Recurring payment is a payment model where funds are automatically deducted from a customers account at scheduled intervals to cover the customers subscription fees for products or services. The payments are pre-scheduled, and the customers are always aware of when they are being taken out. Recurring payments are also known as subscription payments and are charged automatically to a customers credit card or bank account at periodic intervals. The recurring payment framework is most common in subscription businesses such as SaaS companies, DTC ecommerce brands, online learning providers, health and fitness clubs, and streaming services.

Recurring payments are beneficial since the model enables businesses to reduce the time and effort involved in collecting payments from customers for products or services consumed. The recurring payment model also ensures a prompt and reliable inflow of capital, helping to produce a healthier cash flow and lowering collection costs. This puts businesses in a better economic position and reduces the amount of guesswork required in financial planning, as they will know how much revenue they have coming in with a high level of certainty. Recurring payments also strengthen the relationship between businesses and customers by making it much easier for them to do business with the company.

Examples of recurring payments include cell phone bills, gym memberships, and Netflix subscriptions. Recurring payments usually occur weekly or monthly, but they can be set up to occur on whatever schedule works best for the business. There are two types of recurring payments: fixed payments and variable payments. With a fixed recurring payment, a customer is charged the same amount every time, as is the case with a magazine subscription or gym membership. A variable recurring payment means the amount owed is subject to change from payment to payment, such as with usage-based charges like monthly utilities.