Home » A Complete Recurring Payment Processing Guide for Merchants

Recurring billing is a game-changer for businesses that want predictable revenue and improved cash flow. With automatic payments in place, it reduces the hassle of chasing payments for merchants — while customers enjoy convenience and uninterrupted service.

However, setting up recurring payment processing isn’t always smooth sailing. Businesses need to choose the right billing system, ensure payment security, and manage failed transactions.

In this guide, we’ll break down how recurring payments work, the popular payment methods involved, and the key steps to implementing a seamless billing system through payment gateway integration. 

Whether you’re starting out or looking to optimize your existing setup, this guide has everything you need to make recurring billing work for your business.

What are recurring payments?

Recurring payments are automatic transactions that happen on a scheduled basis. Instead of manually charging customers for each purchase, businesses set up recurring billing to deduct payments at regular intervals—weekly, monthly, annually, or any other set timeframe.

Recurring payment processing is used in many industries, from entertainment to essential services. Common examples include:

• Subscription services: Netflix, Spotify, and Amazon Prime charge users monthly or annually.
• Membership fees: Gyms, coworking spaces, and online communities bill members on a recurring basis.
• Utility and phone bills: Many electricity, water, and internet providers offer auto-pay options.
• Software-as-a-Service (SaaS): Platforms like Adobe, Microsoft 365, and QuickBooks run on subscription models.
• Insurance premiums: Health, auto, and life insurance companies bill policyholders monthly or annually.

By automating payments, you can improve customer retention, reduce late payments, and create a smoother experience for your customers.

Popular recurring payment methods

There are several ways to process recurring billing and payments, each with specific pros and cons.

Choosing the right method depends on factors like customer preferences, transaction fees, and security requirements.

Here is a quick breakdown of popular recurring payment methods:

• Credit and debit cards: One of the most common ways to process recurring payments is through credit and debit cards. Customers enter their card details once, and the business automatically charges them on the agreed schedule.
• ACH payments: ACH payments allow businesses to withdraw funds directly from a customer’s bank account. This method is often used for high-value transactions, such as utility bills, insurance premiums, and SaaS subscriptions.
• Direct debit: Direct debit is similar to ACH but is more common outside the U.S. (e.g., SEPA Direct Debit in Europe). Businesses can pull funds directly from customer bank accounts on a recurring schedule.
• Digital wallets: Some customers prefer paying through digital wallets (PayPal, Apple Pay, Google Pay, etc.), as they offer fast and secure transactions without needing to enter card details every time.
• Cryptocurrency: While the adoption is still limited, you can find more and more businesses accepting crypto payments for subscriptions. 

The best recurring payment method depends on your business model, the transaction fees involved, and customer preferences. Most businesses offer multiple payment options to maximize conversions and reduce failed transactions.

Here’s how processing recurring payments works

Setting up recurring payment processing involves more than just charging a customer on a schedule. There are a few steps you need to go through to ensure smooth transactions, prevent payment failures, and maintain compliance. 

Here’s how recurring billing typically works:

1. Customer authorization: Before a business can start charging a customer regularly, the customer must provide explicit consent. This typically happens when they enter payment details and agree to recurring billing during checkout or sign a digital agreement authorizing automatic payments (common for ACH and direct debit).
2. Payment details are securely stored: Once the customer authorizes recurring billing, businesses rely on payment gateways to encrypt and store payment and card details. You will want a gateway like ours — one that uses tokenization and is fully PCI compliant.  
3. Recurring charges are processed automatically: On each billing cycle, the system automatically attempts to charge the customer’s chosen payment method.
4. Confirming and reporting transactions: Once a payment is successfully processed, three things happen — the customer receives an invoice or payment confirmation, the transaction details are recorded in the business’s accounting system, and payment data is analyzed to track revenue, churn rates, and customer behavior.

This is when everything goes smoothly. Sooner or later, some of your recurring payment attempts will fail. This happens due to expired or canceled credit cards, insufficient funds in the customer’s account, bank restrictions, or fraud prevention blocks. To minimize disruption, businesses use dunning management (more on that later).

When done right, recurring billing not only simplifies cash flow management but also helps businesses create a predictable revenue stream.

Is there a difference between online vs retail recurring billing? 

While the core concept of recurring billing remains the same, the way payment details are collected and processed can vary between online and retail businesses.

Online recurring payment processing

This is how the majority of recurring billing happens. Online businesses — such as SaaS companies, subscription box services, and streaming platforms — process recurring payments through digital channels. Customers sign up on a website or app, enter their payment details, and payments are automatically deducted based on the billing cycle.

Key considerations:

• Must integrate with an online payment gateway (like SecureGlobalPay).
• Requires strong security measures (PCI compliance, tokenization, fraud protection).
• Automated invoicing and email notifications for payment confirmations.

Recurring payment processing for retailers

Brick-and-mortar businesses can use a different setup. For instance, gyms, coworking spaces, and similar membership-based businesses often collect payment details in person and set up recurring billing within their point-of-sale (POS) system.

Key considerations:

• Requires a POS system that supports recurring payments.
• Customers may sign agreements in person instead of online.
• May involve physical membership cards or key fobs linked to payment details.

Steps and best practices for implementing recurring billing

In this section, we’ll walk you through the key steps to successfully implement recurring billing. Follow these best practices to create a seamless payment experience for loyal customers.

1. Choose a recurring billing system

You will want a reliable billing system that can handle automated transactions, invoicing, and payment failures.

So, when evaluating billing platforms, consider the following:

• Support for recurring billing: Ensure the platform allows automated payments based on different billing cycles (weekly, monthly, annually).
• Integration with your tech stack: It should work seamlessly with your eCommerce platform, CRM, accounting software, and payment gateway.
• Multiple payment methods: Look for support for credit/debit cards, digital wallets, or any other payment method you plan to use.
• Dunning management features: Helps handle failed payments by sending reminders and retrying transactions.

There are many capable subscription management platforms you can choose from:  QuickBooks, Xero, Zoho Subscriptions, Recurly, and Chargebee just to name a few.

You can technically use Stripe or PayPal as well, but they are not a reliable long-term solution and are a no-go for high-risk merchants.

If you are processing high monthly volumes or have expensive subscriptions, you will want to use one of the subscription platforms mentioned earlier combined with a high-volume merchant account and a payment gateway that supports multiple merchant accounts. 

This will enormously simplify the integration and setup process — and your technical team will love you for it!

2. Define your subscription model

With a billing system in place, the next step is to determine how you’ll structure your recurring payments.

First, decide on the billing cycle (e.g., weekly, monthly, annually).

Then, choose the pricing structure. You can choose between:

• Fixed recurring payments: Customers pay the same amount every billing cycle (e.g., $9.99/month for a streaming service).
• Usage-based billing: Charges vary based on usage (think cloud storage, utilities, telecom services).
• Tiered pricing: Different pricing levels based on features or usage limits (e.g., basic, premium, enterprise plans).

Outside of that, you could offer free trials, loyalty discounts, and introductory rates. 

A well-structured model can help increase customer retention and revenue. Ultimately, the best subscription model will depend on your target audience and business type. 

3. Set up recurring payment processing

Once you’ve defined your subscription model, the next step is to configure your payment processing system. This ensures that payments are collected automatically and securely.

The first thing you will want to do is integrate your billing system with your payment gateway. That is usually done through an API or a built-in integration and involves some copy/pasting and configuration. For example, you’ll need to configure the gateway to accept different payment methods and enable automatic payment processing. 

As a last step in this process, it is recommended to implement dunning management. This means setting up:

• Automated payment retries: If a payment fails due to an expired card or insufficient funds, the system should attempt to charge the customer again after a short delay.
• Payment reminders: Send alerts before payment due dates or when a transaction fails.
• Self-service updates: Allow customers to update their payment information easily.

4. Implement a subscription management system

Customers will have a much better experience if they have some control over their subscriptions:

• Customers should be able to sign up quickly and manage their subscriptions through a self-service portal. 
• A well-designed system allows users to update billing details, change plans, and manage preferences without needing to contact your support team.
• Display transparent terms of service outlining how refunds and cancellations work. Look to automate refunds and partial credits where necessary to maintain customer trust.

The more you can eliminate friction from your recurring billing process, the less customer churn you’ll have to contend with.

5. Automate billing and invoicing

Automating billing and invoicing ensures that customers are charged on time and reduces manual work. A well-implemented system helps prevent missed payments, late fees, and unnecessary chargebacks.

If your billing platform and payment gateway are properly configured, this should be all but done.

Here are a few additional tips to make this process as smooth as possible:

• Set up your system to automatically create and send invoices after each successful payment.
• Ensure invoices include clear payment details, billing cycle information, and transaction history for customer reference.
• Notify customers of upcoming payments, expiring cards, or overdue balances through email or SMS.
• Schedule reminders a few days before the payment date to prevent declines and late fees (see an example below).
• Keep records of invoices for compliance and accounting purposes.

6. Monitor and optimize performance

Once the payments start coming in, you will want to monitor the system to see if there are any optimizations you can make.

For starters, you can track things like subscription churn rates and customer retention. If the numbers seem off, dive into billing reports and payment trends. Your subscription platform should come with analytics tools and reports that make this easy.

Similarly, the portal through which you access your payment gateway should also hold useful information. For example, our payment gateway comes with advanced chargeback management and fraud prevention tools so you review payments that were marked as suspicious or have been blocked to prevent fraud.

Simplify recurring payment processing with SecureGlobalPay

Managing recurring payments at scale doesn’t have to be complicated. You just need the right, reliable tools.

SecureGlobalPay makes this process seamless by providing a modern payment gateway that supports a wide variety of payment methods, integrates with your existing billing systems, and facilitates secure transactions.

Furthermore, businesses that rely on subscription revenue are often considered high risk. As a high-risk merchant services provider, SecureGlobalPay has relationships with dozens of acquiring banks so we can help you get approved and start processing in no time.  

In other words, we have everything you need to implement an effective and scalable recurring payment processing, regardless of your industry. 

Learn more by getting in touch with our world-class support team or jump straight to our online application: