Here at Patreon, our mission is simple: fund the creative class. Our membership platform empowers creators of all disciplines to activate and amplify membership programs that turn their biggest fans into paying patrons. These memberships are powered by a monthly recurring online payment model*, which we manage for creators.
While our mission is simple, the inner workings of monthly online recurring payments can seem complicated and confusing. Let’s take a look at how monthly payments* work at Patreon, and what we’re doing to ensure creators get paid month over month.
If you’ve ever paid for something online, you know how efficient the transaction can appear; with a few clicks you can set up a recurring payment and reap rewards instantly. What’s less apparent is the intricate work behind the scenes. The Payment Cycle contains multiple players and steps, and is set into motion with each and every new transaction. This is true for Patreon payments, and all online businesses and services. Every time a transaction is initiated, the Payment Cycle kicks into action: monies are requested then accessed or denied in seconds.
Step 1: A patron joins a creator’s membership program; they give their credit or debit card information to Patreon and commit to pledge at their preferred tier. BOOM! They are now part of that creator’s inner circle, and can access the benefits included in their chosen tier. Patreon sends an email to the patron confirming they are now a member. Behind the scenes, Patreon has also verified the card with the Card Networks and Issuing Bank, making sure it’s a valid card but doesn’t charge it. In a monthly payments model*, a new patron is charged their pledge amount on the first of the following month.
Step 2: It’s the first day of the following month, and monthly payment processing begins. Patreon charges the patron’s credit or debit card (which is kept on file in a secure vault) the amount they’ve pledged to the creator.
Step 3: As part of the charging process, Patreon accesses a global Payments Gateway, finding the best possible match for that transaction to ensure its chances of success.
Step 4: The Payments Gateway then directs Patreon’s bank (the Acquiring Bank) to request funds from the patron’s credit or debit card (Card Networks) for the pledge amount the patron committed to the creator.
Step 5: The Card Networks relay the request to the Issuing Bank — the bank connected to the patron’s debit or credit card. For safety and security reasons, the Card Networks can’t just free up the funds; they do this extra step to protect against fraud and insufficient fund issues.
Step 6: The Issuing Bank agrees to the request and releases the funds, or doesn’t. Requests are denied for a number of reasons, such as insufficient funds, connectivity errors, or the credit card number is incorrect or expired.
Then, whether the request for funds was approved or denied, the whole cycle repeats in reverse order. Communication from every player is required to complete the cycle, and the approval or the denial is relayed back through the Card Networks, then Acquiring Banks, then Payments Gateway, then to Patreon.
Once the Issuing Banks have approved or denied charges, and Payment Cycle has delivered that information back to Patreon, we work on both approved and denied charges, trying to get creators paid as quickly as possible.
If the request for funds was approved by the Issuing Bank, Patreon emails the patron to let them know. The funds (minus fees, including those that are required to cover each step of the Payments Cycle) go into the creator’s balance and can now be accessed and withdrawn.
If the request for funds was denied, Patreon emails the patron letting them know their card was declined, and asks them to update their card. Additionally, our data scientists have created dynamic retry logic to recover as many failed charges as possible. Our team thinks through what the optimal time is to retry transactions, and we keep at it throughout the month, trying to get creators paid. On average, we successfully collect 95% of pledges with the initial transaction. Of those 5% declined pledges, we are able to recover 70% by the 15th of the month.
We’ll be the first to acknowledge that processing payments is a complex operation, but we’re here to streamline the experience for creators and patrons alike. We don’t want creators to get bogged down chasing declined payments, so we manage customer service around transactions and chargeback disputes on their behalf. And, to simplify payments for patrons, we make it easy to charge all of their pledges to creators at once, and patrons receive a detailed receipt capturing each payment to every creator they support.
The Payments Cycle happens for every single pledge, every single month. Starting on the first of the month, we manage these transactions for millions of patrons all across the globe, processing millions of dollars. We’re working quite literally around the clock to make sure the payments experience is seamless for creators and patrons alike, and that creators are getting paid on time.
Still, due to the number of players and decision makers involved — from acquiring banks to card networks to issuing banks — there can be situations that are out of our control. Every player has a different sets of rules, and each has the authority to decline transactions at any time, for various reasons. Patreon partners closely with each of these players to ensure we are optimizing for successful payments. We do our best to ensure all non-fraudulent charges go through securely and efficiently, and we are actively improving systems all the time.
In the coming months, we’ll be sharing even more about Payments at Patreon, and digging deeper into what our Payments team is doing to ensure successful payment cycles. We consider ourselves the fortunate and eager business partners to our creators, and we’re committed to being transparent as we work to get you paid on time, every month.
Note: If you’re new to online payments and want to learn more about some of these technical terms, please visit our Payments Glossary.
*Creators get to choose how to charge patrons. Today we’re discussing the most commonly used practice, the monthly option, but to learn about each payment model, please see this article.