Recurring payments: what they are, how they work, benefits, and challenges in Latin America

What is a recurring payment?

A recurring payment, also known as autopay, is a billing model in which customers authorize a business to automatically charge them periodically, typically monthly or annually, without manual intervention.

This payment option is used by service providers that offer subscriptions: streaming platforms like Netflix, gyms, software as a service (SaaS), and more.

Types of recurring payments

There are two recurring payment systems that can be automated depending on the type of service offered: fixed or variable .

Fixed recurring payments

These are recurring charges made at a specific frequency (monthly, quarterly, annually) and for a fixed amount. The customer always pays the same amount, regardless of how much they use the service.

This process is ideal for flat-rate subscription services, such as educational platforms, digital services, or gyms.

Variable recurring payments

These are recurring charges whose collection frequency is fixed, but the amount varies depending on the customer's consumption or behavior.

This type of charging is common for services such as telephony, energy, e-commerce, cloud computing, and on-demand platforms.

Recurring Payment vs. One-Time Payment: What's the Difference?

The main difference between a recurring payment and a one-time payment is the frequency and continuity of the transaction .

• Recurring payments allow you to automate payments over a defined and consistent period of time.
• A one-time payment, on the other hand, is made only once for a specific product or service.

The recurring payment model is ideal for companies looking to scale operations and build long-term relationships with their customers, as is the case with subscription or on-demand services.

On the other hand, a one-time payment is more convenient for new customers with one-time purchases, where each transaction requires a new authorization from the user.

How do recurring payments work?

A recurring payment system consists of the following steps:

1. Customer consent: It all starts when the user agrees to be charged periodically using their preferred payment method (credit or debit card, bank account, or digital wallet).
2. The billing logic is defined: the frequency (monthly, annual, or other), the amount to be charged, and the plan terms are established. This configuration is recorded in the company's system or API.
3. The payment method is securely recorded: payment information is not stored directly, but is encrypted and stored under security protocols such as PCI DSS, thus avoiding the direct management of sensitive data.
4. The system automatically triggers payments: with the logic already configured, the payment services engine executes each transaction on the corresponding date, without the need to manually trigger each operation.
5. The payment method is validated before charging: the system verifies that the payment method is active and has available funds, which reduces rejections and improves the success rate.
6. The payment is collected and the systems are updated: once everything is validated, the amount is charged and subsequent actions are automated: sending a confirmation, issuing an invoice, or updating a subscription.

Benefits of recurring payments

For companies

• Predictable Revenue: Businesses can anticipate a steady stream of revenue, facilitating financial planning and growth.
• Improved cash flow: By receiving recurring revenue, payment and cash management improves, operating expenses are covered, and strategic investments can be made.
• Customer retention: The subscription model fosters loyalty, as subscribers tend to stay with the service longer.
• Payment automation: The payment gateway handles payment processing without manual intervention, reducing errors and administrative tasks.
• Improved user experience: By simplifying the checkout process, friction is reduced, improving satisfaction and reducing the risk of churn.
• Business model scalability: allows for better subscription management with different plans, upgrades, or complementary services, easily tailored to user behavior.
• Fewer careless cancellations: A well-implemented system reduces unintentional cancellations due to forgetfulness or lack of reminders.

For customers

• Convenience: Automatic payments eliminate the need to remember payment dates or complete transactions manually.
• Simplified financial management: Recurring payments help users plan their budget more accurately by knowing how much they will spend each month on essential services.
• Continuous access to the service: the customer does not run the risk of losing access due to forgetting to make a payment.
• Greater predictability: By maintaining a stable payment pattern (especially on fixed plans), the user reduces surprises or unexpected charges.
• Customization options: Some services allow for easy plan changes based on changing needs, giving the customer greater control without the hassle.

Challenges of recurring payments

• Risk of non-payment or cancellations: Customers can cancel at any time or experience problems with payment methods.
• Technical or administrative complexity: Implementing an automatic collection system requires proper integration and constant monitoring.
• Post-sale relationship management: Active communication is essential to retain customers and prevent cancellations.
• Transparency and trust: Users must be clearly informed about the terms, fees, and ease of cancellation to avoid friction or mistrust.

Maximize your recurring payments with Rebill

At Rebill , we make it easy to manage subscriptions and recurring payments throughout Latin America, enabling businesses to accept cards, transfers, and e-wallet payments from a single payment platform.

Our technology allows you to design flexible plans: with free trials, customizable payment cycles (monthly, quarterly, annual), specific payment dates, and duration limits defined by installments or due dates.

Automate payment recovery with smart retries—recovering up to 71% of declined payments—and reduce churn without manual intervention.

Additionally, we offer secure payment method tokenization to prevent your customers from having to re-enter their information, among many other features that improve your recurring billing process.

If you're looking for a flexible, secure solution designed to grow with you, contact us and discover how we can transform the way you collect payments in key Latin American markets.