To keep customers come and stay, you have to be efficient from the time they buy a product till the time they make a payment and even after-sales services. 

Payment plays an important part in the flow. Why? Because once customers make a decision to buy, they want to complete the payment process as quickly as possible to start using the product or the service.

In that scenario, recurring payment has proven to be efficient and sales-driven. You probably have heard about recurring payments. But have you really got to understand what it is and how it works? This article will explain all.

What is Recurring Payment?

The recurring payment (also recurring bill) is a process where customers have to pay for a good or a service periodically, on a prescheduled day. This can happen yearly, monthly, daily, etc depending on how a merchant wants to set up their service.

Once customers subscribe to a service and agree on the recurring payment scheme, service providers will get paid on a set day until the customers stop using the services or until the subscription has expired.

This recurring transaction was initially used for the magazine subscription, however, it’s now spreading on many businesses due to the convenience and efficiency it offers, for both customers and merchants.

Recurring Payment: what is recurring payment
Recurring payment definition: a merchant get paid on a periodical basis

Why do you need Recurring Payment?

There are many perks when applying recurring payments to your business. Here is the breakdown for you:

  • Easy to predict cash flow: With recurring payment, all you need to do is to make sure the recurring bill is applied, set up for the initial payment, adjust the amount, and the period then just wait for the money to be credited on your subscription merchant account. You will easily have an overview of the next month’s revenue based on current subscriptions. 
Recurring Payment: Why recurring payment
Subscription merchant and customers
  • Cut cost and waste: recurring payments obviously cut down on the number of papers used for each transaction. It is not only cost-efficient for merchants but also friendly to the environment. 
  • Smooth transaction for a good relationship: The recurring payment is a hassle-free payment process. You, as a merchant don’t have to reach out to your customers to remind of the bills. Your customers also benefit from not receiving reminding emails from many service providers, and not being interrupted to use essential services (such as electricity) in case they forget to pay.

A recurring payment can bring you many benefits as a merchant and also help to grow profit for your business.

>>>> Read more:

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Subscription Payment: Benefits for merchants

How does Recurring Payment work?

Before getting down to the process, you need to understand 2 types of recurring payments: fixed payment and variable payment.

With fixed payment, your account will collect the same amount of money from customers’ accounts on a periodical basis as the fee is unchanged. This can be applied for fixed-price services, such as gym membership, magazines, etc.

On the other hand, with variable payment, the money collected in each payment cycle can vary based on how much you use, such as electricity bills.

That’s the surface, let’s get down to the payment process.

Get a merchant account or payment service provider

In order to start the recurring transactions, you have to get an account that accepts electrical payment. These accounts both help you to process payment and deposit the funds in your business bank account from customers’ debit/credit cards.

Customers subscribe and agree on using recurring payment

This means customers give you permission to access their payment information (debit or credit card) in order for you to deduct a certain amount of money on a fixed day.

Payment processing

The recurring payment is processed in the same as how a credit card payment is handled.

There are 3 parties get involved: the merchant’s bank, the customer’s credit card providers (Visa or Master Card), and the customer’s bank that issues the customer’s credit/debit card.

First, the payment processor will get in touch with the merchant’s bank and the customer’s card provider to inform about the payment.

Next, the card provider will notify the customer’s bank (the issuing bank). The issuing bank will check the account’s balance and make sure this is a real transaction.

Once the transaction is verified, the card provider will inform the payment processor to release the funds into the merchant’s account (usually in 1-2 days after the transaction is approved)

What kind of business is Recurring Payment suitable for?

The recurring payment is applicable to many businesses nowadays, below are some typical examples:


These are the services that often use the recurring payment system as their customers have to pay (usually) a fixed amount for their “membership”  such as gym centers, learning courses, co-working spaces, or clubs, etc.

The period can vary. It can be paid yearly, every 3 months, but typically every month.

Recurring Payment: Type of business 1


Subscription is widely used for many businesses. It varies from the magazine (online, offline), movie platforms (Netflix subscription, etc), gains access to premium accounts such as Spotify, learning apps, advanced features of a service, etc.

Recurring Payment: Type of business 2

Utility providers

Electricity, water, phones are essential in everyday life. You might probably have encountered some customers who forget to pay the bills each month, so recurrent payment will help to save them a lot of hassle and make sure you get paid in a timely manner.

Financial Services

Many people are now using the recurring payment to deduct money from their salary account then send to their saving account. As a financial service provider, this payment method will cut the legwork as you don’t have to follow up with your customers and ask how much they want to credit in their savings account this month. 

The recurring payment is also perfect to streamline your business because you can expect how much you will receive this month.

This also works perfectly for loans. As long as your customers have their salary wired in their account, you will certainly get paid every month once they sign up for recurring payment.

Final words

A recurring payment can benefits you in many ways as a merchant. However, you need to understand how to create a flexible subscription plan with ease, build a customized subscription that fits your customers’ needs. You will also need to know how to manage your subscription and customers’ profiles, so on and so forth. If it sounds daunting to you, don’t worry, our Magento 2 Subscription and Recurring Payments will help you to solve those issues, get in touch with us!