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Guide to recurring payments in e-commerce

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Last editedAug 20237 min read

Recurring payments in e-commerce refer to automated and regular financial transactions made between customers and businesses within the online retail sector. They occur on a predetermined schedule and are commonly used for subscriptions, memberships, and product replenishment. With popular payment methods like Direct Debit, bank payments, and card payments, businesses ensure seamless authorisation and consistent revenue. It streamlines financial operations and fosters customer loyalty.

Once you’ve won a customer, you want to keep them. The way to do this is to keep delivering value to them. Specifically, you need to keep offering them ways to improve their lives. A common strategy is to turn a one-off purchase into a repeating service offering. Implementing e-commerce recurring payments can play an important role in this.

The basics of e-commerce recurring payments

The terms “recurring payments”, “instalments”, “subscriptions”, and “card-on-file payments” are often used interchangeably. This is understandable because there’s a lot of crossover between them. In fact, more than one term can apply to any given transaction. They are, however, slightly different.

The term "recurring payments" just means charging a customer on a recurring basis. The amount may be fixed or variable. The payment term can be time-limited or ongoing. 

The term “instalments” refers specifically to making fixed payments for a specified period of time. Instalments are used as a way to make larger purchases easier to manage.

The term “subscriptions” refers specifically to making fixed payments on an ongoing basis. Subscriptions created through GoCardless can be scheduled to end after a certain number of billing cycles. This allows for opportunities to increase prices, automate fixed-term payment plans and offer financing by splitting a large purchase over instalments.

“Card-on-file payments” are payments made using card details that the merchant has already stored. They are often recurring payments, such as instalments or subscriptions. However, they could also be one-off payments.

The benefits of e-commerce recurring payments

E-commerce recurring payments offer numerous benefits to both merchants and their customers. All of these, however, effectively hinge on their ability to remove friction. In particular, they reduce the need for manual input on the part of both the customer and the merchant.

The customer only has to provide their payment details once. The merchant only has to set up the recurring payment once. After that, the payment literally takes care of itself. The merchant gets secure, predictable income and can also plan their inventory more reliably. The customer gets affordable, predictable expenses. This makes it easier for both to manage their cash flow.

On a broader level, the fact that the merchant and the customer have an ongoing relationship can create the potential for that relationship to develop. At a minimum, the merchant will have an ongoing opportunity to show that they are worth the customer’s trust. This can give them a strong edge when it comes to winning future business.

The practicalities of e-commerce recurring payments

The whole point of implementing e-commerce recurring payments is to reduce friction. That starts with your choice of payment methods. Your three main options are card payments, bank payments and e-wallets. 

Card payments are often the default choice, followed by e-wallets, mainly because they are very convenient. But because most e-wallet transactions are backed by debit or credit cards, they will be impacted by the same problems associated with card payments. 

Payment failure

Card details need to be regularly updated because they can be lost, stolen, expired and therefore cancelled, resulting in payment failure rates of between 10 – 15%. Failed payments cause cash flow issues, create time-consuming manual admin and result in customer churn.

By contrast, bank payments are pulled directly from the customer’s bank account. Bank accounts do not need to be updated every few years, and they cannot be lost, stolen or cancelled. 

Flexible and secure

Bank payments are generally used for recurring payments, but they can be used for one-off single payments as well. Bank payments can be pull-based, granting you control over the payment amount and date. Bank payment schemes grant consumers strong protections, offering peace of mind.


Card payments are less cost-effective, as fees can add up and take a significant chunk of your revenue. They are routed through a network of intermediaries, each of which adds a fee, raising the overall cost of each transaction. Bank payments can offer lower fees because, as direct bank transfers, they have less complex processing requirements, eliminating “middlemen”.

Payment visiblity

There is also the matter of payment status visibility, which card payments only offer at the initial approval stage – visibility beyond that is limited at best. Bank payments benefit from integrated notification systems for failed or returned transactions, offering greater visibility throughout the payment process and allowing businesses to track payments more comprehensively.

International payments

If you serve international customers, it’s crucial you give them options when it comes to payment methods. 76% of international consumers express their preference for being able to pay in their local currency, and bank payments offer you the chance to provide those local options – something that has been shown to increase sales.


If your customers are predominantly UK-based, GoCardless also offers an Instant Bank Payments service for when you need your funds to be confirmed immediately. This means that you take a mixture of recurring and single payments without having to collect card details or use an e-wallet.

Key Takeaways

Card payments are well-suited for e-commerce, as they are convenient and globally accessible. They offer a hassle-free and widely accepted method for customers to make online purchases, eliminating the need for physical cash or complex payment processes. But they do have their issues.

Payment failure

One of the major challenges with recurring card payments is the frequent occurrence of declined transactions and expired cards – resulting in high failure rates, usually between 10 - 15%. By offering bank payment options, you can minimise these issues, as bank accounts do not become lost, stolen or expire. 

Adding bank payments to your payment mix can significantly improve your ability to manage recurring payments effectively.  GoCardless collects 97.3% of payments on the first attempt, cutting involuntary churn and increasing lifetime value and ROI. With GoCardless, you can retry failed payments from inside the merchant dashboard, either manually or using our automated intelligent retry product Success+, increasing the rate of successful collection.

Manual Admin

Integrating bank payments into your payment mix can eliminate the need for manual admin, as bank account details typically remain consistent for longer periods, reducing failed payments and the administrative burden and saving you precious time. 

You can use GoCardless to automate bank payment collection, allowing you more time to prioritise customer service and business growth. Setting up payments takes just a few clicks in the merchant dashboard, and with over 350 software integrations, you can automate the entire collection and reconciliation process with GoCardless.

Transaction fees

Processing card payments often translates to higher fees and interchange rates that can impact your business's profitability. Bank payments come with lower processing costs because unlike card payments there is no network of intermediaries adding on fees. The direct nature of bank payments makes them the cheaper option and allows you to save on transaction fees and allocate resources more efficiently.

Payment visibility

Card payments offer limited information during the processing period, so if you want greater visibility over payment statuses, bank payments are your best bet.  GoCardless merchants can use the merchant dashboard to review payment status and receive instant notification if a customer cancels their payment instructions.

International payments

And when it comes to collecting payments from international customers, GoCardless offers cross-border, direct account-to-account bank payment options in over 30 countries, with low transaction fees and using the Real Exchange Rate.

Case Study: bigblu

bigblu, a provider of satellite broadband services across Europe, faced challenges with processing monthly Direct Debits and high credit card failure rates. 

Seeking a streamlined solution, they integrated GoCardless, eliminating the need to engage with multiple banks and encouraging customers to switch from credit card payments to Direct Debit. The results were remarkable, as Craig, Head of Billing & Credit Control at bigblu, explained: 

Payments became more seamless and far less resource-intensive. The biggest benefit is the faster allocation of payments. Overall, we probably save two hours a day not having to do manual allocations.

The successful integration and process improvements enabled bigblu to increase Direct Debit payments from 12% to nearly 80%, enhancing revenue security. 

Generally, Direct Debit payments have the lowest failure rate, and we average around 97-98% success rate collecting payments with GoCardless across all territories.

The success of the UK integration led to further expansion across multiple countries, such as Spain, Portugal, Germany, France, and Italy. Craig highlighted the importance of communication and choice in incentivising customers, mentioning a campaign to encourage Direct Debit adoption:

In just a few months, we migrated some fairly large customer bases and almost trebled the volume of payments that went through GoCardless.

The transformative impact of GoCardless has attracted interest from other areas of the business, and bigblu continues to work with GoCardless and Kick to automate Direct Debit processing and integrate it with other payment systems, leading to additional commercial benefits.

GoCardless has been very easy to contact and very supportive. We now have a new project ongoing with another brand within our parent company. The fact that we have managed to push GoCardless further into the business is a testament to its success. This will offer yet more commercial benefits for us as a business, and implementing GoCardless on the new brand will also be of huge benefit to our customers.

GoCardless makes it easy for businesses to save time, money and stress collecting recurring payments.

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Setting up payment collection is fast and efficient with GoCardless. By automating the payment collection process, GoCardless drastically cuts down the administrative responsibilities of managing and tracking failed payments for your team.

GoCardless makes it quick and easy to get started with no contracts or long-term commitments required. You can set up instant, one-off, or recurring payments in the merchant dashboard in just a few clicks. GoCardless automatically creates and sends all the necessary forms, doing all the heavy lifting for you. You can also connect to GoCardless via over  350 partner apps, such as Xero and Quickbooks.

Discover how GoCardless can automate payment collection, making it easier for you to concentrate on what matters most - your business growth.

FAQ: recurring payments in e-commerce

What is recurring in eCommerce?

Recurring payments in eCommerce, including Direct Debit and card payments, are essential for subscription services and recurring purchases. Direct Debit enables businesses to collect funds directly from a customer's bank accounts, while card payments involve authorised charges to credit or debit cards. These automated payment methods provide convenience for customers and a steady revenue stream for merchants. By streamlining payment processes, eCommerce businesses can enhance customer satisfaction, cash flow, and long-term relationships.

Please note that the specific payment methods mentioned, such as Direct Debit, BECS, and card payments, may vary based on the country and market context.

What is an example of a recurring payment?

An example of a recurring payment is a monthly subscription fee for a streaming service like Netflix or Spotify. When you sign up for these services, you typically agree to pay a fixed amount of money on a regular basis, usually monthly, to continue accessing their content. The payment is automatically deducted from your chosen payment method, such as a credit card or bank account until you cancel the subscription. 

Other examples of recurring payments include monthly utility bills, gym memberships, insurance premiums, or even monthly mortgage or rent payments.

Which payment method is best for e-commerce?

The best payment method for e-commerce depends on various factors, including the target audience, geographic location, and the nature of the business. It's important to consider offering multiple payment options to accommodate different customer preferences and increase conversion rates. Additionally, ensuring the security and reliability of the chosen payment methods is crucial for building trust with customers and protecting sensitive financial information. Here are some popular and widely used payment methods in e-commerce:

  1. Credit and Debit Cards: Accepting major credit and debit cards, such as Visa, Mastercard, American Express, and Discover, is essential for most e-commerce businesses. Card payments are widely trusted and convenient for customers.

  2. Digital Wallets: Digital wallets like PayPal, Apple Pay, Google Pay, and Amazon Pay offer a quick and secure way for customers to make online payments. They store payment information and facilitate fast checkout processes.

  3. Bank Transfers: Some customers prefer to pay directly from their bank accounts through bank transfers. This method is commonly used for recurring payments or larger transactions.

  4. Cryptocurrencies: Accepting cryptocurrencies provides an alternative payment option for tech-savvy customers interested in decentralised digital currencies.

  5. Buy Now, Pay Later (BNPL): BNPL services, such as Klarna, Afterpay, or Affirm, allow customers to make purchases and pay for them in instalments over time. This can help increase sales by offering flexible payment options.

  6. Mobile Payments: With the rise of smartphones, enabling mobile payment options like mobile wallets or in-app payments can enhance the convenience and user experience for customers.

Local Payment Methods: Depending on the target market, it may be beneficial to offer local payment methods. For example, in certain regions, local bank payment schemes or prepaid cards may be preferred by customers.

Over 85,000 businesses use GoCardless to get paid on time. Learn more about how you can improve payment processing at your business today.

Interested in automating the way you get paid? GoCardless can help
Interested in automating the way you get paid? GoCardless can help

Interested in automating the way you get paid? GoCardless can help

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