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Recurring payment: what it is, how it works and benefits

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  • Recurring payment: what it is, how it works and benefits

    Process automation is part of thousands of businesses present in our routine, such as recurring payments, which you probably benefit from by hiring streaming platforms, online courses, software as a service, among other products or services.

    This modality guarantees more practicality for the consumer and confidence for the companies, since they help to build customer loyalty and obtain greater guarantee of receipt of revenues during the established frequency.

    Do you want to know more about recurring payment, understand the advantages of this payment model and how you can offer it to your customers? So keep following this blog article with us!

    What is recurring payment?
    Recurring payment is an automatic billing format for recurring sales during a certain contracting period – which are usually part of monthly fees, plans or subscriptions to some product or service.

    How does the recurring payment work?
    In a billing and recurring payment model, the consumer chooses the payment method that makes the most sense for him – credit card, debit account, Pix or bank slip, for example – and the platform of the service or product purchased takes care of it. to collect and direct the payment to the company in question.

    This happens by scheduling future charges. The number of transactions, the frequency of billing and the contract period is predefined according to the company and the consumer and the transactions are carried out automatically.

    Some examples of businesses that use recurring payment are:

    Companies or educational platforms
    Streaming platforms for music, movies and series
    telecommunications companies
    Health insurance
    Football team membership plan
    Magazine and newspaper subscriptions
    What are the recurring payment methods?
    There are several ways to use recurring payment when buying and selling products and services. Discover the most famous ones below:

    credit card
    Perhaps the best-known recurring payment model, the credit card allows the company to automate the billing of the customer's invoice. And so, you can guarantee payment for the product or service for the contracted period.

    Unlike the recurring payment, the credit card is also widely used for installment payments. A disadvantage, however, is the charge fees, such as the card's annual fee, administrative fees and revolving credit, for example.

    Account Debit
    Also known as automatic debit, it is a process that allows a certain amount to be transferred from your account to another according to the frequency, amount and period determined. Unlike a credit card, it has no fees and often discounts are even granted to those who choose this payment model, as there is a guarantee that the amount will be paid on the given day.

    A novelty of the account debit is Qatar Email List, which also allows recurring payment by reading a QR Code on the consumer's invoice.

    Bank slip
    Boleto Bancário is a great recurring payment alternative, especially for those who do not have a credit card or bank account. On the other hand, it can be less practical and safe, since the payment recognition time can take up to five days and, during this period, the consumer can abandon the purchase.

    It works great for those who prefer to file physical transaction receipts to avoid any problems with services or products bought or sold.

    What is the difference between installment and recurring payment?
    In recurring payment, the total value of the product or service is paid in each of the predefined periods. For example: the consumer pays the same amount to receive a magazine at home every month.

    In the case of installments, the total value of the product or service is divided into several payments, at a single rate. So even if the product or service has already been delivered, the consumer will have to continue paying until completing all installments of the total amount. Different products and services are not delivered according to each installment paid by the consumer.

    What are the benefits of recurring payment?
    So far, we have noticed that the recurring payment guarantees convenience for consumers and companies, security and reliability, but we list below some more important advantages of this payment model. Meet:

    Customer retention: this payment model helps build customer loyalty, as they receive the product or service and pay periodically, ensuring more revenue predictability for the company.
    Reduction of CAC: for the same reason mentioned above, the cost of acquiring customers becomes lower, since it is possible to guarantee the presence of the consumer in the business for longer and more frequently.
    Safer financial planning: with the guarantee of receipt of revenue, it is possible to plan in the medium and long term, with greater control of cash flow and directing investments more assertively.
    Scalable businesses : the automation of processes and the guarantee of receipt of revenue allows to increase revenue without having to increase costs and expenses, which contributes to more assertive financial planning in pursuit of the development of a scalable business, with higher quality deliveries, power expansion and market value.
    Automation in the billing process: which ensures more practicality for the consumer, who does not have to worry about making the payment every month, for example, and more security for the company, which is guaranteed to receive the bill.
    Delinquency reduction: the recurring payment reduces the chances that the consumer forgets to make the payment or pays late.
    How to offer recurring payment?
    After choosing the means of payment that you are going to offer your customers, the first step is to have a recurring payment system, as is the case with Celero, the financial management platform with accounts payable and receivable functionality that performs collections , issues invoices and schedule installments and recurring payments without bureaucracy.

    In addition, it supports with transparent information and reports that contribute to the predictability of financial management for more assertive decision-making. Want to know more? Take a free trial and understand how Celero can contribute to the automation, security and autonomy of your financial management!​