How to Set Up Recurring Payments in Your Online Business

Imagine having to remind your customers to pay you at the end of every month to avoid overdue payments. Some will forget, others might delay, and a few will drop off entirely. For businesses, that would mean lost revenue and unnecessary friction.

Thankfully, that’s not how most modern payments work. If you’ve ever paid for cloud hosting to run your websites and applications, or used developer tools that charge a monthly subscription, you’ve probably noticed something. You didn’t have to log in at the end of every month and click “pay.” Instead, the payment was handled through automatic recurring payments. That’s the beauty of recurring payments. Once a customer signs up, the system takes care of billing on a regular schedule, whether that’s weekly, monthly, or yearly.

For online businesses, recurring payments are especially valuable when the model is built around subscription payments. Think meal plans, fitness memberships, or beauty boxes. By automating billing, you reduce the risk of missed payments, enhance customer satisfaction, and encourage stronger, longer-lasting customer relationships.

In this guide, we’ll break down what recurring payments are, how they work, and how you can set them up in your own application.

What are Recurring Payments?

Recurring payments are a convenient, automated way for subscription-based businesses to collect payments at regular intervals (weekly, monthly, yearly, and so on) without requiring customers to manually initiate the transaction each time.

They are commonly used for:

• Subscriptions: Subscriptions are those recurring payments you make to keep enjoying a service without interruption. Think of streaming platforms like Netflix or Spotify, or even business tools like Slack and Zoom. Instead of paying once, you pay a set fee every payment cycle (monthly or annually) to get continuous access.
• Memberships: Memberships also run on recurring payments, but with a focus on belonging or access to a group. For example, a gym charges you every month to remain an active member, while an online community might do the same to give you ongoing access to resources, events, or networking opportunities. The recurring payment keeps your membership status active.
• Installments: Installments are recurring payments toward a one-time purchase. Instead of dropping a large sum of money at once, you spread it out over a few months. For example, you might buy a phone on a 12-month payment plan.
• Utility bills: Utility bills are recurring payments tied to essential services. You’re billed every billing cycle (often monthly) for the ongoing use of internet, electricity, water, or insurance coverage. These payments are continuous for as long as you use the service, making them one of the most predictable types of recurring expenses.

No matter the business model, recurring payments usually fall into two categories:

1. Fixed Recurring Payments: With fixed recurring payments, the amount charged remains the same each billing cycle. An example would be a $20 monthly data subscription or a $100 annual membership to a learning platform. This model is straightforward and predictable, which makes it easier for businesses to forecast revenue and for customers to budget their expenses.
2. Variable Recurring Payments: Variable recurring payments change based on usage, consumption, or other business factors. A good example is a cloud hosting service that charges a flat monthly fee plus additional costs for bandwidth usage. Another example is a cable TV service that allows customers to add extra channels for an additional charge. While less predictable than fixed payments, this model often gives customers a stronger sense of value since they only pay for what they actually use.

Benefits of Recurring Payments in Online Businesses

Recurring payments come with numerous advantages because they shape how you operate your business and manage revenue. Here are some of the key benefits:

• Increased Customer Retention: The ease and convenience of recurring payments make it more likely that customers will continue using your service over time.
• More Opportunity for Sales: Since you already have an ongoing financial relationship with your customers, you can cross-sell and upsell additional services. For example, if a customer subscribes to a monthly meal plan, you could offer premium recipes, cooking classes, or complementary products as add-ons.
• Cost Efficiency: Automatic payments, invoicing, and billing reduce administrative work and lower the costs associated with manual payment collection.
• Streamlined Accounting Process: Recurring payments simplify tracking and reconciliation, which reduces errors, saves time, and makes it easier to monitor financial performance.
• Increased Revenue: With recurring payments, you can rely on a steady stream of income at regular intervals. This predictability helps businesses plan and budget more accurately, supporting growth and investment decisions.

How Recurring Payments Work

Below is an overview of how to accept recurring payments:

The journey starts when a customer signs up for a recurring payment plan and shares the details needed to set up billing through the payment gateway. To kick things off, the merchant processes the first payment. This step not only ensures everything is working smoothly but also confirms the customer’s consent for future automatic charges.

From there, the system takes care of the rest. On the agreed schedule, such as monthly, it automatically bills the customer. Many providers also send a friendly reminder before each charge, keeping the customer informed. Once a payment goes through successfully, the gateway settles the transaction by transferring the funds to the merchant’s account.

At any point, the customer has control over their subscription. They can renew, cancel, pause, or even adjust the plan as needed. For merchants, making this process simple and transparent builds trust and encourages long-term relationships.

With the benefits and workflow covered, you might think the most important factor for recurring payments is simply the automation of payments. While automation is key, there are additional considerations to ensure a smooth implementation. Let’s explore that next.

Key Considerations for Implementing a Recurring Payment

While the recurring payment model offers many advantages, careful planning is essential. Here are some critical points to consider:

• Align the Business Need: Start by reviewing your business model and identifying which products or services are suitable for recurring payments and which are better with one-time payments. Subscription-based services, long-term engagements, and membership plans are ideal candidates.
• Select a Pricing Model: Recurring payments can be flat-rate or usage-based. Choose a pricing strategy that fits your product or service, your customer base, and market conditions. Selecting the wrong model can turn the benefits of recurring payments into a headache.
• Ensure Business Transparency: Be upfront with customers about the terms of your recurring payments. Clearly communicate when they will be charged, how much they will be charged (including any additional fees), and how they can cancel. Transparency builds trust and helps prevent future disputes or chargebacks.
• Adopt a Robust Payment Gateway: Select a payment gateway that supports your customers' preferred payment methods (such as cards and bank transfers), automates recurring billing, integrates seamlessly with your system, and ensures security. It should also handle failed payments and send reminders for upcoming charges.
• Plan for Failed Payments: Automatic billing doesn’t always go smoothly. Payments can fail due to insufficient funds, expired cards, or other reasons. Your system should retry failed payments automatically, notify customers, and pause the subscription if needed. Clearly communicate your failed payment policy to customers.
• Ensure Compliance: Recurring payments require adherence to financial and legal regulations, such as the Payment Card Industry Data Security Standard (PCI DSS). Regulations may vary depending on your location and industry, so ensure your processes comply with all applicable laws.

Out of all the points mentioned above, you have control over almost everything except the payment gateway, since it involves working with an external provider. Your choice of gateway can make or break your business. It’s important to choose a platform that offers a robust recurring payment system and supports multiple payment methods that your customers trust and feel comfortable using. Flutterwave is one option that complements your technical and business needs. Next, we’ll explore how to use Flutterwave to set up recurring payments.

How to Set Up Recurring Payments with Flutterwave

To get started with recurring payments on Flutterwave, follow the steps below:

Note: This implementation uses the Flutterwave v3 API.

Step 1: Get API Credentials

Log in to your Flutterwave dashboard and navigate to the API keys section under the Settings menu.

Step 2: Create a Payment Plan

Payment plans let you customize how and when your customers are charged for recurring payments. You can define key details such as the amount, billing interval (e.g., weekly, monthly, yearly), duration, and other parameters that fit your business model. To do this, send a POST request to the create payment plan endpoint.

curl --request POST 'https://api.flutterwave.com/v3/payment-plans' \
  --header 'Authorization: Bearer YOUR_SECRET_KEY' \
  --header 'Content-Type: application/json' \
  --data-raw '{
    "amount": 7500,
    "name": "Online Plan",
    "interval": "monthly"
}'

You’ll get a response similar to this:

{
    "status": "success",
    "message": "Payment plan created",
    "data": {
        "id": 3807,
        "name": "Online Plan",
        "amount": 7500,
        "interval": "monthly",
        "duration": 48,
        "status": "active",
        "currency": "NGN",
        "plan_token": "rpp_12d2ef3d5ac1c13b9d30",
        "created_at": "2020-01-16T18:08:19.000Z"
    }
}

The important value to note here is the data.id. You need it to create a subscription for your customer.

Step 3: Create a Subscription and Initiate a Charge

Next, you’ll need to use the payment plan ID to create the customer’s first charge. This step tells Flutterwave to create a subscription for that customer and handle all subsequent payments automatically. To do this, initiate a charge using Flutterwave Standard and include the payment plan ID in your request.

curl --request POST 'https://api.flutterwave.com/v3/payments' \
  --header 'Authorization: Bearer YOUR_SECRET_KEY' \
  --header 'Content-Type: application/json' \
  --data-raw '{
    "payment_plan": 3807,
    "tx_ref": "UNIQUE_TRANSACTION_REFERENCE"
  }'

Flutterwave Standard also allows you to add customizations such as your company logo, customer details, and other options to create a more personalized checkout experience. Check out the documentation for a full list of available customization features.

On a successful request, you’ll get a link to redirect your customer to a hosted page with the payment details.

{
    "status": "success",
    "message": "Hosted Link",
    "data": {
        "link": "https://checkout.flutterwave.com/v3/hosted/pay/flwlnk-01hynrt7cd1fpm6gtef6khn93g"
    }
}

Once the customer completes the initial payment, Flutterwave automatically charges them at the set interval using the selected payment method.

Beyond the standard payment plan approach, Flutterwave also provides advanced features to handle edge cases in recurring payments, including:

• Card Tokenization: Allows you to securely store a token that represents a customer’s card details. This removes the need to manually store sensitive card data while still enabling seamless future transactions.
• Card on File: Lets you save a reference to a customer’s credit card or debit card details for future use. The main idea is “save once, use anywhere,” meaning the card can be charged within Flutterwave and even across supported platforms.
• Direct Debit: Enables recurring payments to be processed directly from a customer’s bank account. This is especially useful for customers who prefer bank payments over cards.

Wrapping Up

Implementing recurring payments can transform your online business by creating predictable revenue streams and enhancing the customer experience. However, the key to success lies in choosing the right payment partner and setting up the system thoughtfully.

Flutterwave makes recurring payments accessible to developers without requiring extensive payment processing expertise. Its combination of technical flexibility and business-friendly features makes it especially valuable for growing online businesses that want to scale efficiently. Whether you’re launching your first subscription service or improving an existing recurring payment setup, Flutterwave helps you simplify and streamline the process.

To learn more, check out these resources:

• Payment plans
• Flutterwave embed