The global payments industry processes 3.6 trillion transactions each year, and a significant share of those payments are recurring, such as phone bills, insurance premiums, auto and mortgage loan payments, property rentals, and subscription services.
Yet for many businesses, recurring payments are the least reliable part of their payment stack. Credit card expiration dates break autopay, failed transactions trigger manual retries, and operations teams spend time chasing payments that should process automatically. And if the first payment fails, it can cancel the entire subscription.
But as consumers get more comfortable with pay-by-bank, that friction point could soon be obsolete.
Why recurring payments are ripe for modernization
Recurring payments should be simple. The consumer signs up for an auto payment and, month after month, their card or other payment method is charged. In practice, the current recurring payment systems many businesses use are suboptimal at nearly every step of the process:
Higher operational costs: Declines and manual retry strategies don’t just impact individual payments. At scale, they can drastically increase operational costs and make recurring billing increasingly expensive to manage.
Higher processing fees: Credit cards and debit card processors charge higher rates than some other payment methods.
Outdated payment retry workflows: When a payment fails, many businesses revert to manual processes, such as payment reminders, follow-up emails, mailed checks, and support outreach. This takes time, costs money, and introduces frustration.
Legacy payment infrastructure: Many companies still rely on outdated payment infrastructure, leading to avoidable failed transactions, including legacy account-linking methods and a lack of upfront risk checks to assess payment success.
Card-based challenges: Credit cards expire, get replaced after fraud, or change when customers switch providers. Each disruption breaks autopay, risking involuntary churn and forcing businesses to re-engage customers to keep payments on track.
These challenges result in inefficient, costly payments and hurt every team. Support teams have to solve problems that should never have existed, finance teams absorb higher recovery and processing costs, and failed payments quietly erode your customer base.
What is “good enough” at low volume often breaks at scale—making recurring payments a clear candidate for modernization.
6 ways that pay by bank helps businesses save on recurring payments
Pay by bank gives businesses a more reliable foundation for recurring payments by connecting directly to customers' bank accounts. Here are several benefits of migrating recurring payments from cards to bank payments:
Reduce enrollment friction
Customers securely connect and verify their bank account using a simple, automated experience instead of manually entering account and routing numbers. Support for multiple verification methods, including instant verification and same-day micro-deposits, can help businesses convert more customers to autopay and reduce drop-off.
Reduce involuntary churn
Bank accounts change less often than card numbers. Cards expire or get replaced, which often breaks autopay. Checking accounts, by contrast, are often active for decades. This stability reduces involuntary churn and limits support calls to update payment information or reinstate recurring payments.
Lower processing and operational costs
Pay by bank transactions typically cost less to process than card payments, and those savings compound quickly for high-volume billers. Fewer failures also mean fewer retries, fewer support interactions, and less manual exception handling. Together, lower processing fees and reduced operational overhead can save businesses a significant amount.
Retry payments more effectively
Pay by bank enables smarter payment retry options when processing fails. Retry strategies can align with expected funding patterns—such as payroll deposits—rather than relying on fixed retry schedules that can result in unnecessary return fees.
Gain proactive risk insights
Pay-by-bank solutions can provide real-time signals, such as account balance patterns and transaction history, to assess the likelihood of payment success before a transaction is initiated. This helps businesses anticipate failures, reduce recovery costs, and improve the overall payment experience.
Provide consumer choice
Customers have different preferences for how they pay. Offering pay-by-bank alongside cards and other payment methods lets customers choose what works best for them, increasing autopay enrollment and reducing drop-off.
How businesses can set up recurring payments with pay by bank
Setting up recurring payments with pay by bank typically involves four core steps. While the specific steps can vary by provider, the underlying workflow is similar across most bank-based payment systems.
1. Enable secure bank account linking: Customers connect their bank accounts during checkout or during account setup via a secure authentication flow. This verifies account ownership and establishes permission to initiate future payments without requiring manual entry of account and routing numbers
2. Verify accounts before storing payment credentials: Before enrolling an account in recurring billing, businesses confirm that the account is valid and eligible for payments. This reduces payment failures and helps prevent fraudulent activity. In addition, it can confirm that the account is owned by the payer, further helping to prevent fraud.
3. Automate payment initiation and settlement: Once accounts are linked and verified, recurring debits are initiated automatically on a set schedule. Payments are seamlessly transferred from customers' bank accounts to the business.
4. Build intelligent recovery into billing workflows: Not every payment will succeed on the first try. Most modern recurring payment systems include retry logic that adapts to account behavior. This helps improve recovery rates and limits unnecessary retries, fees, and customer support outreach.
Pay by bank helps create a scalable foundation for recurring billing, making it easier for businesses to grow without adding friction, costs, or frustration.
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3 ways businesses can improve the recurring payments experience with Plaid
Recurring payments are a growing pain point for many businesses. Plaid improves the experience across the entire payment lifecycle—from account setup to risk management and recovery.
1. Frictionless account setup with Auth
Plaid Auth lets customers securely link and verify their bank accounts in seconds using their bank’s familiar login experience. It also supports multiple verification methods, helping businesses enroll more customers into autopay while reducing setup friction and early drop-off.
2. Proactive risk assessment with Signal
Before initiating a recurring payment, Plaid Signal provides real-time risk insights based on account behavior, balance patterns, and transaction history. This information helps businesses identify potential failures and fraud risks earlier.
3. Automated payment execution with Transfer
Plaid Transfer simplifies ACH payment and settlement. It handles payment execution, tracking, and exception management, allowing businesses to move money between bank accounts without manually building complex logic systems.
Of course, these products work together to form a unified recurring bill payments solution that provides a more reliable, lower-cost system designed for scaling businesses.
Seamless recurring payments that scale with your business
Recurring payments should be a quiet, background process that runs automatically and requires minimal human intervention. Pay-by-bank offers a stable, scalable way to reduce friction, lower processing and operational costs, and improve the payment retry process.
For subscription services or companies that bill high volumes, modernizing recurring payments isn’t just a small upgrade–it can lead to long-term success.
Learn how Plaid can modernize your recurring payment process.