Reviewed by Mayer Hyman, Payments Specialist | Reviewed for accuracy July 2026
Key Takeaways
- Subscription companies grew revenue 11% faster than the S&P 500 and added 25% more unique subscribers over a recent two-year period (Zuora Subscription Economy Index, 2025).
- Recurring payments remove manual billing effort, but they introduce specific risks: declined transactions, dunning management, and subscription-specific chargebacks.
- The right subscription setup scales from a standalone merchant account with a recurring-capable gateway, to custom API integration, to dedicated subscription management software.
- Fraud and chargebacks are often the biggest payment challenge for subscription businesses, since some disputes look like legitimate cancellations rather than fraud.
The Shift to Subscription Commerce
Businesses selling products and services, not just content creators, are moving toward subscription models because recurring revenue improves revenue recognition and predictability. The number of subscribers a business grows correlates directly with consumer interest, brand perception, and its long-term success.
A subscription economy is the shift away from the traditional per-product purchase model toward a subscription business model. Companies that succeed at enhancing customer experience, offering flexible and personalized pricing, building long-term customer relationships, and managing subscriptions well are the ones capturing this shift. Investors care about the lifetime value of a company’s products and services and the revenue generated over the life of a customer relationship. The longer a customer subscribes, the greater the value and the revenue opportunity.
Subscription Growth, By the Numbers
Subscriptions provide and replenish curated products or services at set, consistent intervals. This model shows up across many businesses and brands: beauty products, nutritional supplements, marketplaces, food and beverage, utilities, memberships, mobile apps, and SaaS. Consumers generally view subscriptions positively for removing friction and providing convenient access to quality services, while subscription businesses benefit from improved forecasting, cash flow, and predictable recurring revenue.
Companies in Zuora’s Subscription Economy Index grew revenue 11% faster than the S&P 500, and grew their unique subscriber base by 25%, over a recent two-year period (Zuora Subscription Economy Index, 2025). That outperformance is a big part of why more businesses across categories, not just streaming and software, are building subscription offerings.
Consider every SaaS subscription used in the workplace, from CRM tools to productivity suites, or every paid mobile app and streaming, finance, lifestyle, and food subscription a typical consumer maintains. Even with some subscription fatigue as consumers try to be more budget-conscious, subscription commerce keeps gaining ground as a preferred way to access products and services.
For businesses offering subscriptions, especially ecommerce subscriptions driven by automation and convenience, having the right systems and platforms in place matters, especially where payments and checkout play a critical role in acquisition and retention.
The Role of Recurring Payments for Subscriptions
A recurring payment is the method that authorizes and captures a subscription transaction on a repeating basis, moving money from the cardholder’s account into the business’s merchant account and then into its deposit bank account. Once a customer provides payment details and agrees to the price and frequency, they continue to be charged on a set schedule until the subscription expires or is cancelled. Subscription billing and recurring billing are terms often used interchangeably to distinguish a one-time purchase from ongoing automatic billing.
For ecommerce subscription businesses, customer acquisition and retention depend heavily on offering a checkout experience with both convenience and value. Manually entering hundreds of transactions won’t get you there. Through recurring payments and a subscription platform to manage them, businesses collect recurring fees with minimal manual effort, while customers avoid a lengthy checkout with every purchase and benefit from subscription discounts.
Solutions for Subscription Management
In a competitive market, it’s difficult enough to stand out with your core products and services. To succeed with subscriptions, businesses should focus on their core offering and leave subscription management and billing to platforms built specifically to handle it. Setting up a subscription program starts with a merchant account, a payment gateway, and a platform or software to handle recurring billing.
Level 1: Standalone Merchant Account With Recurring Support
At the basic level, with the right merchant service provider, subscriptions can run through a standalone merchant account that supports recurring payments through its payment gateway. Businesses can benefit from functionality like converting a standalone transaction into a recurring one, recurring batch imports, and payment links or buttons that support ongoing billing.
Considerations at this level matter, specifically which payment service provider (PSP) you sign up with. Card brands provide incentives and interchange benefits on transactions that pass a recurring flag, so an ecommerce site defaulting to a familiar processor may pay a fixed percentage instead of benefiting from recurring cost savings.
Level 2: Custom API Integration
As a business scales and subscription volume grows, a standalone payment gateway on its own won’t be sufficient. One option is a custom integration through a recurring payments API, where payment tokens are submitted using hosted payment pages or other secure integration methods, so cardholder information doesn’t need to be collected again for subsequent transactions.
Level 3: Dedicated Subscription Management Software
Even custom payment integrations are easy to outgrow in a subscription business model. Building and maintaining a system to manage the end-to-end customer subscription lifecycle distracts from the products and services a business actually sells. This is when it makes sense to look at dedicated subscription billing management software.
There’s a wide range of sophisticated, out-of-the-box subscription management software for recurring billing, accounting, reporting, revenue recovery, and churn visibility. These platforms have already done the work to build a specialized subscription and billing solution and integrated with multiple payment gateways and processors. Chargebee, Zuora, Recurly, and Zoho Subscriptions are among the most common subscription platforms available today, alongside newer niche solutions for specific industries.
Challenges of a Subscription Business
While a solid subscription management solution and strategy helps offload the complexity of recurring billing, trials, and customer lifecycles, the unique infrastructure of a subscription model brings inherent payment processing risk. Several payment-related challenges can disrupt revenue recovery and put a merchant out of compliance with card brand rules.
Cart Abandonment
The right ecommerce platform and subscription management solution already does a lot to reduce checkout friction, but working with a merchant provider that offers multiple payment methods matters just as much.
Declined Payments
Card brand decline responses are meant to help merchants improve authorization rates. Responses fall into categories: soft declines (insufficient funds, temporary hold, restricted card) that can be retried for a successful authorization, hard declines (invalid or expired card) that need corrected data before retrying, and fraud declines (stolen card) that should not be retried. Subscription churn occurs when a customer cancels a subscription or simply stops paying without realizing it’s still active. To recover revenue, businesses use subscription platforms to strategically retry declined transactions and run dunning campaigns for failed payments, sending reminders and reaching out for updated payment details. The right merchant provider helps monitor decline rate increases and offers an account updater service that automatically tracks and updates changed card numbers and expiration dates.
Fraud and Chargebacks
With increased subscription payments, declines, and dunning management comes an increase in disputes and friendly fraud. For subscription-based businesses, this is often the biggest payment challenge with the greatest repercussions. Some chargebacks look innocent, a cardholder deleted the mobile app thinking that would stop recurring charges, then disputed the charge instead of canceling properly. Others are genuinely fraudulent, claiming an unauthorized transaction. Beyond lowering authorization rates and increasing fees, exceeding card brand dispute thresholds can flag a business for a monitoring program or, in the worst case, put the merchant on the MATCH list, closing the merchant account entirely. It’s critical for subscription businesses to run a chargeback and fraud management system that catches real fraud without blocking legitimate sales.
Cartis Payments pairs a subscription-friendly merchant account with a suite of chargeback prevention tools, including Verifi by Visa and Ethoca by Mastercard, that screen and alert on disputes before they escalate.
Looking Ahead in Your Subscription Strategy
In working with subscription-based merchants, a few recurring pieces of advice come up again and again:
- Make it easy for customers to cancel or pause subscriptions
- Maintain regular communication with customers
- Analyze data to minimize churn, and monitor for declines and chargebacks
- Choose a payment gateway and merchant provider that supports recurring payments, integrations, flexible pricing, and payment optimization for level 2 and 3 transactions
- Look for value-add features like account updater
- Supplement your subscription management platform with fraud and chargeback management
FAQ
Why are subscription businesses growing faster than average?
Companies in Zuora’s Subscription Economy Index grew revenue 11% faster than the S&P 500 and grew their subscriber base by 25% over a recent two-year period, largely because recurring revenue improves forecasting and customer lifetime value compared to one-time purchases.
What’s the biggest payment risk for subscription businesses?
Fraud and chargebacks are typically the biggest challenge, since disputes can come from both genuine fraud and customers who forgot they had an active subscription or tried to cancel incorrectly. Both count against a merchant’s dispute rate with card brands.
When does a business need dedicated subscription management software instead of a standard payment gateway?
Once recurring payment volume grows past what a standalone gateway or custom API integration can efficiently manage, dedicated subscription software becomes worthwhile for handling billing, dunning, churn analytics, and revenue recovery at scale.
