Subscription Payments: Definition, Usage, And Its Benefits

Subscription Payment

Online payment is quickly becoming the default way for customers to pay for purchases, whether from an online shop or a physical store. What’s even better is that consumers have several ways to make online payments.

Depending on the size of the payment, type of service, and urgency of payment, consumers today can choose how to pay online. If a large amount of money is to be paid, RTGS and NEFT are the two preferable options, while for quick transfer of money in small amounts, UPI works the best.

When it comes to paying for a service that one has to pay periodically, such as online entertainment services, weekly grocery delivery, SIP investments, EMI on home loans, etc., customers can choose to pay via the subscription method.

If your online business works on a subscription model or if you are planning to offer subscription services to customers, it’s important to understand what subscription payments are and how they work.

What are subscription payments?

Let’s understand subscription payments with a simple example:

Suppose a customer agrees to pay Rs. 700 every month to an online grocery store for home delivery of milk and other dairy products every day. At the end of every month, he has to remember to make a payment and transfer the money online.

If for some reason, he forgets to pay Rs. 700, the deliveries will stop unless the payment is made. Since he can’t wait a day to get milk, he goes to his neighbourhood grocery store and buys the milk.

While the customer did get the milk, it’s a hassle for him that could have been avoided if he had opted for the subscription-led payment option.

This is where subscription payment would have helped as it allows companies to auto-debit the money from their customer’s account. In addition to this, the merchant enjoys the convenience of not having to regularly follow-up with the customer to pay for the next month’s deliveries.

Also Read: Scale Your Subscription Business with Paytm Subscription Links

The definition of subscription payment can be simply put as an agreement between the customer and the company for services that are recurring in nature. By agreeing to pay via subscription payment, the customer allows the company to automatically deduct a fixed amount from their account before the expiry of the subscription.

There are three important elements of subscription payment:

  • One-time consent from the customer for auto-debit
  • Amount to be deducted
  • Start and end date of the subscription

How subscription payments work

To accept recurring payments from your customers without them having to manually make the payment periodically, you should integrate a payment gateway on your platform that can process subscription payments for customers.

Once the payment gateway integrates subscription payment on your website, you can start auto-debiting your customers for their subscriptions.

This is how the process works:

  • Creation: Customers visit your website and sign up to subscribe to the product or service they like. Signing up requires them to enter their details including name, email address, and bank account/card details. Next, they authorise the business to debit their bank account/card as per the payment schedule. This is a one-time process and they don’t need to do this every time the subscription has to be renewed.
  • Activation: Your payment gateway will check the customer’s information including bank account details to make sure there are no errors. The payment gateway might debit a token amount of one rupee to check if the customer’s account details are correct. Once everything is cleared, the customer’s subscription account will be activated.
  • Collection: After the subscription is activated, you can start auto-debiting the agreed-upon amount from the customer’s bank account at a fixed interval.

Why Paytm has the best subscription solutions?

If you are looking for a payment gateway that can help you offer subscription services to your customers, Paytm Payment Gateway is the right solution.

Paytm Payment Gateway has diverse offerings for businesses that rely on the subscription model.

Here are the three reasons why you should use Paytm Subscriptions:

  • Support for different subscription models: Paytm Payment Gateway understands that companies will offer different subscription payment plans to their customers.With Paytm Payment Gateway, you can let your customers use your product on a trial basis and later start charging them once they are satisfied with your offering. Additionally, you can also collect a one-time registration fee and start accepting recurring payments in the following months.
  • Subscription Links: With Paytm Payment Gateway, you get to choose how you want to collect payments. You can either choose to automatically debit customers’ accounts or opt for manual collection.The latter option, which is called Paytm Subscription Links, is a simple way to remind users to pay for their recurring bill or monthly subscription at the close of the expiry of the subscription. Your subscribers can simply click on the link, choose the payment mode, and complete the payment process.
  • Simple UPI Autopay mandate: To further simplify automating recurring payments for you as well as your customers, Paytm Payment Gateway lets users create the UPI AutoPay mandate easily on your platform.

These mandates are created instantly, after which there is no need for users to enter their UPI IDs to make recurring payments. Users have the freedom to modify, pause, or even revoke the mandate when they want to cancel the subscription.

In addition to these, Paytm Payment Gateway has one of the highest payment success rates in the industry. With high-performing APIs and customisable SDKs, Paytm PG processes almost all transactions successfully. With over 250 million cards saved on our network, including over 100 million bank accounts, the success rate of payments is higher than the industry standards.

In case the server of a particular bank is down, it informs customers to choose a different payment method.

Frequently Asked Questions

Which sectors have used the subscription model successfully till now to accept recurring payments?

A lot of sectors rely on automatically collecting payment from users to offer subscription services. A few examples are online streaming companies, online education startups, grocery delivery companies, and furniture rental startups, among many others.

What is the difference between e-NACH and e-mandate?

E-NACH (Electronic National Automated Clearing House) and e-mandate are two different services that allow companies to accept recurring payments automatically from users. While e-NACH is operated by the National Payments Corporation of India (NPCI), e-mandate is taken care of by individual banks.

What does the Reserve Bank of India say about recurring payments?

The RBI’s new rules say that starting October 1, 2021, banks will have to intimate customers via a message and email informing them that a certain amount of money will be deducted from their account. Banks will have to inform users at least 24 hours before the due date.

Additionally, if the subscription amount is more than Rs 5,000, customers will have to authenticate the payment with an OTP.

What happens if the payment fails?

Depending on the grace period set by the business, Paytm Payment Gateway retries to collect the payment. If the business gives their customers four days of grace period, Paytm Payment Gateway will try to collect payment once a day for four days.

Can customers cancel their subscriptions?

Yes, customers are free to cancel or modify their subscription either from the merchants’ app/website or the Paytm app.

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