Recurring Payment Transactions

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When consumers or businesses are billed regularly for services like Internet access, resulting in an automatic transfer of funds, a recurring billing transaction occurs. Recurring transactions can involve checking accounts or credit card accounts as the source from which funds are obtained. According to Credit Card Management, Visa indicated a 39-percent increase in recurring transactions during fiscal year 2000, totaling approximately $23 billion. The magazine indicated that recurring payments were a high-growth market in the early 2000s, especially among businesses like apartment management companies, cable TV providers, and health clubs. Additionally, a study from MasterCard revealed that "36 percent of customers with recurring billsfor such services as cable, utilities, telecommunications, and insurancewould readily switch to a merchant or service provider who offered them a credit card payment method for their recurring bills."

Recurring payments benefit the parties engaged in transactions in different ways. For companies engaging in e-commerce, they represent a measured flow of revenue, allowing merchants to foresee when and how much money they will receive from customers. For the banks that actually issue credit cards to consumers or business users, they represent an increase in interchange income (a merchant's bank pays a credit-card-issuing bank interchange fees for every transaction). Finally, recurring transactions represent convenience for consumers, who don't have to mail checks or money orders to pay bills.

Credit card companies were doing different things to encourage companies to promote recurring payments with their customers during the early 2000s.

Visa was testing a service that updated credit card information for merchants in the event that customers' cards were upgraded (for example, from gold to platinum status) or changed by an issuing bank. This helped to prevent charge-backs if consumers failed to provide the updated information to merchants. Additionally, MasterCard International's Service Industries Incentive Program, tailored to the telecommunications, utility, insurance, and cable TV industries, provided a host of benefits and incentives to merchants who promoted recurring transactions.


"The Challenge of Recurring Payments." Credit Card Management, July 1999.

Lucas, Peter. "New Markets for the New Century." Credit Card Management, December 2000.

"Service Industries Incentive Program for Recurring Payments." MasterCard International Inc., June 5, 2001. Available from

SEE ALSO: Acquiring Bank; Card-Issuing Bank; Charge-backs; Electronic Payment; Payment Options and Services, Online; Transaction Issues