At UniBul Merchant Services we work mostly with e-commerce and MO / TO (mail order and telephone order) businesses and the topic of recurring payments naturally keeps popping up in our conversations with existing and prospective clients. We have of course written on the subject multiple times before, but it is worth revisiting it every few months and share anything new that we may have learned in the interim.
Recurring payment plans present merchants with many challenges they don’t get to deal with when processing one-time transactions. Such arrangements can last for years, during which time many things can and do happen that prevent a monthly payment from being processed, even though dozens may have previously gone through without a hitch. You need to know what can cause such issues and how to minimize the chance of it happening. Here are twelve tips to help you do just that.
12 Tips for Processing Recurring Payments
The following guidelines will help you set up a recurring plan correctly and manage each successive payment effectively:
1. Allow your customers to choose the billing date. Doing so will help ensure that funds are available in the cardholder’s account.
2. Inform your customers of how the transaction will appear on their card statements. The way your business name and phone number are displayed on your customer’s statements and in their transaction activity logs is managed through your merchant account‘s billing descriptor. Contact your processor and make sure that your billing descriptor is set up to correctly show your “Doing Business As” name and customer service phone number.
3. Clearly disclose your cancellation policy. To minimize chargebacks and comply with industry regulations, provide a concise, straightforward disclosure of your policy on both the service agreement and your website.
4. Provide details about the billing arrangements. Clearly disclose all charges related to the delivery of products and services.
5. Discontinue billing immediately upon cancellation. Provide customers with a cancellation confirmation that informs when the last payment will be processed, if one is still due, or, if applicable, when credit will be issued.
6. Inform customers of any delay in the delivery of products or services. Provide a new delivery date.
7. Provide a customer service phone number. There is no better way to resolve most issues than a phone conversation, so make sure your customers know how to contact you.
8. Inform customers of their right to terminate a recurring transaction. Recurring transactions can be cancelled and your customers need to know that.
9. Make sure that all payments receive an authorization approval. Even though you have your customer’s consent to process each payment of a recurring plan and have received an authorization approval for the first one, you still need to authorize each successive transaction before submitting it for clearing.
10. Include the Recurring Payment Indicator with all transactions. Contact your processor for assistance, if needed.
11. Ask for an alternative payment method if an authorization request is declined. Over time, payment information changes, even for active credit card accounts. At the very least, bank cards are renewed every few years and new expiration dates are issued, which alone may lead to an authorization decline. When that happens, request another form of payment and ask your customer to update her billing details.
12. Send a pre-billing notification 14 days before processing a payment. Do it regularly and you will see fewer customer disputes. Here is a sample of how such a notification should look:
To: customer email@example.com From: merchant firstname.lastname@example.org
Subject: Recurring transaction notification Date: 28 December 2011 04:26:13 -0500
Dear Customer Name,
This email confirms your authorization of the transaction listed below, entered on 12/28/2009 at 2:03:38 PM has been processed and will be debited from your account.
Transaction Origination Date: 12/28/2011
Name on Account: Cardholder Name
Description: Approved recurring charges on 2011-11-28
You have authorized Merchant Name Services, Inc. and you financial institution to initiate the transaction detailed below. You have acknowledged that the origination of debit or credit transactions to your account must comply with the provisions of local laws. This authorization is to remain in full force and effect until Merchant Name Services, Inc. has received written notification from you of its termination in such time and manner as to afford Merchant Name Services, Inc. and your financial institution a reasonable opportunity to act on it.
Processed for: Merchant Name Services, Inc.
Phone #: 800-111-1111
Email: merchant email@example.com
If you process higher volumes of recurring payments, you may want to consider enrolling into Visa’s and MasterCard’s card account updater services, which help keep information current by updating it every time there is a change in the account number, expiration date or some other item.
If you stick to these best practices and make them part of your payment processing routine, you will have fewer customer disputes and chargebacks to deal with. As you gain experience, you should add your own items to this list and I hope you’ll share them with the rest of us.
Image credit: Smpbank.lv.