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Best Practices For Recurring Payments

Recurring payments have become a key feature for businesses offering subscription-based services or memberships. Whether you're operating a streaming service, a gym, or a SaaS platform, ensuring seamless and secure recurring billing is essential to maintaining customer satisfaction and steady revenue. However, handling recurring payments requires compliance with card scheme regulations and best practices to avoid chargebacks, failed transactions, and disputes.

In this blog, we'll explore the best practices for managing recurring payments, focusing on the guidelines set by major card schemes such as Visa, Mastercard, and American Express (Amex). Following these practices will ensure compliance as well as support in enhancing your customer experience.

  1. Clear Customer Communication and Consent


One of the key factors for successful recurring payments is transparent communication with your customers. According to Visa and Mastercard, merchants must obtain explicit consent from the cardholder before initiating recurring charges. Including outlining the terms of the recurring agreement via a confirmation email or digital receipt, such as:

  • Billing frequency and Amount of the payment
  • Cancellation policies and instructions
  • Start date and when the first charge will be processed

Visa’s Rules for Merchants emphasise that providing this information helps reduce disputes and chargebacks related to misunderstandings or unexpected charges. Keeping an electronic record of the customers consent will help in resolving potential disputes.

  1. Use Pre-Transaction Reminders


Sending a pre-transaction notification is an excellent way to reduce customer disputes, particularly for long-term or high-value recurring payments. Both Visa and Mastercard recommend notifying customers 3 to 7 days in advance before the next billing cycle, particularly if:

  • The billing amount has changed.
  • The recurring payment is infrequent (e.g., annually).
  • The subscription is about to renew.

A pre-billing reminder gives customers time to review their subscriptions and avoid surprises, which can lead to chargebacks. Automating the pre-transaction email outlining the upcoming charge amount, terms and date giving the customer time to update their payment information if necessary or cancel before they’re charged.

  1. Offer Easy Cancellation and Management Options


It’s essential that customers can easily cancel or modify their recurring payments. According to American Express Merchant Requirements, businesses should provide a simple process for cardholders to manage their subscriptions, whether through a self-service portal or customer support. Making it hard to cancel or update subscriptions can lead to disputes and negatively impact your brand reputation. Ensure you confirm any cancellations with email notices.

  1. Utilise Payment Tokenisation for Security


Security is critical in handling recurring payments. Storing sensitive cardholder information can expose your business to data breaches and fraud. Secure sensitive data with tokenisation, where the card number is replaced by a secure token that is unique to that transaction and merchant. This ensures compliance with PCI DSS standards while enabling recurring payments.

  1. Update Payment Information Automatically with Account Updater Services


One of the most common challenges with recurring payments is failed transactions caused by expired or replaced cards. By using Account Updater Services which automatically update your customers' card details when they receive a new card, you can significantly reduce failed payments and customer churn. These services not only minimise disruptions but also ensure a smoother payment process, and they’re included as part of Axcess Merchant Services' comprehensive offerings.

  1. Use Clear Transaction Descriptors


Handling recurring payments also means you need to be vigilant about disputes and chargebacks. One key area to focus on with dispute resolution is ensuring that recurring payments are clearly labelled on bank statements that reflect the product or service you’re charging for, which helps customers recognise the charge. Keeping records of your recurring payment agreement, transaction history and customer communication is also useful in the event of a chargeback.

  1. Provide Multiple Payment Methods


Offering multiple payment options can increase the success rate of recurring payments, cater to different customer preferences and improve customer satisfaction.
Ensure you partner with a processor supports multiple card schemes as well as alternative payment methods such as direct debit or digital wallets (e.g., Apple Pay, Google Pay) services. Regularly review your payment success rates and consider expanding the payment options available to customers.

Managing recurring payments effectively is crucial for ensuring customer retention, reducing disputes, and maintaining revenue stability. By adhering to the best practices, such as ensuring clear communication, using secure technology, and providing flexible payment and cancellation options, you can optimise your recurring payment processes.
At Axcess Merchant Services, we help businesses stay compliant with the latest industry standards for recurring payments, providing secure and efficient solutions tailored to your needs.

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Written By Sarah Rae Hughes Marketing Manager