Automatic Payments: Guide for business managers

The adoption of automatic payments not only streamlines the payment process but also enhances cash flow predictability. In this guide, we cover the what, why, and how increasing signups can boost company revenue and improve on-time payments.

Digital payments are now ubiquitous, with McKinsey reporting in their recent Digital Payments trends report that 2023 is the first year where more than 90% of consumers say they have made some form of digital payment over the course of the year.

What are automatic payments and how do they work?

Automatic payments, also known as recurring payments or autopay, are a financial transaction method in which a customer allows a business to automatically deduct funds from their bank account or charge their credit card to pay for goods or services at regular intervals. The process requires the customer to explicitly authorize the business to process a saved payment method on a regular basis.

1. Authorization: Customers provide their payment information and grant permission to the business to deduct a predetermined amount on a specified date or at regular intervals.
2. Processing: On the scheduled payment date, the business's payment processing system automatically initiates the transaction using the payment information.
3. Confirmation: Customers receive a notification confirming the successful payment, providing transparency and documentation.
4. Record-keeping: Businesses maintain consistent records of payments automatically, reducing the risk of errors and simplifying financial tracking.

According to “Streamlining Bill Payment,” which is based on a PYMNTS survey of 2,913 U.S. consumers, almost 39% of all consumers pay at least one monthly bill using Autopay.

Run a carefully organized campaign to increase signups

A well-executed automatic payment campaign can lead to improved cash flow and stronger customer loyalty.

1. Define objectives. Identify your baseline metrics: How many subscribers do you have currently? What % of total customers is this? What is the current monthly rate of signups? Evaluate the results of any emails or notifications that are already in place. By How much do you need to boost conversion?
2. Segment your audience. Categorize your customer base into segments based on factors like payment history, preferences, or purchase frequency. Obviously, remove any customers that are already on Autopay - you're going to thank them as part of this campaign.
3. Craft messaging across channels. Create compelling marketing materials and emails that emphasize the benefits of automatic payments, such as convenience, reduced administrative costs, and the potential to reduce late fees.
4. Curate incentives through Paylode. Provide perks or incentives to entice customers to sign up for automatic payments. Paylode can help you choose and negotiate a high-value perk that is unlocked after the customer takes an action, This incentive drives in-the-moment conversion rate increases.
5. Create email templates . Design an email series that educates customers about the advantages of automatic payments and highlights the perks they can enjoy by signing up. Craft compelling subject lines to capture their attention.
   
6. Prepare notifications. Have an expert copywriter review and improve the notification, in-app or account-based messages. What do users see when they log in or pay a bill?
7. Create a landing page that advertises the perk they can unlock. Develop a user-friendly landing page on your website where customers can easily enroll in automatic payments and see the perk they can unlock when the task is complete. Make the process intuitive and secure, and the perk valuable enough to want to click.
8. Thank existing autopay customers with a perk. When times get tough, people cancel autopay. Remind them of their benefits and offer a thank-you to keep them on track.
9. Launch, measure, and iterate. Continuously track campaign performance, analyzing metrics like open rates, click-through rates, and conversion rates. Adjust your strategy based on the data to optimize results.

Let's do the math

Imagine a scenario where a business with 1,000 customers achieves a 10% increase in automatic payment signups. We'll explore how this can translate into increased revenue and improved on-time payments for a product costing around $100 per month.

Total Customers: 1,000

Initial signups: 200 (20% of customers)

Increased signups: 20 (10% increase)

Average monthly payment per customer: $100

Revenue and on-time payments impact

Initial monthly revenue coming from Autopay: $20,000 (200 customers * $100)

Increased monthly revenue after campaign: $2,000 (20 new signups * $100)

Total monthly revenue after increase: $22,000 + ancillary revenue

Percentage increase in monthly revenue from Autopay: (Increased Monthly Revenue / Initial Monthly Revenue) * 100 = (2,000 / 20,000) * 100 = 10%

Increasing automatic payment signups not only boosts revenue but also improves on-time payments. When customers set up automatic payments, they are less likely to forget or delay payments, reducing instances of late fees and improving cash flow predictability.

Autopay creates more predictable, consistent revenue

Getting more automatic payments can streamline payment processes, enhance cash flow predictability, and improve customer satisfaction. By running strategic automatic payment campaigns and offering enticing perks as incentives, businesses can increase signups and enjoy the financial benefits that come with it.

The math behind this strategy demonstrates that even a modest increase in automatic payment signups can lead to substantial revenue growth and a significant improvement in on-time payments. As business operations professionals, embracing automatic payments and leveraging them to their full potential can be a game-changer for your organization, enhancing both efficiency and profitability. Compare these results with a paperless billing cost reduction campaign.