How to Accept Recurring Payments in the UK

If your business offers a subscription service to customers, you’re going to need to know about recurring payments.

They can be used as part of billing practices to automatically collect payments from customer cards or bank accounts on a pre-agreed schedule (i.e. the same date every month).

Recurring payments are commonly used by utility and telecommunications companies, TV streaming platforms, insurance companies, gyms and Software-as-a-service (SaaS) providers.

In this guide, we’ll show you how to set up recurring payments for your business. This includes a list of payment processing providers, some info on fees and a step-by-step guide to getting started.

And while you’re looking into cost-effective ways of getting paid, make sure to check out Wise Business. It’s the ideal solution for receiving international payments, without losing out to high fees and currency conversion costs.

💡 Learn more about Wise Business

Benefits of accepting recurring payments

An effective recurring payments system can offer many benefits to both businesses and their customers. Get your setup right, and you’ll have a low-effort, cost-effective way to bring in consistent and regular revenue for your company.

Advantages for your business include:

• Predictable revenue, which can improve cash flow management and financial planning
• Improving cost efficiency, through the automation of the billing process. This can save valuable time compared to manual billing, speed up the process and reduce the risk of errors and delays.
• Reducing late and missed payments, which can save the business from wasting resources chasing up late payments.
• Increased customer retention, as customers who subscribe to the service and are billed automatically are more likely to remain with the business. As long as billing is convenient and easy, customers are likely to continue using the service.
• Upselling and cross-selling opportunities. Subscribed customers have an existing relationship with a company, and loyalty only grows over time. This creates opportunities to market other products and services to the customer, which can further boost revenue as well as loyalty.
• Simpler accounting. With a regular, consistent stream of set-amount payments, it’s easier to track revenue and reconcile accounts.

There’s also the fact that digital billing is more environmentally friendly, as there’s no need for paper bills or invoices.

For customers, recurring payments offer a fully hassle-free way to pay for the subscriptions and services they use. After the initial setup, payments will be automatically collected - so the customer doesn’t need to enter card or bank details each month.

Types of recurring payments

There are a few different ways you can implement a recurring billing system within your company.

For example, you can set up flat-rate or tiered pricing, per-user pricing, or opt for a usage-based system. There’s also ‘freemium’, which is where the core service is free but there’s an expectation that customers will upgrade to a premium plan to access more services and features.

The right option for you depends on your business model, as well as your product or service and how it is used by your customers.

You’ll also want to consider what payment methods your billing system will support - this may depend on which payment processing provider you choose.

The most popular methods are Direct Debit and debit card payments, but there’s also PayPal and mobile wallets like Apple Pay, Google Pay and Samsung Pay.

How to set up recurring payments?

Now, let’s take a look at how to implement a recurring billing system for your customers, starting at the very beginning:

1. Decide on a pricing model - i.e. flat rate, tiered, per user or usage-based.
2. Choose a payment processor and create an account - we’ll cover a list of the most popular recurring payment processing providers in the UK next.
3. Check that your recurring billing model meets UK compliance laws - you might need the services of a specialist solicitor for this. If you operate globally, this can be more complicated, as you need to ensure you’re compliant with the laws in all companies you operate in.
4. Set up recurring billing in the payment gateway. You’ll need to set the payment frequency (i.e. monthly or annually) and a range of prices based on your billing model. You might also want to segment customers based on what subscription tier they’re signed up to.
5. Choose what payment methods you’ll accept. This may be determined by what methods your payment processor supports, but aim to offer as many as possible. The more flexible you are, the better the experience for the customer.
6. Develop a system for customer authorisation. You’ll need explicit consent from your customers before you can start collecting payments automatically. For this, you’ll need to develop policies, terms and conditions, a checkout process and clear communications. It’s crucial that your customers understand exactly what they’re signing up for, including the billing cycle, amount and how they can amend or cancel the subscription.
7. Create a plan for failed payments. This is rare with an automated system, but it can happen - especially if a customer’s card expires during the billing cycle. You’ll need to plan for this, with options such as email notifications and automated retries.
8. Train your customer support team. They’ll need to be able to respond effectively to all customer queries and issues related to recurring billing. This will ensure that issues are resolved quickly.

Recurring payment processing providers

In order to set up recurring billing, you’re going to need a payment gateway.

To help you compare options, here are some of the most popular UK payment platforms which offer recurring payments:

How to choose a recurring payment provider?

To find the right payment provider for your business, here are some key factors to bear in mind:

• Available pricing models and payment methods - you need a provider that supports your billing model and the payment methods your customers use.
• Cost - you’ll need to compare all costs, including monthly and per-transaction fees, to find the best value option for the services you need.
• Security - is the provider able to store and manage customer payment information securely? And is your own account access fully secure? Look for features such as 2-step authentication, 3D Secure authentication for card payments and advanced data encryption.
• Compliance - make sure the provider is compliant with Payment Card Industry Data Security Standard (PCI DSS) as well as other UK laws relating to payments and data.
• Reliability - look at reviews and testimonials from existing customers to assess the quality of the service, including whether there are issues with reliability.
• Key features - look for features that will save your business time and money, such as automation and integration with your existing business tools (i.e. your accounting software)

Accept recurring payments - fees and cost

Here’s a quick look at the kinds of fees associated with recurring billing systems:

• Monthly subscription/plan fees for the platform
• Per-transaction costs
• Fees for accepting international payment
• Failed payment fees
• Chargebacks
• Cancellation fees.

FAQs - Set up recurring payments

What is an example of a recurring payment?

Entertainment streaming services such as Netflix, Apple TV+, Amazon Prime Video or Disney+ offer the perfect examples of a recurring payment in action.

The customer signs up for recurring billing directly with the streaming service, and subscription payments for a set amount are automatically taken from the bank account or card on the customer account each month.

How do I set up a recurring Direct Debit?

As a business, you can set up a Direct Debit with a customer by sending them a Direct Debit mandate to complete. Also known as a Direct Debit instruction (DDI), this can be sent online, on paper or even over the phone, and once signed it provides explicit permission for the recurring payment to be set up.

What is the difference between a Direct Debit and a recurring payment?

A Direct Debit is a recurring payment taken only from a bank account, and can take a few days to clear.

A recurring payment can be taken from a card, bank account or other payment method, and is usually cleared instantly.

Does Stripe support recurring payments?

Yes, Stripe supports recurring payments through Stripe Billing. This is an add-on to the processor’s core service, which offers features specifically for subscription billing models and has monthly or pay as you go fees.

Receive payments in multiple currencies with Wise Business

Wise can help UK businesses to receive payments in multiple currencies, with low fees and the mid-market exchange rate.

A Wise Business account comes with local account details to get paid in 8+ major foreign currencies like Euros and US Dollars just as easily as you do in Pounds, these payments can come directly from your customers, from PSPs like Stripe and Amazon, or from platforms like Chargebee.

All you need to do is add the relevant currency account details to the platform you need to withdraw the funds. Once you receive the payment in Euros, Dollars or other supported currencies, you can hold this money into your multi-currency account, send with Wise Business debit card or convert back to Pounds with low fees and the mid-market exchange rate.

Get started with Wise Business 🚀

And that’s about it - our essential guide to accepting subscription payments for UK businesses.

We’ve covered payment processing providers, benefits of recurring billing and steps to get set up, so you should have all the info you need. Choose the right payment gateway and you should find that implementing recurring billing is actually pretty straightforward. Good luck!

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Sources last checked on date: 30-Oct-2024