Recurring payments in the SaaS industry: 6 common types

In the SaaS world, recurring payments have emerged as a cornerstone of business success. But what is a recurring payment? 

It's the automatic, scheduled collection of payments from customers for ongoing access to your solution and services.

This guide will explain the benefits of recurring payments for SaaS businesses. We’ll also explore the inner workings of this payment system and provide a detailed overview of common recurring payment methods.

What does recurring payment mean exactly?

A “recurring payment” means an automatic charge on a schedule. The customer gives consent once. You then bill each period for ongoing access. Most recurring payment examples in the SaaS industry renew monthly or annually.

Quick recurring payment example: A project tool charges monthly recurring payments of $29 per user until the user cancels. Some providers bill a fixed fee, but others charge a base fee plus usage.

Why SaaS businesses use recurring payments

Recurring payments have become an integral tool for SaaS businesses. But what makes this billing model so compelling? Let's dive into the specific advantages that drive SaaS companies to embrace recurring payments:

• Predictable cash flow: Scheduled invoices make revenue easier to forecast.
• Less manual work: Automation replaces one-off invoices and reminders.
• Better customer experience: Friction is lower; renewals happen on time.
• Pricing flexibility: You can run tiered, hybrid, or usage-based plans without changing how you collect.

Note: Want fewer manual steps and fewer errors? Explore our automated billing software overview.

How does a recurring payment system work?

A recurring payment system works by following these 4 main steps:

1. Customer subscribes. They pick a plan, agree to terms, and add a payment method (card, ACH/SEPA, wallet, or bank debit).
2. Billing runs on schedule. Your billing system creates a charge at the end of each billing cycle.
3. Payment processing. The gateway or processor requests authorization through the card network or banking rails.
4. Funds settle. On approval, funds move to your merchant account and access continues until the next cycle.

Tip: Variable recurring amounts (for usage) need a transparent invoice presentation so customers understand what changed.

Note: Need tooling to run this reliably at scale? See our guide to subscription billing software.

6 common types of recurring payment methods for SaaS companies

Choosing the right methods can shape results. Here’s a closer look at common recurring payment options.

1. Credit and debit cards

Recurring card payments are the default for most SaaS. You store a token, then charge it each cycle for monthly recurring payments or annual plans. Let’s go over some benefits and considerations:

• Benefits: Integration with payment gateways like Stripe, PayPal, and Braintree enables automated recurring billing. 
• Considerations: Network fees, chargebacks, and PCI scope. Use account updaters and dunning to improve recoveries.

Note: Enable dunning, account updaters, and smart retries to power enhanced recurring payments without extra engineering.

2. Direct debit (ACH/SEPA)

Direct debit pulls funds from a bank account on a schedule. In the U.S., use ACH. In the EU, use SEPA. In other regions, use local debits (e.g., Bacs, BECS, PAD). Let’s analyze this type’s benefits and considerations:

• Benefits: Lower fees than cards, fewer chargebacks, good for B2B and high-ticket invoices.
• Considerations: Settlement times are slower than cards; you need clear mandate collection and notifications.

Tip: Pair direct debit with clear invoice emails so that customers know when a SaaS recurring bill will come through.

3. PayPal with billing agreements

PayPal supports recurring agreements for subscriptions. Customers pay from a PayPal balance, card, or a linked bank.

• Benefits: Trusted brand, higher conversions in some markets.
• Considerations: Fees and dispute flows differ from cards; keep taxes and descriptors consistent across methods.

Note: For payment methods, fees, and risk controls across wallets and rails, read our SaaS payments guide.

4. Digital wallets (Apple Pay, Google Pay)

Wallets speed up the first checkout and save a tokenized card for future renewals.

• Benefits: Fast sign-ups on mobile, and fewer entry errors.
• Considerations: Behind the scenes, these still bill cards. Manage them like card tokens.

5. Invoice presentment + autopay (card or ACH)

For B2B, send an invoice but collect payment automatically via stored card or direct debit on the due date. This is a billing workflow, not a separate payment rail: the payment method is still card or ACH.

• Benefits: Finance teams get invoices for records; collections stay automated.
• Considerations: Avoid “manual bank transfers” for renewals; set recurring subscription payments with autopay by default and let customers opt out.

6. Emerging: Open Banking VRP (where supported)

Variable Recurring Payments (VRP) let a customer authorize bank-to-bank pulls with fine-grained limits (amount, frequency, merchant).

• Benefits: Bank-level auth, fewer card failures/expiry issues, and potential fee savings vs. cards.
• Considerations: Limited market coverage; you’ll still need cards/ACH for most geos; mandate UX matters.

Related concepts

These items shape how you bill and communicate, but they aren’t how money moves.

Subscription management platforms

Tools like Recurly manage plans, proration, invoicing, taxes, and recurring payment retries. They integrate with payment methods; they are not a payment method. Keep them in your stack for billing logic and reporting.

Note: See how to run plans, proration, and renewals at scale in our SaaS subscription management blog post.

Prepaid subscriptions

The customer pays once for a fixed period (for example, 12 months up front). There is no ongoing automatic charge during the term. This is a billing model, not a payment method.

Postpaid billing

You charge after usage (for example, metered API calls). The payment method is still card or bank debit. Postpaid is a pricing/billing model, not a payment method. Invoice presentation and explanation should be clear to avoid customer confusion.

Note: Comparing flat‑rate, tiered, hybrid, and usage-based pricing? Start with our SaaS billing models explainer.

Accept more recurring payment types with the help of Orb

So far, we've explored various recurring payment methods in SaaS. Now, let's talk about how Orb is the definitive tool to simplify and elevate your recurring revenue strategy.

Orb is a done-for-you billing platform designed to help SaaS businesses of all sizes. We provide the tools and flexibility you need to manage recurring payments with ease and confidence.

Here's how Orb can help you optimize your recurring billing processes:

• Integration with payment gateways: Orb integrates with leading payment gateways to help you accept a wide range of payment methods, from credit cards and digital wallets to ACH and direct debit. 
• Run any pricing model: Think fixed fees, seat-plus-usage, and pure usage. Orb offers flexible pricing while keeping invoices accurate.
• Easier management of pricing structures: With Orb, you can manage complex pricing scenarios. Think volume discounts, prepaid credits, and tiered pricing. 
• Raw event accuracy: Orb ingests raw event data at scale, so invoices remain transparent and accurate even as your pricing changes.
• Better customer experience: Orb's accurate and granular invoices improve the customer experience. By providing transparency and convenience, you can build trust and reduce billing-related friction.
• Data-driven decision-making: Orb's reporting capabilities provide valuable insights into your recurring revenue streams. Track key metrics, find trends, and make informed decisions about your pricing plans.
• Forecast before launch: Run Orb Simulations on historical data to preview revenue and usage outcomes before launching new pricing. 

Ready to make the most of your recurring revenue strategy? Add Orb as your recurring billing solution to support a variety of pricing models, accurately bill customers, and make data-driven pricing decisions. Explore our flexible pricing plans to find an option that fits your business needs and budget.