The Ultimate Guide To Recurring Payment Processing: Types, Examples, And Best Softwares

Delivering hassle-free payment experiences is no longer optional. Whether it’s a SaaS product, a streaming platform, or a utility service, businesses rely on recurring payments to deliver uninterrupted service while ensuring predictable revenue streams. 

This guide will help you uncover the essentials of recurring payment processing, how it works, and how to choose the ideal payment processor for your business, along with a list of the best payment processors.

What are recurring payments? 

Let’s say your team subscribes to Slack’s premium plan, and you authorize recurring payments. The payment is debited monthly, ensuring uninterrupted access to its features. 

This is a prime example of recurring payments. They are pre-authorized transactions scheduled at regular intervals—monthly, quarterly, or yearly. 

Recurring payments can be classified primarily by the payment method and business model. Let’s explore the types in detail.

Types of recurring payments

Understanding the types of recurring payments will help finance leaders determine which payment method suits their business goals and customer base.

Based on the payment method

1. Card-based payments

‍These payments are automatically deducted from a customer’s credit card, debit card, or prepaid card regularly. This can also include international payment methods, including foreign exchange (forex) transactions. This flexibility is crucial for global SaaS providers or companies with a diverse customer base.

2. ACH payments

ACH (Automated Clearing House) payments pull funds directly from a customer’s bank account. B2B companies often prefer this method with more significant transaction amounts.

3. E-Wallet payments

Digital wallets such as PayPal, Stripe, or Apple Pay are becoming increasingly popular for businesses targeting customers who prefer seamless, mobile-first experiences. 

Based on the payment structure

1. Fixed recurring payments

‍These refer to a consistent amount charged every billing cycle, commonly seen in software subscriptions or service plans. For example, Salesforce and Zoom charge a fixed monthly or annual fee for access to their respective platforms.‍

2. Variable recurring payments

‍These payments fluctuate based on the customer’s usage or consumption, such as usage-based pricing models in SaaS. For instance, Amazon Web Services (AWS) charges businesses based on the amount of data stored or computational power used, while Twilio uses variable pricing for API usage. This model is ideal for companies offering flexible, scalable solutions where charges depend on specific usage metrics.

Steps to set up and accept recurring payments

Setting up recurring payments requires a streamlined workflow. Here are the steps that you can follow:

1. Evaluate your business needs

When setting up recurring payments, it’s essential to assess your broader business needs. These include factors like your company’s scale, the complexity of your pricing models, and the type of customer relationships you maintain. Understanding these aspects ensures that your payment system can accommodate future growth and evolving business dynamics.

2.  Define payment parameters

Once you’ve evaluated your business needs, the next step is to define the payment parameters. These parameters include payment frequency, transaction size, international payment needs, and the preferred payment methods for your customers. 

3. Choose a payment processor

Look for a provider that offers PCI DSS compliance and regional and industrial laws that may affect your payment practices. Multi-currency support, multi-payment support, and seamless integration with your billing system to enable real-time data flow between the two systems (your billing software and payment processor) is also crucial. 

4. Transaction initiation and customer authorization

For recurring payments, the process begins when a customer initiates a transaction and provides consent to authorize it. This involves defining the payment parameters and collecting authorization through an online form, a signed agreement, or by sending an authorization code to verify the transaction. This verification step is critical, as it minimizes the risk of fraudulent transactions and ensures customer consent for ongoing charges.

5. Monitor and manage recurring payments

Keep track of payment success rates and resolve any issues quickly to maintain customer trust. That is where the integration with your billing software comes in handy. It will help you with payment tracking, handling dunning (failed transactions), sending reminders, and managing customer payment-related queries.

Considerations while choosing a recurring payment processor

The payment processor you choose will impact your operational efficiency and customer experience. Here are the key considerations that can help guide your decision.

1. Payment methods and global support

To serve a diverse customer base, opt for a provider that supports various payment methods, such as credit cards, ACH transfers, digital wallets, etc. Ensure the processor can handle multi-currency transactions and localized payment options to cater to regional customers. 

This is especially important if your business is scaling globally, as it ensures seamless transactions across different regions. You should also consider whether the provider can accept forex payments and international card types, helping your business expand without barriers.

2. Seamless integration

An ideal payment processor ensures seamless two-way data synchronization with billing software, minimizing manual intervention in bank reconciliation. CRM integration provides valuable customer insights and tracks payment history, while e-commerce and POS system integrations enhance operational efficiency by automating workflows and streamlining transactions

3. Security and compliance

Security is paramount in financial transactions. Choose a payment processor that adheres to global security standards, such as compliance with Payment Card Industry Data Security Standards (PCI DSS). Additionally, ensure the processor aligns with region-specific regulations, such as the General Data Protection Regulation (GDPR) in the European Union (EU). This compliance is crucial for meeting country-specific requirements, especially in regions like the European Union (EU), Asia-Pacific (APAC), and Latin America (LATAM).

The payment processor should also include inbuilt robust fraud detection tools and advanced security measures like encryption and tokenization to protect sensitive cardholder data during transactions.

4. Transparent pricing

Understand the full cost of using a recurring payment processor. While many providers advertise competitive rates, it’s essential to dig deeper into transaction fees, subscription costs, and any hidden charges that may arise.

Hidden fees to watch out for include chargeback fees, monthly minimums, or cancellation fees that can add up over time. Ensure the pricing model aligns with your financial goals without compromising necessary features.

5. Customer support and usability

A processor that offers responsive customer support and an intuitive user interface will save your business time and frustration. Choose a provider with accessible customer service channels to resolve payment issues like disputes and chargebacks quickly. 

6. Scalability

As your business grows, you’ll need a payment processor that can scale alongside it. Choose a solution that can handle increasing transaction volumes and complexity without compromising settlement speed. A reliable recurring payment processor should transfer funds to your bank account quickly, ideally within 1–2 business days. Faster settlement speeds improve cash flow, enabling you to reinvest in growth opportunities without delays.

7. Mobile compatibility

In a mobile-first world, ensure your payment processor is compatible with mobile devices, allowing customers to make payments easily from their smartphones or tablets.

Now that you know what to look for, let’s explore the 5 best recurring payment processors that can help streamline your payment management and drive your business growth.

5 Best payment processors for recurring payments

Choosing the right payment processor is crucial for businesses and finance leaders aiming to streamline operations and scale globally.

To help you decide, we evaluated the five best recurring payment processors based on global reach, security features, integration capabilities, payment methods, and cost-effectiveness.

1. Stripe

Stripe is a widely used payment processor favored by businesses looking for scalability, flexibility, and developer-driven solutions. 

• Payment methods: Stripe supports an extensive array of payment methods, including credit cards, ACH, Apple Pay, Google Pay, and many digital wallets. This makes it a versatile choice for businesses that want to offer their customers multiple ways to pay.
• Global transactions: Stripe is built for global operations, supporting over 135 currencies and regional payment methods. This benefits businesses that need to expand internationally or process cross-border payments seamlessly.
• Integration capabilities: Stripe's powerful APIs and extensive integrations with platforms like Shopify, WooCommerce, and Salesforce make it easy for businesses to embed payment solutions into their websites or apps without a hassle. It’s ideal for companies with custom needs or a technical team that requires flexible options.
• Security features: Stripe is PCI-DSS compliant and uses industry-standard encryption and security practices. It also features robust fraud prevention tools like machine learning-powered monitoring and risk assessment, which helps protect against chargebacks and unauthorized transactions.
• Transaction fees: Stripe charges a starting fee of 2.9% plus $0.30 per transaction, which varies based on the payment method. 

2. PayPal

PayPal is a trusted payment processor with a strong reputation, particularly for international transactions.

• Payment methods: PayPal supports payments through PayPal accounts, credit cards, and debit cards. While it lacks some of the more advanced features of other processors, it’s ideal for businesses that want a straightforward solution for online payments.
• Global transactions: PayPal is available in over 200 markets and supports 135 currencies, making it a reliable option for businesses seeking to reach a global audience. 
• Integration capabilities: While PayPal offers basic integrations with most e-commerce platforms (like Shopify and BigCommerce), it’s less flexible than Stripe in terms of customizations. 
• Security features: PayPal provides strong security measures, including 24/7 fraud monitoring, encryption, and chargeback protection. Additionally, it offers seller protection for certain types of transactions, which is helpful for businesses in high-risk industries.
• Transaction fees: PayPal’s transaction fees are higher than other processors, starting at 3.49% + $0.49, and it charges additional fees for international payments, currency conversion, and micropayments, which can add up for businesses with lower-margin products.

3. Checkout.com

Checkout.com supports over 150 currencies and operates in around 50 countries, making it an excellent choice for companies seeking international reach and payment flexibility.

• Payment methods: It supports credit cards, debit cards, digital wallets, and local payment options, making it suitable for businesses targeting global markets. 
• Global transactions: Checkout.com supports over 150 currencies and offers domestic processing capabilities in around 50 countries. This enables businesses to cater to a global customer base without worrying about currency conversion issues..
• Integration capabilities: This tool integrates easily with third-party platforms. It also supports tax automation and fraud protection, streamlining financial workflows and reducing manual effort.
• Security features: It uses advanced fraud protection tools powered by machine learning and AI. These tools help businesses reduce chargebacks and fraud while ensuring secure payment transactions.
• Transaction fees: Checkout.com’s pricing varies between 1.5%-4% of the transaction amount, and it is customized based on business needs, volume, and region. The pricing may vary, but it is primarily designed for high-volume businesses with global needs.

4. FreshBooks

FreshBooks provides a combination of invoicing and payment processing, making it a good choice for freelancers and small businesses. 

• Payment methods: FreshBooks allows businesses to accept credit cards, ACH payments, and PayPal transactions. 
• Global transactions: Through integrations with Stripe and PayPal, FreshBooks supports international transactions, but its native capabilities are more focused on the U.S. market. 
• Integration capabilities: FreshBooks integrates well with Stripe, PayPal, and other financial tools, but it’s primarily designed as an accounting software with limited payment processing capabilities.
• Security features: FreshBooks ensures secure transactions using security features, including encryption and fraud prevention tools. 
• Transaction fees: The transaction fee starts at 2.9% plus $0.30 and varies according to the payment method chosen. However, businesses need to factor in both FreshBooks’ service fees and the transaction fees of its partners, such as Paypal, Stripe, etc.

5. Helcim

Helcim is a transparent and user-friendly payment processor suitable for businesses looking for an affordable yet reliable solution.

• Payment methods: Helcim supports various payment methods, including credit cards, debit cards, ACH, and mobile payments. 
• Global transactions: Helcim supports multi-currency transactions but is less internationally robust than Stripe. 
• Integration capabilities: Helcim integrates easily with various e-commerce platforms. While it offers robust integration options, it doesn’t provide the same flexibility as Stripe’s developer-oriented APIs. 

• Security features: Helcim is PCI-DSS compliant and offers advanced fraud detection and chargeback prevention tools.
• Transaction fees: Helcim charges the transaction fee within a range of 0.5%-5% of the transaction amount, depending on the mode of payment. It’s typically more cost-effective for businesses with higher volumes.

Considering these crucial factors, you can find the best solution to suit your business needs and growth ambitions.

How does Zenskar simplify recurring payment processing?

Managing billing and payment systems in-house can be challenging, especially as businesses scale. 

Outsourcing to a dedicated recurring billing and revenue recognition solution like Zenskar helps you streamline your operations, reduce the burden on your internal teams, and ensure compliance with accounting standards. 

Here’s how Zenskar can work alongside your chosen recurring payment processor to streamline your recurring billing process:

1. Integration with leading payment gateways

Zenskar integrates with top payment processors such as Stripe to help businesses automate invoicing and payment collection. This integration allows you to:

• Automate the collection of payments for recurring invoices and track their status in real time.
• Easily add payments collected via alternative methods, such as cash, cheque, or bank transfers, keeping your payment system comprehensive.
• Update customers' receivables balances instantly, ensuring your financial records remain accurate.

2. Support for multiple payment methods

Zenskar supports a wide range of payment methods to accommodate global customers and local preferences:

• Credit, debit, and prepaid card payments (with integrated merchant accounts).
• Direct debits through ACH, SEPA, and other regional payment methods.
• Non-digital payment options like cash, cheque, or bank transfers.

3. Setting up default payment methods for convenience

Zenskar allows you to assign default payment methods for each customer easily. If a default payment fails, you can:

• Automatically retry payment using an alternative method, ensuring minimal disruption.
• Keep the payment process frictionless for your customers while maintaining a steady cash flow for your business.

4. Seamless gateway configuration

Setting up payment processors like Stripe with Zenskar is simple and user-friendly.Easy integration reduces setup time, so businesses can start accepting payments quickly without needing technical expertise.

5. Streamlined financial management

Zenskar’s integration with payment gateways ensures that all payments are automatically recorded in your financial system, providing visibility into receivables and reducing manual work. This integration helps you:

• Keep accurate, real-time financial records.
• Minimize payment failures by automating retries.
• Gain valuable insights into your recurring revenue streams.

Check out our documentation for a step-by-step guide to seamlessly connect to Stripe.

Accurate financial data is crucial for making informed business decisions. Automating these processes helps you focus on high-level strategy while ensuring your back-office runs smoothly.

Explore how Zenskar can elevate your financial operations and help you easily manage recurring payments. Get started today and see how we can help you scale efficiently.

Frequently Asked Questions (FAQs)

1. What are recurring payments, and how do they work?

Recurring payments are transactions for subscription-based services or products at regular intervals, typically monthly or annually. These payments are processed automatically with a one-time effort by the customer to authorize payments.

2. What is an example of a recurring payment?

A typical example of a recurring payment is a monthly subscription for services like Slack, zoom, or software like Adobe Creative Cloud. Customers are billed for their ongoing access to these services.

3. Can we cancel recurring payments at any time?

Yes, most recurring payment systems allow users to cancel payments at any time. However, cancellation policies may vary depending on the service provider, and some may require advance notice or have specific cancellation terms.