predictable Cash Flow for Businesses:
The possibility of predicting the revenues is also very easy because the payments are made periodically. In this, there are so many advantages such as it enhances the process of budgeting, planning of cash flow and provide a steady cash flow.
- Improved Customer Retention:
This approach creates long term cooperation between the business providing the product or the service and the consumers who make payments periodically.
- Reduced Payment Failures:
Since payments happen automatically, there is little risk of payment defaults and missing payment transactions hence lesser burden of payment transactional overheads attached.
- Scalability:
When such businesses expand they can facilitate thousands of such transactions through appropriate payment modes. Specifically, this scalability is crucial for the subscription-based companies in improvement of their performances.
Key Considerations for Recurring Credit Card Processing
Due to the reputation of payment data, the business has to adhere to necessities such as the PCI-DSS. The use of a payment gateway must be one that accurately does the tokenization and encryption of details to keep them safe from hackers. Recurring Credit Card Processing may be affected by card declines or having an expired card. payment gateways usually have features whereby they try to do a transaction several times or send a notification to the customer to update his/her details.
Final Thoughts
Daily credit card processing is a boon to organizations in an endeavor to facilitate and enhance the services of the company which may involve subscription based services. As for the benefits, the most obvious but very significant advantages include such points as the cut in administrative expenses, the enhancement of cash flow, and the increase of customer loyalty.