What are recurring payments and how do they work?

Recurring payments are becoming increasingly popular these days. They simplify the process of regular payments, such as subscription fees, utility bills, or loan repayments. In this article, we'll explain what recurring payments are, how they work, and how you can take advantage of them to make your financial life easier.

What are recurring payments?

Recurring payments (also known as “auto payments”) are automatic regular payments that are made from the client’s bank account, card, or e-wallet. They allow you to pay for services or goods at a specific frequency, whether it is a monthly subscription to a streaming service, utility bills, or loan repayment.

Recurring payments spare the client from the need to manually make a payment each time, which makes them a convenient solution for regular expenses.

How do recurring payments work?

Recurring payments work as follows: the client gives permission to the company or service to automatically debit funds from their account. This can be done through a subscription to the service, in which the client specifies their payment details and agrees to the terms of automatic payment. Then, on the specified day (for example, every month), the system automatically debits the required amount and sends it to the company's account.

Due to the fact that the process is automated, the likelihood of forgetting to pay something on time is reduced to zero, which is especially convenient for those who travel often or simply prefer to automate their financial life.

Benefits of recurring payments

Recurring payments have many benefits. Firstly, they provide convenience, as the client does not need to enter payment details or remember payment deadlines every time - everything happens automatically. In Kazakhstan, most banks, such as Halyk Bank of Kazakhstan and Kaspi Bank, offer the option of setting up recurring payments for their clients, which simplifies the process of paying on a regular basis.

Secondly, recurring payments save time, as the debits are made automatically, eliminating the need to stand in lines or waste time on manual transfers. This is especially important in Kazakhstan, where the penetration rate of mobile banking has reached more than 70%, allowing automatic debits to be made directly via a smartphone.

Benefits for business

In addition to the above benefits for customers, recurring payments provide many benefits for businesses. Automation of payment processes helps businesses to consistently receive regular income, reducing the risk of late payments and delays in payments. Practice shows that up to 20% of total customer churn in subscription businesses is attributed to customer forgetfulness or transaction failure, rather than a deliberate action. Using recurring charges significantly increases the conversion rate, since the human factor is eliminated. In the event of an unsuccessful transaction, the payment provider can repeat the write-off attempt until it is successful.

If the write-off cannot be completed, for example, due to lack of funds or a blocked card, the provider sends an automatic reminder to the customer to pay. Also, in some cases, an automatic card renewal tool is used, which allows you to write off money even if the card is reissued. This helps retain customers and minimize churn.

The use of recurring payments reduces administrative costs for transaction processing and frees employees from routine work, allowing them to focus on strategic tasks. The company's management is able to plan revenues and make decisions on profit distribution, which makes the business more sustainable and predictable.

How to set up a recurring payment?

To set up a recurring payment, you need to follow a few simple steps:

• Select the service or product that you need to pay for regularly. For example, this could be a subscription to a streaming service or a utility bill.

• Provide your payment details. This could be a bank card number or e-wallet details. It is important to make sure that there are enough funds in the account for payment.

• Confirm authorization for automatic debiting. This usually includes agreeing to the subscription terms and automatic debit settings.

• The system will then automatically debit the correct amount on the specified day, so you don't have to worry about forgetting to pay.

What to look for when using recurring payments?

While recurring payments have many advantages, there are a few things to consider. First of all, it is essential to monitor the balance in your bank account. Insufficient funds may result in the inability to make a payment, which in turn will cause a delay and, possibly, additional fines or penalties. Regularly checking your balance or enabling account status notifications will help avoid such situations.

In addition, when using recurring payments, special attention should be paid to security. You need to make sure that the company that will debit the funds is reliable and uses modern data protection technologies. This is especially important to prevent leaks of personal information and prevent fraudulent activities. Choosing proven and reputable service providers will help minimize risks.

Another important aspect is the ability to cancel a subscription. If you need to stop recurring payments, you should read the terms of the service. Many companies offer an easy way to cancel through your personal account, but in some cases, you may need to contact the support service. It is important to understand how cancellation works in advance to avoid unnecessary charges in the future. Having a clear understanding of the cancellation terms will help you better manage your finances.

Statistics on recurring payments in Kazakhstan

Recurring payments are becoming increasingly popular in Kazakhstan. According to the National Bank of Kazakhstan, in September 2024, more than 1.1 billion transactions worth over 16.8 trillion tenge were made using payment cards.

Although separate statistics on recurring payments are not published, the growth in the number of transactions in online and mobile banking, as well as the expansion of digital payment services, indicates a growing interest in automating regular payments among the population and businesses.

Conclusions

Recurring payments are a convenient and reliable way to automate regular payments. They save time, help avoid late fees, and make your financial life easier. With recurring payments, you can focus on important things without worrying about forgotten payment deadlines.

PAYGATE offers state-of-the-art solutions for automating your business payments. We will ensure the security and reliability of transaction processing so that your customers can receive quality services without delays. Want to learn more about our services and integration options? Contact us, and we will help you set up convenient payment tools for your business!