Methods for accepting recurring payments with Precium

Recurring payment businesses are deeply reliant on the ability to successfully accept consistent, secure payments from customers. To ensure sustainable customer acquisition and retention, it is important for businesses to carefully consider the payment methods offered to customers at the start of their journey.

The category of ‘recurring payment’ business models is broad, stretching from low-value subscriptions such as on-demand delivery or streaming media services to high-value transactions such as insurance premiums or mobile data plans. 

Different payment methods offer distinct benefits – understanding these enables businesses to select an approach based on their transactional requirements, cost considerations, and customer experience goals. Precium offers merchants four payment options for processing recurring transactions: card, EFT debit order, DebiCheck, and Capitec Pay. 

In this article, we explore each of these options, covering their benefits, limitations, and ideal use cases to help executives make informed decisions about which recurring payment methods best align with their business needs.

Card Payments

Benefits

Card payments are an ideal option for businesses that value speed and customer convenience. With real-time processing at any time of day, card payments offer a seamless experience for both businesses and consumers. Card payments are typically tokenized using a once-off 3D Secure (3DS) one-time-pin (OTP), or selected businesses can make use of fully frictionless processing. When authenticated with 3DS, card payments are difficult to dispute, offering protection to merchants. Businesses making use of network tokenization also benefit from automated card-on-file updates when a card is lost or expires, removing the need for customers to manually update their card details.Card payments also allow for variable transaction amounts month-on-month and variable frequencies, offering full flexibility to merchants. 

Limitations

Despite these advantages, card payments may not be the most cost-effective solution for high-value transactions, as they incur a percentage-based fee. Additionally, card payments are subject to a moderate fraud risk, which may require businesses to implement extra security measures to protect against unauthorised charges. Businesses also need to consider the scope of their Payment Card Industry Data Security Standards (PCI DSS) compliance; working with a certified PCI DSS payment provider ensures that sensitive card details are securely captured and stored, without introducing additional compliance requirements for internal teams.  

Best For

Lower-value, high frequency or usage-based subscriptions, especially those where customer convenience and transaction speed are top priorities. This method is an attractive option for digital-first customers seeking a streamlined experience, particularly younger South Africans with less experience with debit order payments. Industry examples include on-demand delivery, software subscriptions, and streaming platforms.

EFT Debit Orders

Benefits

EFT debit orders offer a cost-effective option for recurring payments, particularly suited for high-value transactions and business-to-business (B2B) collections. To set up an EFT debit order, businesses create a “mandate”, where customers give permission for their account to be debited under specific terms and conditions. For EFT debit orders, mandates can be paper-based, voice-based (agreed on the phone), or digital. This method also allows for variable transaction values and all frequencies, giving businesses the ability to adapt payment amounts based on usage or other factors.

Limitations

EFT debit orders carry a higher dispute risk compared to other payment methods – customers can dispute transactions up to 40 days after the transaction date and when they do, the payment is automatically refunded. This presents a significant credit risk to businesses, particularly those serving customers with low, variable incomes. Beyond 40 days, customers can still dispute the charge however merchants have the opportunity to contest the dispute.

EFT debit orders are subject to bank cut-off times, where transactions are processed between specific times of day and not on Sundays and public holidays. Payments are processed in the “late collection window” (after DebiCheck transactions), which results in higher rates of failed payments. Failed transactions can take up to 72 hours to be confirmed by banks, impacting cash flow and reconciliation for businesses. In addition, consumers are also charged a high penalty fee for failed collections, which impacts customer experience and can erode their ability to pay for the service. 

Best For

High-value collections and B2B transactions, where transaction cost is a significant consideration. EFT debit orders are ideal for businesses seeking a cost-effective recurring payment option, where there is relatively low risk in their transaction book. Industry examples include investment contributions, business utility bills, and internet service providers.

DebiCheck

Benefits

DebiCheck is designed to give businesses and consumers greater security and assurance by enabling customers to authorise mandates electronically. This reduces the risk of unauthorised or fraudulent debits for consumers, while offering greater dispute protection for businesses. While also subject to bank cut-off times, DebiCheck is processed in the “early collection window”, typically resulting in higher success rates than EFT debit order. When payments fail, businesses can track customers’ accounts for up to ten days and automatically deduct funds when the account balance is topped up. DebiCheck offers fixed, variable and usage-based options for collection value, which is stipulated in the mandate. 

Limitations

DebiCheck is more costly than EFT debit order, with an upfront authentication fee and higher transaction costs. While the authentication process should in theory offer more dispute protection, many customers do not accept the mandate request, which increases disputability. Planned changes in the national payment system mean that these non-authenticated mandates (“Registered Mandates”) will be processed in the late collection window, potentially impacting success rates for merchants. Currently, DebiCheck does not work on business accounts with more than one signatory, limiting its applicability. Additionally, frequency options are restricted making it less suitable for businesses needing custom payment schedules.

Best For

Consumer-to-Business collections and businesses with high-risk transaction books. DebiCheck  Industry examples include insurance, lending, and vehicle leasing. 

Capitec Pay

Benefits

Capitec Pay is a secure, real-time payment solution designed specifically for Capitec customers, making it highly convenient for businesses with a large Capitec client base. This option offers no bank cut-off times and is not disputable, providing businesses with greater transaction security. Additionally, Capitec Pay supports variable transaction values, allowing companies to manage a range of subscription types and usage-based payments.

Limitations

Capitec Pay’s exclusivity to Capitec customers limits its reach compared to other methods. Moreover, customers can cancel their mandates and mandates expire at the end of the set frequency, which may require businesses to renew them periodically to ensure continuity.

Best For

Subscription-based businesses looking to serve a Capitec-focused customer base. Capitec Pay is an excellent choice for enterprises prioritising transaction security and real-time processing. Industry examples include software subscriptions, gaming, and streaming services. 

Comparing Key Attributes

Authentication  

Each method employs a unique form of authentication. Card payments use 3DS OTP, while EFT debit orders offer multiple mandate options, including paper, voice, and electronic mandates. DebiCheck mandates are authenticated electronically, while Capitec Pay relies on app-based authentication for secure processing.

Frequency  

Card, EFT debit orders, and Capitec Pay support any frequency, giving businesses full flexibility. In contrast, DebiCheck restricts frequency based on the mandate and options may be limited depending on the payment provider. 

Disputes  

Disputability is a critical consideration for businesses managing recurring payments. Card payments are challenging to dispute, providing a secure payment channel. EFT debit orders are disputable, while DebiCheck is disputable only if mandate terms are not honoured. Capitec Pay stands out as entirely non-disputable, offering complete payment assurance for businesses.

Processing Speed  

The processing speed varies significantly among these methods. Card payments and Capitec Pay offer real-time processing. DebiCheck is subject to bank cut-off times, but is processed in the early collection window and offers real-time collection results. EFT debit orders are both subject to bank cut-off times and processed in the late collection window, with delayed processing results for failed payments.

Fee Structure  

Card and Capitec Pay operate on a percentage-based fee model, which may be more costly for high-value transactions. EFT debit orders and DebiCheck, utilise a flat fee structure, making transaction costs more predictable and potentially more affordable for businesses with high recurring payment values. However, EFT debit order and DebiCheck have bank penalty fees for businesses and consumers, which impact customer experience and introduce “hidden costs”.

Selecting the Right Payment Method for Your Business

For enterprise businesses in South Africa, selecting the right recurring payment method requires balancing security, cost, and customer experience. Here’s a summary:

By carefully assessing the benefits, limitations, and ideal use cases for each payment method, businesses can optimise their recurring payment processes to better serve customers, improve revenue assurance and enhance operational efficiency. By partnering with Precium, businesses can selectively expose different payment options to customers based on predefined criteria plus tokenize a back-up payment method to increase success rates and recovery of failed payments. 

Get in touch with us to collaborate on your recurring payments strategy.

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