Set Up Recurring Payments in PayPal the Right Way

If you run a business where you need to bill your customers at regular intervals, you may need a payment solution that supports this. With a credit card or other solutions that bill one-off, you must follow up with customers every month to get payments. This can get tedious and impractical, especially if your customer base grows substantially.

Also, if you run a SaaS business, billing manually does not make sense. PayPal recurring payments are a great way to solve this challenge. Before we look at how to set up recurring payments, PayPal the right way, let’s first answer some fundamental questions about the billing method.

What Is PayPal Recurring Payments and How Does It Work?

PayPal recurring payments allow you to bill your customers at regular intervals. For instance, if you charge a monthly subscription, you need a recurring payment solution to manage these payments. In a typical recurring payment transaction, a customer follows four basic steps:

Set Up Recurring Payments in PayPal the Right Way
Source
  1. Customer clicks on Subscribe button on your website.
  2. Customer is prompted to log into PayPal
  3. Customer agrees to the subscription terms and conditions, which activates the subscription.
  4. Customer is redirected back to merchant’s page.

If the customer does not have a PayPal account, they will follow the following steps:

Set Up Recurring Payments in PayPal the Right Way
Source
  1. Customer clicks on Subscribe button.
  2. Customer is prompted to create a PayPal account.
  3. Once created, the customer is prompted to agree to subscription terms and conditions, which activates the subscription.
  4. Customer is redirected back to merchant’s page.

How Can I Use PayPal Recurring Payments?

As a merchant, there are a variety of ways you can use recurring payments for your business. Here are some examples:

  1. Magazine and other periodical subscriptions.
  2. Software-as-a-Service subscriptions.
  3. Subscription box payments (e.g. Birchbox)
  4. Tutorial class subscriptions.
  5. Website access subscriptions.
  6. Any other type of business that requires periodical billing.

What Recurring Payment Models Does PayPal Support?

PayPal currently supports two types of recurring payments:

Fixed Recurring Payments

PayPal fixed recurring payments is a simple frequency-based payment model that bills customers a fixed amount at a given frequency (e.g., per month). This type of payment is great for services that offer a fixed service for a fixed price. An example is a SaaS business that offers a fixed service on a fixed charge.

Per User/Seat Recurring Payments

Per user/seat recurring payments charge a frequency-based fee that is further influenced by a quantity variable. For example, a SaaS company that charges per user will use this type of billing to charge a variable fee among its customers.

How to Set Up Recurring Payments PayPal – Three Options

Creating recurring payments in PayPal can be accomplished in one of three ways:

Option 1 – Direct Integration via PayPal API

This option requires programming skills so you may need to work with a programmer. To create recurring payments:  

  1. Go to Business Setup under the Tools tab in your PayPal account.
  2. On the Business Setup page, under “How would you like to get paid?” pick “On your Website.”
  3. Next, pick one option under “How would you like to process payments on your website?” (Process all payments through PayPal OR Add PayPal as another way to receive payments.)
  4. Next, under “How would you like to set up PayPal on your website?” pick Option A.
  5. Under this option, pick “Set up API credentials.”
  6. From here, follow the instructions found here to complete the set up manually.

Option 2 – Create a Button and Embed It

Creating an embeddable button can be an easy way to add recurring payments to your website in the shortest time possible. The only challenge is that adding a button makes it impossible to customize the checkout process for your customers. To create a button, follow steps 1-3 above. Then:

  1. In step 4, pick Option B.
  2. Under this option, click on “Create payment buttons” and follow the instructions on that page.
  3. Once you’ve created the button, copy/paste the HTML code generated onto your website to embed the button.

Note: Buttons are best used for donations, which do not require a shopping cart experience.

Step 3 – Use PayKickstart

PayKickstart allows you to add PayPal as a payment option directly to your PayKickstart account profile. To do so, follow the following steps:

  1. Create a free PayKickstart account.
  2. In the top right menu, click on Integrations.
  3. On the payment integrations tab, click on “Add a payment gateway.”
  4. From the popup that appears, select PayPal from the list of payment gateways. (We suggest picking the more advanced PayPal (Beta) option)
  5. Choose an account name.
  6. Pick the account base currency.
  7. Click Connect, which will take you to PayPal to complete the integration.
  8. Within PayKickstart, enable PayPal recurring payments for your subscription products.

Mistakes to Avoid When You Set Up Recurring Payments PayPal

Mistake 1 – Poor Transparency

Although your customers may know and trust you, not being 100% transparent during billing can lead to customer churn. For example, if a customer receives a billing statement from you that does not show all the details about the charges, they may not feel confident continuing the subscription.

To avoid this, we recommend sending out detailed invoices before you bill, and detailed statements after you bill. Also, we recommend maintaining consistent branding in all billing related communications to ensure your customers always know they are talking to you.

Mistake 2 – Making Cancellation Difficult

Some black hat e-commerce methods recommend making it difficult for your users to unsubscribe so you can extract more value from them. This is a poor approach to customer retention. In many cases, this results in negative reviews and feedback.

A better way is to offer an easy way for your customers to cancel their subscription. Why? Because it costs you more to hang on to unhappy customers than to happy ones. PayKickstart makes the cancellation process easy for your customers so they can cancel at any time.

Mistake 3 – Not Scheduling Dunning Emails

Inevitably, your customers’ credit cards will expire. If you do not have an effective way to notify them of this issue, you may end up with lost revenue. Composing and scheduling effective dunning emails is an important step you should take to avert this.

When you use PayKickstart, you can easily create and schedule dunning emails to send out to your customers. Keep in mind that you may need to compose a series of dunning emails as sending out one may not be effective with some customers.

In Summary

Setting up recurring payments in PayPal can be an effective way to help your business attract more customers. As PayPal is a well-known and trusted brand, using it on your website can also help boost your brand.

Although you can set up PayPal recurring payments manually or by adding a button, we recommend using a payments integrator like PayKickstart that does all the heavy lifting for you.

To discover how you can set up recurring payments PayPal with PayKickstart, set up a free PayKickstart account today or contact support for direct assistance.