Subscription Sales vs. Recurring Payments

"Recurring payments" and "subscription sales" are two closely related terms. That's why they are often wrongly used to refer to the same concept. There are in fact differences between recurring payments and subscription sales. Knowing the proper definition of the terms "recurring payments" and "subscription" will help you better understand the principles governing subscription sales.

In order to understand the differences between recurring payments and subscription sales, it is necessary to know what a recurring payment is.

A recurring payment is a payment type in which a customer authorizes the seller to automatically deduct a fixed amount from him on a periodic basis.

This payment type allows for scheduled payments to be set up at regular intervals, most often monthly. It is often used for:

• subscriptions to online services
• and recurring bill payments
• but also in the context of a payment in several installments.

The main advantage of recurring payments is that it allows the customer and seller to no longer have to worry about upcoming payments in the context of a subscription, for example. Because payments will be made automatically and will be deducted according to the schedule agreed between the seller and the customer.

The definition of a recurring payment already gives you an indication of the differences between recurring payments and subscription sales. But to properly understand what subscription sales are, a definition of what a subscription is is necessary.

A subscription is a contract in which a customer agrees to pay a periodic amount to a seller in exchange for access to services or for the acquisition of products.

The terms of a subscription contract define:

• the service or product to be provided,
• the amount the customer will have to pay periodically
• and the payment schedule.

Subscriptions are often of long duration and can last for several years. Subscriptions can be renewed automatically until the customer decides to cancel or change them for another subscription.

A subscription is characterized by:

• The amount of the recurring payment it initiates. This amount can be fixed but can also vary. Particularly depending on the use of the products/services provided. This is then referred to as a subscription with a "pay-as-you-go" payment. The amount of a subscription can also change in tiers after defined periods. This is then referred to as a subscription with an "evolving" amount.
• Its periodicity: it defines the frequency of recurring payments (often monthly, quarterly or annually).
• Its duration: it determines how long the subscriber will continue to pay the agreed amount periodically.
• The products and services to which it gives access.

Although there are many differences between recurring payments and subscription sales, these two concepts are often used interchangeably.

Recurring payments are single transactions that occur at regular intervals in the context of a subscription.

Subscriptions, on the other hand, are contracts between suppliers and customers that initiate a recurring payment in exchange for the provision of products or access to services.