What are recurring payments? How they work, examples, and benefits.

Key takeaways

• Recurring payments let businesses charge customers automatically on a fixed schedule, helping reduce admin and improve cash flow.

• Common billing models include fixed, tiered, usage-based, and variable pricing, with options to suit everything from SaaS to services and utilities.

• Airwallex makes it easy to manage recurring payments with smart retry logic, custom billing cycles, detailed reporting, and secure integration across your tech stack.

From gym memberships and meal kits to cloud storage and streaming platforms, recurring payments are everywhere. They’re how businesses collect payments on an ongoing basis, whether it’s for regular access, usage, or delivery. And customers love them too. They only have to authorise a payment method once, and all subsequent payments happen automatically.

Recurring payments help businesses lock in predictable revenue, reduce failed transactions, and keep customers engaged without extra effort. Here, we’ll explain how they work, explore different billing models, and show how to manage them effectively. You’ll also see how Airwallex makes it easier to automate recurring payments.

What are recurring payments?

Recurring payments are automatic charges that happen on a fixed schedule. Once a customer gives permission, their chosen payment method is billed at regular intervals. That might be monthly, weekly, or annually, depending on your setup.

You’ll find recurring payments everywhere. Utility bills, insurance premiums, and loan repayments all rely on them. Subscription services like Netflix, Spotify, or SaaS tools use them too, but they’re only one part of the picture.

It’s worth making the distinction. Recurring payments refer to any repeatable charge that happens automatically with prior customer approval. Subscription payments are a subset of that, used specifically for ongoing access to a product or service.

The difference matters. It helps you choose the right billing model and spot new ways to improve your payment experience. Whether you’re charging for access, usage, or scheduled deliveries, recurring billing gives you a more reliable way to collect revenue and keep customers on board.

How do recurring payments work?

Setting up recurring payments is simple once the right systems are in place. At a high level, it’s a five-step process that moves from customer authorisation to automatic billing. Everything runs in the background, reducing manual work and helping you stay in control of your cash flow. Here’s how recurring billing works:

1. The customer signs up: A customer chooses a plan and enters their payment details at checkout. They agree to be charged on a regular basis, based on the billing cycle you’ve set. This could be weekly, monthly, or yearly, depending on your service. If you don’t have a full web checkout set up, you can also use payment links to send customers directly to a secure payment flow.

2. Payment information is securely stored: Once authorised, the customer’s payment method is tokenized and stored using your payment system. This encryption keeps sensitive details secure and allows for future charges without asking the customer to re-enter their information.

3. The payment gateway kicks in: Your payment gateway securely routes each transaction to the card network or bank for approval. If the payment is approved, the money moves into your merchant account and is later settled into your business account. Behind the scenes, merchant acquirers facilitate this transfer by handling the authorisation and fund capture process.

4. The billing cycle takes over: Each time a payment is due, your system automatically triggers a charge. This can be a fixed amount, or variable based on usage or customer behaviour. Many businesses also use this step to issue automated invoices or receipts.

5. Failed payments are retried: Not every transaction goes through on the first attempt. With a smart retry system in place, failed payments are automatically retried at the best time to recover the charge. Customers can also receive reminders if action is needed, helping reduce churn and support requests.

Examples of recurring payments

Recurring payments have become so ubiquitous, that you might be surprised at all the places they show up. They’re a core part of eCommerce payment processing, especially for businesses selling subscriptions, memberships, or repeat deliveries. They aren’t one-size-fits-all though. Depending on your business model, you might charge a fixed monthly fee, vary your pricing based on usage, or offer flexible tiers that scale with customer needs. Across industries, this flexibility helps you stay predictable without adding manual work. Here are some real world examples.

SaaS

SaaS businesses rely on recurring payments to bill for software access, support, and upgrades, often with tiered or usage-based models that grow alongside the customer.

• Dropbox charges recurring fees for cloud storage based on plan size and team features, with monthly or annual options.

• Airtable uses tiered subscriptions, with increasing features and limits as customers move from free to business-grade plans.

Services

Recurring payments aren’t just for flashy startups or digital-first platforms. Some of the longest-standing users are service providers offering essentials like electricity, insurance, or broadband. These businesses rely on recurring billing, usually via direct debit, to keep things running smoothly and avoid missed payments.

• Utilities companies collect monthly direct debits for electricity, gas, or water, with the amount adjusting based on usage. Customers get predictable billing, and providers avoid the hassle of chasing overdue invoices.

• ClassPass, at the other end of the spectrum, bills a fixed monthly fee for access to fitness classes across gyms and studios. Customers get flexibility, and businesses get steady revenue.

Education, media, and content

Content and learning platforms often use recurring payments to give customers ongoing access, while encouraging long-term engagement.

• MasterClass runs on an annual subscription model, giving unlimited access to its full library of expert-led courses.

• Audible uses a hybrid approach, combining a fixed monthly fee with credit-based usage that rolls over if unused.

Types of recurring payments

Recurring payments aren’t limited to one format. Depending on what you sell and how your customers use it, you’ve got different options to bill in a way that works for both sides. The right setup helps you stay flexible, keep revenue flowing, and reduce the admin behind the scenes.

Here are the most common recurring billing models and where they make sense.

Each model suits a different kind of business. You might start with one and adapt over time as your customers and pricing strategy evolve.

Pros and cons of recurring payments for businesses

Recurring payments offer significant advantages when done right. They help you bring in steady revenue, build stronger customer relationships, and reduce the admin that slows your team down. But they also come with a few risks to be aware of.

The benefits of recurring payments

Predictable income is one of the biggest wins. With recurring payments, you can forecast revenue more accurately and make better decisions about hiring, expansion, and investment.

Customer retention often improves too. By keeping payments on autopilot, you remove friction from the buying process and make it easier for people to stick around.

Recurring payments also cut down on busywork. Instead of sending one-off invoices or following up on late payments, your team can automate billing and focus on higher-value tasks.

And because payments happen behind the scenes, your customers don’t have to think about it. That means fewer drop-offs and more consistent engagement over time.

The trade-offs of recurring payments

Recurring billing only works well if you’ve got the right systems in place. Without smart retry logic, flexible billing tools, and global payment support, you could see more failed transactions than expected.

There’s also the risk of silent churn. If customers forget they’re subscribed or lose interest, they might cancel without warning. This can lead to sudden drops in revenue if you’re not tracking activity closely.

Direct debits and saved card payments come with compliance responsibilities too. You need to protect customer data, follow Payment Card Industry (PCI) standards, and stay on top of regional regulations.

Finally, recurring payments can mask engagement issues. Just because someone's still paying doesn’t mean they’re still using the product. Good data and communication are key to spotting problems early and keeping retention high.

Done well, recurring payments take the pressure off your finance team and help you grow more sustainably. But success depends on setting up the right billing model and managing the details that keep it running smoothly.

Make recurring payments work for your business

Recurring payments give you a more reliable way to collect revenue, retain customers, and reduce the manual work behind billing. But to really get the benefits, you need systems that integrate with the tools you already use. With Airwallex, you can connect recurring payments to your Customer Relationship Management (CRM) platform, accounting software like Netsuite and Xero, and ecommerce platforms like Shopify and Magento, so everything runs in sync.

You can significantly increase conversions by making it easy for your customers to pay the way they want to. While subscription models are great at driving sign-ups, the real opportunity lies in offering familiar local payment options and removing any friction at checkout. With Airwallex, you can support a wide range of payment methods, from Visa, Mastercard, and American Express, to Apple Pay, Google Pay, Klarna, AfterPay, and local bank transfers, all through one platform.

Airwallex helps you build flexible billing cycles, automate retries on failed payments, and keep customers informed at every step. All while giving you access to detailed reporting and built-in compliance.

However you work, we make recurring payments easier to run, easier to scale, and easier to get right.

Frequently Asked Questions (FAQs)

What are the benefits of recurring payments for customers?

Recurring payments make life easier for your customers. They don’t have to remember payment dates or manually authorise each transaction, which means fewer missed payments and a smoother experience.

How secure are recurring payments?

Recurring payments are highly secure when processed through PCI-compliant systems. Sensitive data is encrypted and often tokenized, so it can be stored and used safely for future transactions.

What happens when a recurring payment fails?

Most payment systems retry the payment automatically. With Airwallex, smart retry logic helps recover failed charges at the best time, while notifying customers if action is needed.

How can I manage and track my recurring payments?

You can track recurring payments using your subscription management or billing platform. Airwallex offers full visibility into payment status, customer activity, and revenue performance from one dashboard.

What are some best practices for implementing recurring payments in my business?

Start with a clear billing model and make your terms easy to understand. Use a reliable payment system with automated retries and reminders, and monitor usage data to spot churn early.