Don’t make these 3 common recurring credit card processing mistakes
Recurring payments…auto pay…recurring credit card processing…call it what you want, the process is the same. A customer provides a merchant with a payment method – usually a credit or debit card, or bank account information – and grants their approval to be billed at regular intervals (weekly, monthly, annually, etc.) for goods or services. Recurring payments are useful for many types of businesses– from tanning salons and music streaming services, to subscription makeup boxes and pet food.
When Steve Gilkey first started his personal training business a decade ago, he didn’t even think to use recurring payments. And – he quickly learned the headaches involved with charging clients’ accounts for their regular services when facing hassles like expired cards, invalid CVV codes, and NSF declines. He knew there had to be a better way to bill customers without the time-consuming task of doing so manually.
3 common mistakes in processing recurring payments
Before partnering with a card processor with experience in recurring payments, Steve made the following common mistakes that many other merchants do:
- Not using an account updater service to capture updated card information. You may think that once you have a valid credit card on file for a customer’s billing payments, you’re ready to successfully run their transactions for several months or even years. That’s what Steve thought, but he quickly ran into multiple declines each billing cycle – and he was losing big money.
- Not having signed contracts/terms of service in place before billing customers. When you are offering recurring billing services, it’s important to have a straightforward and completed contract (or terms of service agreement) with the customer before proceeding with the relationship. Signed contracts are a critical piece for streamlined billing, and help establish a merchant’s reputation and protect their bottom line.
- Not having a robust fraud solution in place. As with any type of payment processing, fraud is a risk that merchants face. Make sure that such threats are mitigated before they happen by implementing payment security measures such as encryption and tokenization to protect stored card numbers. Also, follow best practices to ensure that additional customer contact information is kept up to date, such as mailing addresses, telephone numbers, and email addresses. If, for example, your customers receive shipments from your business in the mail, the last thing you want to worry about is inadvertently sending items to the wrong address—which could result in an instant loss.
By partnering with a merchant services provider that offers an account updater service, Steve is now able to reduce and recover declined authorizations by automatically seeking a new authorization with updated credit card information. For example, in the event that a customer’s card expires or is replaced due to fraud, the account updater service retrieves updated card information to run the transaction. Customers are reissued credit and debit cards all the time, for various reasons. An account updater service helps reduce the risk of losing out on revenue when a customer forgets to provide their updated card information to a merchant.
Signed contracts are especially important in recurring billing to help protect a business in the event of a chargeback. Your customer contract should include a clear explanation of how the recurring billing works, including when accounts are billed, what happens to the customer’s account in the event of repeated declines, and how the agreement can be terminated.
How recurring payments benefit customers
Steve’s customers enjoy the convenience of auto pay that automatically debits their account weekly for his service. They don’t have to worry about bringing a credit card or other method of payment to their regular training sessions, and they can just get down to the business of getting in shape without fussing with a payment transaction. Here are some other recurring payments benefits that customers enjoy:
- Automatically emailed receipts
- Ability to update payment method(s) and amounts according to budgeting needs
- Expanded payments options including ACH transfer from a checking account
How recurring bill payments benefit business owners
Recurring payments offer many benefits to business owners like Steve, including:
- Increased accounting efficiencies and reduced clerical errors
- Fewer late payments and better cash flow
- Better customer loyalty by making payments simple, easy and worry-free
- Eliminated costs associated with manual billing, mailing, and postage
- Customized billing schedule
- Reduced risk of storing sensitive payment data since the payment processor handles it instead
- Access to a secure online portal with reporting and detailed transaction data 24/7/365
- Compliance with PCI-DSS requirements
Contact Vantiv today to learn how a recurring payments engine can power customer payments, help keep your customers happier, and keep your focus on what really matters—your business and your customers. Check out even more about automated recurring billing solutions.