What is a recurring payment and how do they work?

Recurring payments are regular payments made at agreed-upon intervals of time.  

Whether weekly, fortnightly, or monthly, the customer authorises a business to deduct money from their bank account or card. These intervals are agreed upon when you build said customer’s payment plan.   

On billing day, the business initiates a ‘pull-payment’, meaning the money is pulled from the customer's account and held in a merchant bank account. Some common examples of recurring payments include... 

• Gym or sports memberships and fees 

• Personal training fees 

• Subscription services like Netflix, Amazon Prime, Binge and Disney+ 

• Real estate fees like rental payments and mortgage repayments 

• Electricity, internet, phone, and other utility bills 

• Online subscriptions to The Guardian, The Australian or the Sydney Morning Herald 

• School and education fees  

Many people make recurring payments to pay for services that occur on an ongoing basis — it’s far easier and more convenient that way, and it saves people from forgetting to make a payment. This is especially true if the recurring payment is fixed and the same each time - it benefits both the customer and the business to automate payments by automatically deducting the money each week, fortnight, or whatever period is agreed upon. 

The convenience and assurance that comes with recurring payments have made it a popular revenue model for businesses. It provides a better, more consistent cash flow, reduces problems with late or non-payments, and increases customer retention by setting them up with a payment plan that requires minimal effort on their part and divides costly expenditures into manageable sums. 

What is a one-off (non-recurring) payment and how do they work?

Non-recurring payments are one-off transactions that can be made through a variety of methods. These payments only happen once - there’s only one invoice and one bill. One-off payments are usually larger than the individual payments made on a payment plan.  
Here are just a few examples of non-recurring payments: 

• Goods, merchandise, and products 

• One-off bills, fees, and fines 

• Services not covered by subscriptions or memberships 

• Set-up fees 

• Gym equipment 

• Gift cards or vouchers 

• Short-course fees 

 Many business models that offer membership or subscription fees as recurring payments also offer options to combine the total costs of recurring payments into one non-recurring payment.  

For example, a monthly subscription to Disney+ will cost AUD 13.99 per month — however, customers can choose pay an annual fee of $139.99. This offers a 16.61% discount from what they would pay over the year through recurring monthly payments. Many retailers also offer the choice to pay non-recurring or split the sum into four quarterly payments. 

From a business perspective, non-recurring payments offer more immediate and rapid initial growth, since the full payment occurs earlier. This allows businesses more capital to invest in growth and recovery from marketing and sales costs. For smaller transactions, such as short-course fees, it makes more sense for customers to pay in full, so it’s important that businesses can also process non-recurring payments. 

Recurring vs one-off payments: which is better for modern businesses?  

Neither recurring or one-off payments are outright better than the other — both have their advantages and disadvantages. They both offer businesses good ways to receive and manage payments. Recurring payments may be harder to set up, but once they are, they generate more customer lifetime value and increase cash flow. Non-recurring payments may be less frequent, but they offer immediate growth, simplify the billing process, and provide greater flexibility. 

To offer customers the best experience, a combination of both is important. Having the ability to offer both recurring and non-recurring payments will give your business the tools to handle payments your way, whilst also delighting your customers. 

Set up Secure and Convenient Recurring and Non-Recurring Payments with Ezypay 

If you’re looking for a platform that allows you to manage your payment and billing systems, then look no further than Ezypay.  

Ezypay empowers your business to seamlessly receive, amend, and manage recurring and non-recurring payments for your business.  

Get in touch to learn about recurring and one-off payments and how Ezypay can help you collect and process both.