Subscription and recurring billing payments are popular in many industries. Recurring payments are convenient for consumers, allowing them to pay for goods & services over time. And recurring billing is great for merchants, ensuring continuity of payments over time and enhancing cash flow.
Debt and credit cards are the most popular payment method for Americans. Therefore, it is important for all merchants to accept cards for recurring billing.
The primary issue with card payments for recurring payments is ensuring that the card on file is still valid on the date the recurring payment is due. Because a recurring billing transaction will be declined if the card data is not up-to-date.
Each year more than 20% of debit and credit cards are reissued. Cards are reissued for a variety of reasons. Cards that are lost or stolen are reissued by the consumers’ banks. Cards expire and need to be reissued. Bank mergers can cause cards to be reissued. And data breaches at banks, major retailers, or other security issues require new cards be reissued to consumers.
Updating cards manually is time consuming and inefficient. And no matter how much effort is directed at contacting customers for updated card data, you still may not be able to obtain the necessary information.
For this reason, using a card updater service is extremely helpful to protect your recurring payments cash flow.
When a card recurring payment is declined, a card updater service automates the process of obtaining current card data. If a card is declined, the card updater automatically contacts the consumer’s issuing bank to get the updated information on the reissued card. Then, the transaction is automatically resubmitted, and the card is approved for payment of the recurring billing amount.
As a result, recurring payment revenue is protected. Without the need for manual intervention.
Keep in mind that as helpful as card updater services are, there will still be cards that will not be able to be updated. Still, card updater services generally are successful in updating card info 70-80% of the time.
While cards are popular for recurring billing, ACH is far more stable for recurring payments than cards. The reason for this is easy to understand.
Once bank accounts are established, consumers rarely change banks. It is a major hassle to change bank accounts. Direct deposit of wages and recurring payments for household and other bills are often attached to the bank account so changing banks is major task.
It takes a lot of effort on the part of consumers to change banks. First finding a bank to change to. Then actually going to the bank to establish an account. Most consumers are not going to exert the effort because there’s usually not enough difference between banks nor benefits to the consumer to justify the change.
Therefore, recurring billing paid by debiting bank accounts are extremely stable. Payment data seldom needs updating. Payments continue uninterrupted. Protecting against revenue leakage and ensuring cash flow continues until the end of the payment term or the consumer cancels.
Another benefit of using ACH for recurring payments is that ACH transactions are far more difficult to chargeback than card transactions.
With a card payment, consumers can simply call their bank to dispute a transaction. Consumers can chargeback a transaction up to 180 days. And the card issuing bank frequently sides with the consumer since the consumer is the bank’s customer.
Compare this to ACH. Revoking an ACH payment generally requires that the consumer visit the bank, submit an affidavit and provide supporting documents proving that the transaction was not authorized. And the window for filing an ACH dispute is only 60 days. Significantly shortening the time allow for disputes compared to card payments.
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