Collecting Recurring Payments from International Clients
Many businesses are switching to a recurring service model. While it brings interesting benefits, especially to their cash flow, it also triggers a variety of concerns. How will international clients easily pay for a recurring service, and which payment methods do they prefer?
As a business owner, it’s in your interest to make the checkout process as seamless as possible. More often than not, it is assumed that accepting major credit and debit cards is enough. However, studies have shown that international clients might prefer a different payment option.
How Recurring Payments Work
Before we dive into data that shows what kind of payment options you should consider, this is an explanation on how recurring payments work. Assuming you decide to use a payment processor such as Stripe, you’d create a product for each of your services in Stripe (using their API). When a client subscribes to a service, their subscription will be linked to your product, an invoice will be generated automatically, and the payment deducted.
To achieve this flow, you need to set up a checkout form that asks all the relevant data from your client:
- Full name
- Email address
- Billing address
- Payment details
Once the client enters their payment information, for example, a debit card, its data will be encrypted, and stored on Stripe’s end. The payment processor creates a client profile with the saved card data so it can be used when a new payment is due.
With a client portal, you could allow your clients to manage their recurring service subscription, downgrade it to a lower-priced plan, upgrade it, or cancel it altogether. Not only does such a self-service feature improve the user experience, it also reduces your workload.
Payment Methods for International Recurring Payments
One thing businesses need to take into account is their target customer. Are they selling mainly to other businesses, or private customers? The latter are mostly fine with card payments. However, many business entities do not have corporate cards, or struggle to use them for online payments. There are many hurdles they need to overcome, but it largely comes down to their accounting department and card limits.
For B2B transactions, bank transfers are highly preferred, especially for large payments. However, international bank transactions are more often than not linked to a variety of complications, such as high fees for SWIFT transfers. It’s even harder to do them on a recurring basis.
Thankfully, payment processors have realized that there is a market gap for international recurring payments. Here are a few options you can use for your business:
- Stripe allows U.S. based companies to accept ACH payments
- Stripe allows businesses in the U.S., Europe, and select other countries to accept SEPA Direct Debit payments in EUR
- PayPal allows easy subscription payments for clients around the globe
It’s worth looking at the payment method acceptance across the globe as it can vary considerably from country to country. GoCardless has put together a guide for the preferred payment methods in Europe.
E-wallets such as PayPal are popular in select countries, for example France (10% of all transactions) and Italy (17.1%), but less sought after in Ireland. In Germany, the national Electronic Direct Debit accounts for every fourth transaction, while in The Netherlands, six out of ten transactions are processed through iDeal.
Processing Costs and Dispute Rate
Offering clients every imaginable payment method might seem like a way of improving the checkout rate. However, business owners should also consider that some payment methods require a higher processing cost, while others might increase the dispute rate.
Credit cards have an especially high dispute rate due to the fact that their owners can easily file a dispute with their issuer. Payment processors usually charge a fee every time a dispute is charged, and require the merchant to submit evidence that will be reviewed by the card issuer. The good news is that card chargebacks have gone down significantly over the past years according to a study published by MIDIGATOR.
The revenue lost to chargebacks varies between business sectors, but has decreased to less than four percent of the total revenue.
That being said, other payment methods have a lower chargeback and dispute risk (SEPA Direct Debit), while the situation with mobile wallets isn’t clear as of yet. Stripe is under the impression that they reduce fraud and increase the mobile checkout experience. However, some mobile wallets do not support recurring payments at this time.
Planning for the Future
If you just start accepting recurring services, keep an eye on payment trends. The share of each payment option has been changing over the last few years as this Statista table shows.
Digital/mobile wallets are becoming increasingly popular, especially in Asia where debit cards are rather uncommon, and bank transfers seldomly used. Most customers in this region use one of the leading wallets, such as Alipay, WeChat Pay, Paytm, and GoPay on their smartphone.
To accept as many payment options as possible, business owners should take a look at their preferred payment processor. Some of them are already offering mobile wallet integrations such as Apple and Google Pay. Stripe for instance runs a WeChat Pay beta some business owners might qualify for.
Collecting recurring payments from clients around the globe has become easier than ever. While each market prefers certain payment methods, businesses can continue focusing on card payments. On top of that, they should think about adding mobile wallets if they support recurring payments. Those who are active in the B2B space should consider integrating ACH and SEPA Direct Debit payments.