The recurring payment billing model allows businesses to collect customer payments periodically. This model has become increasingly popular as ecommerce and subscription services continue to expand. Recurring billing can make payments easier for businesses and customers, providing an economic opportunity for businesses in France.

In this article, we cover what you need to know about recurring payments—how they work, how they can support your business, and how to start accepting them.

What’s in this article?

• What are recurring payments?
  
• What’s the difference between recurring payments and one-time payments?
  
• The different types of recurring payments
  
• How do recurring payments work?
  
• What types of businesses can benefit from recurring payments?
  
• What are the benefits of recurring payments for businesses?
  
• Using Stripe Billing for recurring payments
  
• How to implement recurring payments with Stripe
  

What are recurring payments?

Recurring payments—also known as automatic payments—allow businesses to charge customers for products or services periodically. Payment frequency can be weekly, monthly, yearly, or custom-based, depending on the subscription plan.

There are three main recurring payment methods in France:

• Debit or credit card payments go through a payment gateway
  
• Single Euro Payments Area (SEPA) direct debit payments require the customer to share their banking details and sign a direct debit mandate
  
• Digital wallet payments
  

What’s the difference between recurring payments and one-time payments?

Recurring payments involve periodic charges for the ongoing delivery of products or services. A one-time payment is a single charge for a product or service. Recurring payments are typically tied to subscriptions, while one-time payments are usually occasional or single transactions.

With recurring payments, the customer commits to ongoing charges over time, based on the terms of the subscription. With one-time payments, the customer makes no ongoing commitment to the business. The customer can choose to make another purchase or to end the business relationship.

The different types of recurring payments

There are three types of recurring payments:

• Fixed
  
• Variable
  
• Hybrid
  

All three types of recurring payments require the business to store the customer’s payment method information. They also require the customer’s authorization for the agreed amount to be periodically charged.

Fixed recurring payments

This type of recurring payment is the most straightforward. The customer is charged the same amount at fixed intervals. For example, a customer subscribes to a magazine for €25 per month. Their card or account will be charged €25 on the same day each month.

Variable recurring payments

With this type of recurring payment, billing is irregular. The billed amounts can vary with each payment, typically depending on how much the service is used. Variable billing comes in two forms:

• Usage-based billing
  With usage-based billing, the business charges customers variable amounts depending on how much they use the service during the billing period. Examples include mobile phone services that charge a per-minute rate and utility services that bill on consumption.

• Volume-based billing
  Volume-based billing determines pricing based on the quantities of a product or service customers use. Typically, the more a customer uses, the more the price decreases to encourage higher volume purchases. This usually involves charging the customer for a quantity agreed on in advance. For instance, the fees for a management software subscription might be based on the number of users on the account. The fee could be €10 for one user but €9 per user for two or more users.

Hybrid recurring payments

Hybrid billing combines fixed and variable billing. With this type of recurring payment, the agreement specifies a usage threshold, with additional fees charged if the customer exceeds the threshold. For example, an internet service provider might charge €10 per gigabyte used beyond the monthly data limit.

How do recurring payments work?

Here is what recurring payments involve:

• Collecting customer registration details and payment information
  
• Storing the payment information securely
  
• Processing payments periodically
  
• Confirming the payments
  
• Updating payment details and managing subscriptions
  
• Managing nonpayment
  

Here’s a closer look at each step in the recurring payment process:

• Collection of customer registration details and payment information
  When signing up, customers provide their card or bank account details and authorize the business to charge future transactions on an agreed-upon schedule. Customer consent is legally required and promotes trust between the business and its customers.

• Secure storage of payment information
  The business stores the customer’s payment details securely, typically through a payment provider, such as Stripe. The provider uses tokenization and encryption to keep sensitive data secure in accordance with industry standards, such as the Payment Card Industry Data Security Standard (PCI DSS).

• Periodic payment processing
  The business automatically charges the amount owed to the customer’s saved payment method following the agreed-upon billing schedule. The service provider handles the transaction by checking the payment details, confirming the customer’s funds, and transferring the amount from the customer’s account to the business’s account.

• Confirmations and notifications
  If the transaction goes through, the customer receives a confirmation—typically, an email specifying the payment amount, date, and other relevant details. To promote transparency and ensure customer satisfaction, the business can notify the customer before an automatic charge, when a payment fails, or when a payment method is due to expire.

• Updates to payment details and subscription management
  Customers should be able to update their payment details and change their subscription plans, typically through their accounts. This flexibility gives customers more control and promotes billing information accuracy, which can help reduce the risk of unpaid bills.

• Management of payment failures and disputes
  Payment failures can happen for various reasons, including expired payment methods or insufficient funds. Businesses should implement systems to address these issues, such as retrying payment methods, notifying customers, and offering a grace period for customers to update their payment details. Stripe Billing automates many of the steps needed to prevent and manage failed payments and disputes.

What types of businesses can benefit from recurring payments?

Recurring payments are well-suited for B2B and B2C businesses that offer products or services on a subscription model and rely on recurring income to operate and grow.

This payment model is used across various industries:

• Subscription services: This includes streaming services, software-as-a-service (SaaS), and memberships. Recurring billing generates steady revenues and promotes customer loyalty.

• Gyms: Monthly or yearly memberships ensure a consistent cash flow and give customers uninterrupted access to facilities and services.

• Digital and print newspapers and magazines: Subscriptions allow media outlets to earn steady income and allow customers to access content regularly.

• Utility and telecom businesses: Recurring payments are ideal for the providers of basic services, such as electricity, water, gas, internet, and mobile phone. These are utilities customers typically need to use continuously.

• Online courses and educational platforms: Recurring payments work well for training providers that offer ongoing access to courses, webinars, and learning resources that are regularly updated.

• Monthly box services: Businesses that deliver subscription boxes—for meal kits, beauty products, or apparel—often use recurring billing to secure a steady income and manage their inventory more efficiently.

• Cloud storage providers: Recurring payments work well in this case, as customers need ongoing access to their files and data.

The advantages recurring payments offer have led to the growing popularity of subscription-based products and services. Many businesses have implemented strategies to take advantage of this type of loyalty-based revenue stream. This is the case even when their core activity doesn’t naturally lend itself to a subscription model. For example, a marketing consultancy could offer a subscription-based newsletter with weekly expert tips.

What are the benefits of recurring payments for businesses?

Here are some other benefits of recurring payments for businesses:

• Compliance with payment deadlines
  
• Fewer payment failures
  
• Enhanced customer experience
  
• Predictable cash flow
  
• Boosted customer loyalty
  
• Efficient payment processing
  
• Reduced billing costs
  

According to a May 2022 OnePoll survey, 86% of respondents in France planned to increase or keep their subscription spending steady over the following 12 months. This shows the popularity of recurring payments for French shoppers and the potential for steady income for French businesses.

Compliance with payment deadlines

Most recurring payments are processed following a set, predictable schedule. For example, payments could be set for the fifth of each month or every year on January 1. Automating recurring payments lowers the risks of missed or late payments, which can be valuable for businesses and customers.

Fewer payment failures

Recurring payment software tools—such as Stripe Billing—use a range of features to help prevent payment failures. These strategies include the follow-up feature Smart Retries and advance notifications prompting customers to update payment methods that are about to expire.

Enhanced customer experience

Because they are predictable and automated, recurring payments offer a smoother, more transparent customer experience, which can ultimately benefit the business.

Predictable cash flow

For businesses, visibility into expected cash inflow is important. Predicting payment failures or subscription cancellations in a given billing cycle can be challenging. However, recurring billing provides a more reliable estimate of expected cash inflows than one-time payment models.

Boosted customer loyalty

Recurring payments don’t prevent customers from canceling their subscriptions, but they can promote loyalty and boost customer lifetime value. Customers don’t need to take any extra steps to continue payments, unlike making one-time, manual purchases.

Efficient payment processing

Businesses typically automate recurring payments rather than handling them manually, which saves time and resources.

Reduced billing costs

Because processing automated payments requires less time than manual payments, the costs associated with recurring billing revenue tend to be lower.

There are also challenges to recurring payment, including additional administrative work in some cases. For instance, saved payment details need to be updated whenever a card expires. However, with Stripe Billing, you can set up automatic reminders to notify customers of upcoming expiration dates.

Using Stripe Billing for recurring payments

Stripe Billing is a complete billing solution designed for businesses that want to support recurring payments globally. Billing simplifies your billing processes. It offers:

• Easy integration
  Billing is easy to integrate with Stripe Payments, allowing your suite of Stripe tools to communicate easily with each other. All Billing functionalities can be accessed from your Dashboard.

• Flexible billing models
  Invoicing tools such as Billing can help create new opportunities and set up your business for success, even if you’re not using a dynamic billing model yet or currently use only one billing model. Billing handles all per-user, usage-based, and volume-based invoicing.

• Support for coupons, free trials, prorating, additional products, and surcharges
  All payments and all customers are different. Billing supports exceptions to standard billing, helping to keep your recurring billing revenue consistent.

• Effective support to prevent churn
  Billing prevents and manages payment failures through a comprehensive approach that involves a card update tool and Smart Retries—a feature that sends dunning emails. In 2021, Billing helped businesses recover 38% of failed payments on average.

How to implement recurring payments with Stripe

To start accepting recurring payments from your customers, start by partnering with a payment service provider, such as Stripe. Click here to create a Stripe account.

Once you’ve created a Stripe account, you’ll soon be ready to start accepting recurring payments. With Stripe Invoicing, you can collect payments from your current customers and generate Payment Links to promote your subscription offers.