The recurring payment processing model is a common billing method businesses use by merchants in various industries. Many of these merchants are categorized as Software As A Service or SAAS companies, which can include other industries that operate using a customer subscription model. Merchants operating these businesses commonly struggle to find suitable payment processing services to accommodate their subscription model for billing. Finding a recurring payment processor can be one of the most challenging aspects of a subscription business since most merchant service providers have concerns with these billing models.
What are Subscription Payments and Recurring Payment Processing
Merchants accepting recurring payments are aware of many problems that can arise in their business. Setting up customers to pay automatic payments on a schedule can become problematic for several reasons.
Working with an experienced payment processor can help alleviate many of these problems that would otherwise persist and create additional problems and unnecessary costs. There are several precautions and safeguards for merchants and businesses to consider before entering customers into a subscription billing services agreement.
Many of these merchants have asked how to set up automatic payments for your business when there are so many restrictions surrounding these payments. The subscription billing model operates slightly differently than businesses in the continuity merchant account industry but has many of the same customer problems.
Best Payment Methods for Subscription Payments
Businesses using a billing model that requires subscription processing models have a couple of payment options they can use. Depending on the type of product and the sales price, one solution might work better than the other for accepting customer payments. The most common billing service include:
- Credit Card Processing: One of the most common forms of online payment processing, accepting credit or debit cards is one of the easiest ways to start taking e-commerce payments. While rebilling can be a simple process, the ease for customers to cancel payments and claw back previous payments has been difficult for some subscription businesses.
- Electronic Check Processing: Electronic check has filled much of the void in payment processing left by the credit card industry. Widely viewed as an alternative payment method, merchants have begun to accept and fully utilize e-checks as a low-cost payment system. Compared to credit or debit cards, the limited liability has also made it a preferred means of rebilling customers.
The card associations have continually increased the restrictions and guidelines surrounding accepting subscription payments. These changes have made it more difficult for merchants to grow their subscription payment business while navigating the various regulations.
These changes have often resulted in merchants accepting electronic checks as their preferred billing method. While viewed as less of a mainstream method for accepting subscription payments, with some minimal training, merchants have realized that accepting e-checks is as simple and automatic as credit cards.
Best Practices for Customer Payment Subscription Management
In recent years, the restrictions placed upon merchants in the recurring payment processing industry can become increasingly stringent. The card association has required new guidelines for consent by the customer when entering into a billing agreement. Here are a few of the suggestions for merchants to improve subscription management when accepting new customers:
- Expression of Consent: Merchants must allow the customer to express their consent for entering into the recurring payments agreement with the merchant. Most merchants have already had similar types of documentation as part of the sales process that informed customers of the billing cycles.
- Improved Notifications: When starting a subscription payment, a merchant must provide the customer with information about future payment service billing. A receipt confirming the subscription payments, details of the product(s) sold, start date, and future billing cycles is required. Merchants will also have to send customers notifications before future billings.
- Details Receipts: The receipts sent out to customers need to provide the customer with simple-to-understand information about their transactions. Merchants must inform customers about trial periods and how to cancel before the subscription payments start. Merchants must provide customers with information on the current transaction and future billing information about upcoming recurring payments. Providing customers with a simple-to-understand cancellation process is also required on receipts.
- Enhanced Descriptors: Changes to the requirements of descriptors will require merchants to disclose the nature of their transactions. The descriptor must inform customers that the sales is only for a trial period. Future transactions at the end of the trial period do not require this and can reflect the company’s name.
- Easy Cancellation: Merchants must provide a simple way for customers to cancel their subscriptions so customers can do it hassle-free. Whether it’s by providing an online solution or another method, customers need to be given an easy way to opt-out on their own.
Consumer protection has been at the forefront of the payment card industry and pressured merchants to improve subscription management. While this is important, it makes the merchants’ jobs more cumbersome. These new transaction requirements have created additional costs for merchants that otherwise operate their businesses without problems. Added requirements have hindered much of the billing practices of the subscription industry. At the same time, consumer protection has made it easier for customers to charge back for services they agreed to before.
Merchants that have taken concern with the requirements for credit and debit card transactions have been opting to use alternative subscription payment system methods. One of the easiest to implement has been the use of electronic checks. Check processing services cater to the subscription-based industry, a reason why you see so many fitness gyms using this model. Accepting checks benefits merchants with lower fees, fewer restrictions, and less recourse available to customers. These differences have fueled many merchants to make the change to electronic checks and simplify their customer subscription management process.
Finding the Best Recurring Payment Processor for Subscription Payments
Merchants and businesses looking for the best way to accept recurring payments must ask important questions before starting. The payment processor that a business works with can affect the success of a business. Partnering with an unqualified company can create significant problems with billing and customer retention. Some of the most important pieces of information for merchants to look for include:
- Tolerance for Subscription Businesses
- Requirement for Subscription Businesses
- Subscription Gateway Software
Before applying, merchants must verify what industries the subscription payment processor can work with. This question is often not asked, and only after the merchant has started accepting payments does the payment processor reveal that subscription payment billing is unacceptable.
Once merchants find a payment processor willing to work with a recurring payments merchant, finding out what they require is also important. Some processors might require customers to sign a document confirming the subscription payment terms, while others might allow it to be done electronically without a signature. Knowing these terms can also help merchants make the best choice before signing up for payment processing services.
Another important check for merchants is to confirm that the payment gateway software provided can safely and securely handle recurring payments. With the rise in online fraud, storing customer card account information in the gateway is essential. Working with a payment processing gateway service that offers a solution that provides PCI Compliance protection is what all merchants will need going forward.
Apply for a Subscription Billing Payment Service
In the recurring payments industry, businesses need a reliable payment processor to grow their business. Working with a subscription payment services provider that can not provide longevity with their merchant account will cost the merchants significantly more in lost revenue. With an experienced processor like Allied Payments, merchants will not have to worry about their merchant accounts. Our secure gateway provides complete PCI Compliance, and our banking partners specialize in payment processing for customer subscriptions.
Merchants with any questions or ready to start with our application process, feel free to reach out to our payment processing team. Our representatives will be more than happy to help answer any merchant’s questions about our payment solution for subscription billing.
Frequently Asked Questions (FAQ)
What is a subscription merchant account?
A subscription merchant account is a type of payment processing account that allows businesses to bill customers on a recurring basis—weekly, monthly, or annually. It’s ideal for subscription-based services like SaaS, memberships, digital content, and more.
Why do subscription businesses often fall under the high-risk category?
Subscription businesses are considered high-risk due to factors like recurring billing models, higher chargeback ratios, longer customer lifecycles, and potential fulfillment delays. These risks lead banks and processors to treat them with additional scrutiny.
How can I get approved for a high-risk subscription merchant account?
To get approved, you’ll need to provide a complete application, business bank statements, processing history (if applicable), and a clear business plan. Partnering with a specialized provider like Allied Payments can increase your chances of fast approval.
What industries qualify for high-risk subscription merchant accounts?
Industries include online dating, fitness memberships, digital downloads, coaching programs, CBD subscriptions, adult entertainment, nutraceuticals, and more. If your business relies on recurring billing, you likely qualify.
What features should I look for in a subscription merchant account provider?
Look for features like recurring billing support, chargeback mitigation tools, high approval rates, flexible payment gateway options, real-time reporting, and fraud prevention technology.
Can I integrate a subscription payment gateway with my website?
Yes. Allied Payments supports seamless integration with most e-commerce platforms, CRMs, and custom websites. Our team helps ensure your payment gateway handles recurring payments smoothly and securely.
How do chargebacks affect subscription businesses?
Chargebacks are a major concern for subscription models. Too many can result in account freezes or termination. Allied Payments helps with chargeback prevention tools and dispute resolution support to keep your account healthy.
What makes Allied Payments a good choice for high-risk subscription merchant services?
We specialize in high-risk industries and offer tailored solutions, fast approvals, low rolling reserves, and dedicated account support. Our technology is built to handle recurring billing efficiently and securely.
Are there rolling reserves or setup fees involved?
High-risk accounts may involve rolling reserves or setup fees depending on your business model and risk level. At Allied Payments, we work to negotiate the most favorable terms for your business.
How fast can I start processing subscription payments?
In many cases, accounts can be approved and live in as little as 24–72 hours, depending on the completeness of your application and business documentation.
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