Recurring payments are transactions that repeat at regular intervals, such as weekly, monthly, or annually. They are the cornerstone of subscription business models, allowing entities to buy and sell continuous access to a product or service. Whilst these are now commonplace in the world of consumer retail, the adoption of recurring B2B payments is still in a relatively early stage.
There are two types of recurring payments: push and pull. With push payments, like bank transfers, the customer initiates each payment. This gives them control but creates uncertainty for the business. Pull payments, like bank direct debit, give the business control as payments are pulled automatically on the due date.
Pull-based recurring payments are ideal for managing B2B subscriptions. They let businesses take control of getting paid, avoiding late payments, and unnecessary admin costs. Customers authorise them upfront, and funds are deducted on schedule. This predictability is key for subscription companies to forecast revenue and leverage growth opportunities.
Offering flexible recurring payment methods tailored to customer preferences boosts conversion and retention as businesses expand internationally. Optimising the billing experience is critical, as recurring payments are a continual touchpoint with subscribers. Recurring pull payments allow businesses to focus resources on core operations, not payments.
Recurring payments are ideal for any business model that involves ongoing access to a product or service. Some use cases for this are software subscriptions, equipment rentals, or membership sites.
The reason why recurring billing is so appealing is that it provides predictable cash flows for companies. With payments set to automatically pull on a fixed schedule, businesses can reliably forecast revenues from subscription or usage fees. Recurring pull payments also reduce uncertainty compared to invoice-based models, where the onus is on the customer to actively push through each payment. When payments are pulled automatically, businesses can rest assured funds will be collected on time without having to continually follow up to reduce late payments.
Beyond predictable revenues, recurring billing also provides companies visibility into their financial pipelines based on scheduled future payments. For any business that charges ongoing fees for access to products or services, implementing recurring pull payments like bank debit can transform financial operations by enabling reliable revenue forecasting and reducing payment failures.
There is a plethora of recurring billing providers operating in the B2B ecosystem. For those initially focused solely on subscription order-to-cash workflows and business operations, integrating recurring payment processing functionalities is a natural evolution to enhance their comprehensive offering.
Several players leverage payment service providers to add recurring payment capabilities to their offerings. Chargebee has developed its recurring billing capabilities by integrating with payment gateways such as Stripe or PayPal to run their recurring payment collection processes along with invoicing and notification reminders. Recurly’s subscription billing and management platform has had success stories such as LiveChat – which is now able to offer its recurring payments capabilities to over 200,000 subscribers. Recurly’s revenue recovery features increase retention and mitigate churn by reclaiming lost revenue from failed renewals. The San Francisco-based fintech integrates 15 gateways in more than 50 countries. GoCardless uses its global bank network to collect bank-to-bank payments for invoice payments. This solution targets small and large businesses.
Others do it a different way. BlueSnap, a B2B payment platform, has integrated Armatic in 2019 to add accounts receivable (AR) and invoicing automation. In this case, the automated invoicing solution has enabled the recurring payment capability for BlueSnap. In a conversation with Casey Griswold, who leads the GM Invoicing Solution within BlueSnap, he noted that he has witnessed the impact that this new layer has had on BlueSnap’s customer base: ‘Customers have started to experience a decrease ranging from 30% to 60% in their Days Sales Outstanding (DSO) as well as a reduction in the resource requirements for managing their AR process’.
The AR automation market is today still relatively untapped in contrast to subscription management solutions focused on B2C. There is room for growth in automating B2B recurring payments in AR solutions. Accounts receivable automation has historically been very manual and lacking in innovation compared to other business functions. Most companies still use Excel or basic accounting software to manage AR. Yet, enterprise resource planning (ERP) systems such as NetSuite and Sage are building more subscription management capabilities natively, which could reduce the need for separate solutions.
Buyers reluctant to use recurring billing often express concerns about feeling locked into agreements that restrict their flexibility to switch suppliers easily. Vendors can mitigate this concern by communicating transparent terms, applying no-penalty cancellation fees, and offering flexible account management features such as pausing. Recurring billing may also help buyers optimise their budget predictability. If operated on a larger scale within the organisation, reconciliation, procurement, and payment costs can be significantly improved.
EDC sees more solutions to be integrated into the recurring payment offer. Instalment plans to provide buyers with further payment flexibility and dynamic early payment discount offers triggered by the supplier via the recurring billing solution are among the initiatives that can help refine the B2B recurring payment offer.
This editorial piece was first published in The Paypers' Cross-Border Payments and Ecommerce Report 2023–2024, which taps into the fast-growing cross-border market and provides a comprehensive overview of trends and developments that are pivotal in this space, being the ultimate source of information for ecommerce businesses interested in expanding globally.
As a Manager at EDC’s Paris office, Louis enjoys witnessing the modernisation of payments and payment-related processes in B2B ecosystems reshape the financial institutions landscape.
An Associate Consultant at EDC’s London office, Euan has worked on consulting projects with EDC’s global client base and is also a core member of EDC’s M&A Advisory team.
Edgar, Dunn & Company (EDC) is an independent global payments consultancy. The company is widely regarded as a trusted adviser, providing a full range of strategy consulting services, expertise, and market insights. EDC expertise includes M&A due diligence, legal and regulatory support across the payment ecosystem, fintech, mobile payments, digitalisation of retail and corporate payments, and financial services.
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