Recurring Payments in Brazil: A Comprehensive Guide for Your Cross-Border Business

The business world is full of challenges and competition. To keep up, payment strategies have rapidly evolved to meet the diverse needs of companies of all sizes and industries. Among the most significant trends is the adoption of recurring payments. Whether it’s for subscriptions, memberships, or payment plans, the recurring payment model has been steadily gaining prominence across diverse industries.

In this article, we will delve deep into the concept of recurring payments, providing you with insightful guidance for its successful implementation in the Brazilian market. Let’s begin! 

Understanding Recurring Payments

Recurring payments are a seamlessly automated billing model operating at predefined frequencies. Generally, these charges are processed via the credit or debit card details furnished by customers within the company’s system.

These charges can be scheduled weekly, monthly, quarterly, annually, or at any other agreed-upon frequency, established between customers and the company providing the product or service. This dynamic model is commonly utilized by streaming services – such as Netflix and Spotify – subscription clubs, apps, SaaS, gyms, and numerous other spheres.

Unpacking the Mechanism of Recurring Payments

Automatic recurring payments are based on the customer’s prior authorization and allow the company to charge them at regular intervals without manual intervention. This authorization typically transpires during the initial subscription or purchase. Once greenlit, the payment information is securely stored, facilitating successive charges without requiring customer intervention.

Additionally, certain companies may proffer this option via a recurring payment link. In this scenario, customers periodically receive pre-filled payment links through email or SMS. These links encompass purchase specifics and payment alternatives, such as local credit and debit cards, Pix, and even boleto bancário.

The distinguishing feature here is that, in this context, the payment process isn’t “invisible,” as customers must take action to complete the payment.

Understanding the Difference Between Recurring Payments from Credit Card Installment Payments

The main difference between installment payments and recurring payments is how they are processed for billing.

Credit card installment payments entail the division of the total purchase amount into fixed increments, with customers manually settling each installment as it falls due. Paying in installments is a popular practice in Brazilian e-commerce: 44% of all credit card purchases are paid in up to 12 installments, according to the Associação Brasileira de Comércio Eletrônico (ABComm).

On the other hand, recurring payments are set up using automation, where customers give prior authorization for automatic billings at regular intervals. This authorization is usually obtained during the initial subscription or purchase. This way, customers don’t have to use up a large portion of their credit limit when signing up for a plan or subscription.

While installment payments mandate manual tracking and execution, recurring payments proffer enhanced convenience to customers. Charges occur automatically, circumventing the need for manual intervention.

Businesses Adopting Recurring Payments

Recurring payments have a significant impact on various industries and businesses. Recurring payments have a significant impact on various industries and businesses. Enterprises offering subscription-based services, including streaming platforms, Software as a Service (SaaS), clubs, and fitness centers, represent the typical use of recurring payments.

In addition, e-commerce has also adopted recurring payments in various sectors. The increase in online stores in the past few years highlights the availability of the option to make repeated purchases of specific products from their selection. Pharmacies, supplement emporiums, and even supermarkets have embraced the prospect of recurring online purchases for their customers.

Advantages Galore: Recurring Payment Benefits

Offering the possibility of recurring payments to your customers can bring many benefits. Here’s how:

1. Predictable Revenue Streams

   For businesses, recurring payments offer heightened financial predictability, easing cash flow management. Moreover, an unceasing revenue inflow can prove pivotal for startups and small-scale enterprises striving for sustainable expansion.

2. Customer Loyalty Fortification

   Recurring payments confer convenience and ease upon customers, diminishing the need for manual payment initiation. In addition, having ongoing access to services or products can increase customer loyalty. When customers are happy with the quality of service and find payments easy to manage, they are more likely to remain loyal to the company for a long time.

3. Improved Customer Retention

   Businesses that offer the option of recurring payments often see a boost in customer retention rates. This leads to smoother service continuity and lower attrition. Customers appreciate the convenience and reliability of recurring payments, which can foster loyalty to the brand.

4. Elevated Lifetime Value (LTV) and Diminished Customer Acquisition Cost (CAC)

   Recurring payments correlate directly with an increased customer LTV. Prolonging customer retention translates to higher customer value over time. In addition, recurring payments can help reduce customer acquisition costs (CAC) as attracting new customers may be more challenging than keeping existing ones.

Overcoming Challenges in Recurring Payments

Although recurring payments can be advantageous, there are also challenges that need to be considered.

1. Upholding Security and Confidentiality

   To protect customer data, it’s important to have strong systems in place for managing sensitive information like credit card details. Therefore, it is crucial to carefully choose a Payment Service Provider (PSP) to safeguard customer financial information from possible threats.

2. Subscription Management

   A carefully crafted subscriber portal that enables customers to modify their subscriptions before canceling can be an effective method for improving customer retention and extending subscription duration.

3. Mitigating Payment Failures

   Sometimes, charges may fail because of glitches in payment processing. It is important to have payment recovery strategies in place to prevent these situations and ensure successful transaction completions.

Recurring Payment Methods in Brazil

There are various recurring payment methods available for e-commerce in Brazil, depending on what customers prefer and what companies offer. Some common options include:

Recurring payments offer numerous benefits to businesses and customers alike. By understanding the mechanics of this model, implementing best practices, and choosing appropriate recurring payment methods, companies can improve their financial management, increase customer satisfaction, and achieve sustainable growth.