A Simple Explanation of …“What are Recurring Payments?”
We are building Amplify to be the go to platform for recurring payments, so it gets a bit funny when a prospective client or partner, ask a question we consider the answer to be obvious.
The question usually comes in the form “What is recurring payment?” or “What are recurring payments”.
I wrote this post so that I can literally just tell anyone that asks me this question to go lookup and read this summary.
So what are “Recurring Payments”?
Recur /rɪˈkəː/: occur again periodically or repeatedly
Payment /ˈpeɪm(ə)nt/: the action or process of paying someone or something or of being paid.
A recurring payment in simple terms is any payment that happens repeatedly or periodically. When you are paying someone or paying for something repeatedly or periodically, it is a recurring payment. The payment could be daily, weekly, monthly, quarterly, bi-annually, annually or any similar schedule, depending on the product or service. In fact any same product or service you pay for more than once to have access to, falls under recurring payments.
The more generic form of payment is the one-time payment where you buy a product or service and pay for it once. Interestingly enough, there are lots of payments that are recurring in nature that just do not seem obvious.
Obvious examples of recurring payments include: newspaper and magazine subscriptions, subscription to satellite TV (DSTV, GoTv, etc) monthly mobile data subscription, subscription to content streaming services (Iroko, Netflix, Apple Music, etc), monthly internet subscription (Swift, Spectranet, Smile, etc), software subscription (Google Apps, Basecamp, Github, etc)
Using the above examples, it becomes tempting to generalize all recurring payments as subscription payments and that would not be totally wrong.
The less obvious examples that extends recurring payments far beyond subscriptions include loan repayments, tithe payments, utility bills, premium contributions, pension contributions, salary payments, school fees payments, corporate contributions, and many more.
Another point worthy of mention is the fact that recurring payments are usually associated with payments that are fixed in nature. But looking at the second set of examples, recurring payment amounts can also vary. The fact that your PHCN bill this month was N4500 and last month was N4230 doesn’t disqualify it as a recurring bill.
As an individual, if you pay for any of the products or services I gave as an example above, you are paying recurring bills. Businesses who charge their customers regularly for these services are accepting recurring payments. More broadly, payments like salary that applies to both individuals and businesses is also a form of recurring payments, especially considering that most salaries do not change on a monthly basis.
As for the difference between recurring and one time payment, one answer I like to give is that a one time payment is a recurring payment that happens once. When you buy a shirt on Konga, you are not required to pay more than once for the shirt, this is a typical one-time payment that everyone easily understands.
As a customer, you can authorize a company to collect a recurring amount you are paying from your ATM card or bank account on a regular basis. The reason to do this is because of convenience as it takes away the need for always remembering to pay your bills and prevents being cut off from a service you really need.
For businesses that have a need to accept recurring payments, they can automate the process by using Amplify. The advantages for a business includes ease of predicting cash flow, ensuring prompt payment from customers, significant reduction in the cost of collection, less involuntary customer churn (big term for losing customers that still want your service) and other similar benefits.
If you run a business that has a need to collect any of the type of payments described above, feel free to check out our website on www.amplifypay.com or send an email to firstname.lastname@example.org. We help Nigerian businesses accept and manage recurring payments online.