Unlocking Growth Potential: A Comprehensive Guide to Recurring Payments for Small Banks and Credit Unions

Are you struggling with manual payment processing? 

If you’re a bank or credit union with customers with diverse payment needs, methods, and schedules, managing regular payments can be a never-ending task. Moreover, the growing demands on your institution can quickly become overwhelming and nerve-wracking. 

Convenience and automation, therefore, become necessary in the banking industry. And this is where recurring payments enter.

In this comprehensive guide, we will explore the concept of recurring payments, its benefits, and how to integrate it into existing models to streamline their payment operations. 

Let’s get started.


What are Recurring Payments?

Recurring payments automate the process of regular financial transactions by authorizing the bank to withdraw funds from a customer’s account on a specified schedule.

Such payments benefit both customers and financial institutions by allowing customers to use different payment methods like ACH processing, credit cards, debit cards, or SMS payments without having to set constant reminders and enabling banks to accommodate various types of recurring payment schedules, such as fixed and variable amounts or specific dates.


Automate Payments Collection with Powerful Recurring Payment Solutions


Why Should Small Banks and Credit Unions Consider Recurring Payments?

Many banking institutions’ day-to-day tasks revolve around collecting payments from their regular customers. Therefore, automating the process via recurring payments impacts banking institutions on several levels. Here are some benefits of recurring payments that small banks and credit unions can enjoy:

1. Enhanced Customer Loyalty

Recurring payment services enable banks and unions to offer a convenient and seamless payment experience, which can improve customer satisfaction and loyalty to build stronger relationships with customers. Customers who regularly use recurring payments are more likely to stay with a bank or credit union over the long term.

2. Increased Customer Retention

As mentioned above, convenience and seamless experience prompt customers to stay with a bank or credit union for a longer term. Moreover, when customers have their recurring bills set up with a financial institution, they are less likely to switch to a competitor. The stability in customer relationships becomes a valuable asset for small institutions who wish to grow their customer base.

3. Improved Cash Flow 

Recurring payments provide a predictable and steady source of revenue for small banks and credit unions. By facilitating automated recurring transactions, banks and credit unions can rely on regular inflows of funds, which can help with financial planning, budgeting, and business expansion. 39% of consumers pay their monthly bills on time through automatic payments.

4. Improved Operational Efficiency 

Automating the payment process eliminates manual intervention, paperwork, and administrative tasks involved with payment processing, minimizing the expense. This frees staff to focus on other critical customer service areas and value-added activities.

5. Competitive Advantage

Small banks and credit unions enjoy a competitive edge in the market as they can differentiate themselves from competitors and attract customers who value the convenience and efficiency of recurring payments.


How Do You Implement Recurring Payment Solutions?

Now that we have explained the benefits and impact of implementing recurring payments into workflow let’s explore how to implement it without getting “Payment Blues.” 

1. Choose a Payment Gateway or Processor

When implementing recurring payment solutions into your payment processing system, it’s essential to carefully plan and consider several factors before choosing the right operator. Consider the following while researching:

  • Identify your business’s immediate and long-term requirements and goals.
  • Analyze your current systems and processes to identify challenges, weaknesses, and strengths and determine the most effective way to incorporate recurring payments. 
  • Ensure that the recurring payment solution seamlessly integrates with your legacy systems.
  • A Federal Trade Commission (FTC) study revealed that fraud losses in 2021 increased by 70% over 2020, with a total loss of $5.8 billion. Check for robust security measures to safeguard customer information.
  • See if they are PCI-compliant and have the necessary certification.

Pro tip: Opt for Nacha preferred solution providers.


Download our Guide on 6 Strategies to Optimize Your ACH and Merchant Services  Account

2. Negotiate and Sign the Deal

Connect with the narrowed-down list of providers to discuss their offerings, payment methods, customer support, subscriptions, and hidden fees. Take advantage of the first offer. Negotiate your way in to find a mutually-beneficial deal

3. Integrate the Payment Gateway

Let your third-party solution provider integrate the model into your application or website. Define your subscription plans and pricing structures. Determine each plan's frequency (e.g., monthly, yearly) and billing amount. 

Pro tip: Consider offering different tiers or options to accommodate customer preferences.

4. Manage Payment Failures

Ensure that the third-party solution provider sets up systems to handle failed payments due to reasons like expired credit cards or insufficient funds. Set up processes to notify customers about failed payments and prompt customers to update their payment information.

5. Test and Deploy

Thoroughly test your recurring payment system in a staging or development environment before deploying it to production. Perform end-to-end testing to ensure proper functionality, handle edge cases, and verify integration with the payment gateway.

6. Monitor and Optimize

Continuously monitor the performance of your recurring payment system, gather customer feedback, and make improvements based on user experience and business needs. 


Optimizing Customer Experience with Recurring Payments

All your investment will amount to zero if your customers do not adopt it, so optimizing the changes to enhance customer experience and satisfaction becomes integral to setting up recurring payment solutions:

  • Simplify the customer journey by providing intuitive and easy-to-use interfaces. 
  • Minimize the number of steps required to set up recurring payments and ensure that the process is easy to understand and navigate.
  • Communicate the terms and conditions of recurring payments to customers, including the billing frequency, amount, and any additional charges. 
  • Send automated reminders to customers before their recurring payments are due. 
  • Offer responsive and knowledgeable customer support to address any questions or concerns related to recurring payments. 
  • Empower customers to manage their recurring payments through self-service options. A study reveals that 73% of customers want to solve product or service issues independently.

Successful Implementation of Recurring Payments

Mashreq Bank, a leading acquiring bank in the United Arab Emirates, aimed to tap into the growing e-commerce potential. Still, doing so at scale with an increasing customer base and traditional payment processing took a lot of work.

To stay ahead of the curve, Mashreq Bank partnered with Mastercard Payment Gateway Services to integrate its reliable and secure white-label payment gateway, enabling the bank to offer its merchants fast, innovative, and highly secure recurring payment options. This strategic move allowed Mashreq Bank to witness a remarkable 126% year-on-year increase in transactions processed through its gateway in 2019 alone. They also contributed to the UAE government’s vision of cashless transactions by 2021.



Marketing and Promoting Recurring Payments

While you can wait for your customers to adapt to the change, an intelligent approach is to encourage your users with subtle marketing practices. Using different marketing channels like social media, emails, SMS, and referral programs, you can improve adoption at a fast pace.

  • Use targeted emails to inform customers about the convenience and advantages of recurring payments.
  • Create a knowledge base on your website to explain recurring payments and address common questions.
  • Implement a referral program to incentivize customers to refer others who sign up for recurring payments.

Future Trends in Recurring Payments

The payment processing landscape is continuously evolving with developing artificial intelligence, technological advancements, and changing customer preferences. We expect a few of these trends to emerge:

  • The Global Subscription/Recurring Billing Management Market size is estimated to reach USD 22,768.38 million by 2030.
  • More individuals and businesses will embrace digital banking and automated financial management.
  • Recurring payments will integrate with voice assistants, smart devices, and IoT technology to offer effortless and enhanced customer experience.
  • Mobile banking will continue to evolve, resulting in more seamless and user-friendly recurring payments on mobile devices, with improved functionality, customization options, and real-time notifications.
  • AI and data analytics will optimize recurring payments by analyzing customer data to offer valuable insights for personalized offers, reminders, and better payment schedules.

Reach Out to iCG Experts

We hope this guide provides a clear insight into recurring payments, helping small banks and credit unions build a future-proof payment processing system. By understanding, implementing robust solutions, and staying attuned to future trends, these institutions can enhance operational efficiency and customer experience

Do you have any questions, or are you ready to start your recurring payment journey? Reach out to one of the experts at iCheckGateway.com.

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