If we define recurring payments in simpler words, it is process in which certain amount is withdrawn from customers’ bank account after certain intervals. The time interval can be regular or irregular depending up on the nature of business.
Types of Recurring Payments:
In the case of standing order, a fixed amount is deducted from the card or bank account after regular time interval. This is popular in hospitality businesses in charging membership fee from the consumer. This is basically an instrument where the customers promise to give a fixed payment on equal interval for a specific time period. In this the process of payment is initiated by the parties who have to pay (customers) even when the receiver hadn’t demanded for the payment.
The concept of direct debit is similar to standing order with some differences. Unlike standing order, in direct debit the recurring payment is received in different amount at uneven intervals. In this even a third party can transfer payment from bank accounts. Payment of monthly electricity bills is example of this recurring payment type. In this case, the merchant or service provider asks for the payments. The
Benefits of Recurring Payments:
Recurring payments are favorable for both customers as well as merchants. In the business, where the payment is made and received through card recurring payment, this facility simplifies the task. If we look from perspective of merchant, they don’t have to worry about the date of payments. Similarly the customers don’t have to remember the date of payment. Recurring payment option will deduct the amount from their bank account on the due date.
To conclude, recurring payment is good option for the businesses who receive payments of repetitive nature like hospitality business, electricity board, NGOs, etc. Recurring payment make sure that the payment is realized on the due date. Now you don’t have to send payment reminders to the customers.