Understanding How Merchants and Marketplaces Use Recurring Payment Processing to their Benefit

Subscriptions have become engrained in the fabric of our payment culture worldwide. 

The average American consumer pays for at least four subscriptions and spends over $900 in annual costs. Europeans show similar usage of these services, spending nearly €700 per year on subscriptions. 

Recurring payment processing gives businesses the tools necessary to rake in revenue from these high spending figures and capitalize on the subscription hype. 

In 2024, the recurring payments market soared to nearly $167 billion thanks to the rise of subscription-based business models, among other factors. Globally, researchers predict that the subscription economy will balloon to almost $1 trillion by 2028. 

If you are hoping to tap into the subscription market, integrating a recurring payment processing solution is your first vital step to take. 

What are Recurring Credit Card Payments? 

Recurring credit card payments are transactions processed on a regular, pre-defined schedule. 

The customer and business agree upon a payment amount through a subscription contract, often renewed automatically on a monthly basis. In exchange for their payment, customers receive access to a specific product or service offered by the company. Examples of popular recurring payment use cases include:

• Streaming subscription services
• Ecommerce subscriptions or memberships
• Retail memberships (i.e. Costco, Sam’s Club, etc.) 
• Utility service bills, like water, WiFi, and electricity
• Software-as-a-service (SaaS) products and platforms
• Identity protection and other cybersecurity services

Basically, any product or service that involves ongoing usage can be paid for with a subscription.

To enable those subscriptions, you need recurring payment processing, which requires a strategic approach to automatically scheduling collections of funds at specific dates and times. 

What are variable recurring payments?

Variable recurring payments are a sub-type of recurring payments where the amount of the transaction can differ between each collection period. A common example is credit card companies that allow customers to set up automatic payments of their monthly minimums, in which case the minimum can vary from month to month depending on the customer’s spending habits. 

When implementing a recurring payment solution, it’s essential to consider whether or not you will need variable recurring payment capabilities. 

How Do They Work?

Recurring payment processing is unique to regular payments due to its ongoing nature. 

Rather than simply charging a customer once, a subscription billing system must maintain access to a customer’s payment credentials to collect the subscription funds on the billing date. However, like a one-time payment, the process begins with that initial customer interaction.

After a customer signs up for your subscription product or service, they are prompted to initate the first transaction. At this time, the customer authorizes the charge with their information while your payment system takes the necessary (and, ideally, automated) steps to verify the customer’s identity. 

During this process, your payment interface must provide the customer with clear terms of agreement on how and when a recurring charge will happen, as well as the amount of the charge. 

That’s all it takes to get a subscription started, but what happens next?

First and most importantly, you’re going to need a secure place to store your customer’s payment information. There are many different ways to store payment data, some more complex than others. In all cases, your method for storing this information must comply with the PCI DSS. If you have chosen to store your credentials through an independent partner or service, then the specific technical details of your chosen solution will depend on what that provider has to offer.

Using Spreedly as an example, our open payments platform allows you to store credentials for your recurring payments in an advanced vault that is PSP-independent, PCI-compliant, and actively managed by the Spreedly team. With this kind of solution, you can confidently store customer payment data for your subscription needs without taking additional compliance and technological burdens in-house.

Managing your recurring payments

Getting a subscription started with your customer is only step one. 

Once you have your customer payment data securely stored, you need to set up an automated schedule for initiating the payment from the merchant side based on the timeframe you agreed to with your customer (i.e. weekly, monthly, annual, etc.). You also need to set up alerts and notifications for any changes made to a subscription payment agreement, such as:

• Upgrades or downgrades to a customer’s current plan
• Failed transactions due to hard declines, such as incorrect credit card information or insufficient funds in the customer’s account
• Upcoming subscription renewals

Automating these types of alerts helps keep your recurring payment process operating smoothly without unwarranted disruptions to the customer experience. An automated recurring payment solution can create more predictable revenue streams and reduce your administrative overhead, all while keeping the payment process as simple and work-free for customers as possible. 

What kinds of recurring payment processing solutions exist?

There’s more than one way to enable recurring payments at your business. Which option you choose depends on the scope of your needs and how much developmental involvement you want in the process.

An open payments platform can offer you the comprehensive suite of tools and technologies you need to enable all types of payment use cases, including subscriptions. Through such a platform, you can access multiple different payment gateways and payment service providers, all while maintaining an independent system that is not tied down to any singular provider. 

Other solutions for recurring payment processing include:

• Manually configuring your payment gateway to store customer payment data and automatically charge customers on specified billing dates.
• Open a merchant account with a service provider offering recurring payment capabilities. 
• Set up direct debits that directly charge a customer’s account (typically, this type of solution is only used for larger payments or B2B payments, rather than traditional consumer uses).

Why You Should Start Accepting Them

Setting up recurring payment processing can be your key to stabilizing revenue and improving your relationships with returning or subscription customers. 

Perhaps more importantly, streamlined recurring payments that can be made instantly online are quickly becoming a commonplace expectation from consumers.

A PYMNTS survey of 2,000 consumers found that 42% rely on retail subscriptions for their recurring purchases rather than shopping in-store. Such reliance is expected to climb higher in the coming years, as younger generations like Millennials and Gen Z showing a preference for online subscriptions. 

Offering subscriptions can increase your customer engagement and loyalty, helping to grow long-term relationships and build a more consistent customer base. Instead of relying on repeat purchases, you can establish an ongoing connection with customers, increasing each person’s lifetime value. Additionally, recurring transactions simplify the payment process, reducing friction and making it easier for customers to continue using a service without manual monthly payments. 

Businesses also need to consider recurring payments from a B2B perspective. For example, an eCommerce marketplace that collects a monthly platform or software usage fee from merchants needs the ability to reliably retrieve these funds. A recurring payment processing solution gives you the freedom to perform subscription collections both with consumers and other businesses and merchants. 

Accepting recurring payments ultimately positions your business for optimal growth. Automated billing reduces administrative overhead, freeing up time to focus on adapting to your target markets.  

Challenges Can Arise While Managing Recurring Payments

Any payment technology can come with challenges if not properly integrated, managed, and maintained.

False declines can be one of the greatest risks to recurring payment revenue. 

In a collaborative report published by PYMNTS and Spreedly, we found that 56% of U.S. consumers have experienced a false payment decline in the last three months, while 40% of global customers reported experiencing false declines recently. Another PYMNTS Intelligence report shows that false declines put an estimated $157 billion at risk and lead to more than $80 billion in losses in 2023.

Some false declines occur due to no fault of your business, such as when a customer supplies incorrect card information or allows their card to expire. However, other failures can occur due to issues with your payment processing, such as a payment gateway outage or a failed payment authorization. 

The ability to automatically reroute transactions to other payment gateways when a false decline occurs can help your business recover revenue that would otherwise be lost. 

Aside from addressing the issues presented by false declines, other problems you may encounter when managing a recurring payment processing solution include: 

• Compliance complexities caused by regional regulations (if you operate in multiple jurisdictions or geographies)
• High customer churn rates due to a clunky subscription payment system (such as, if a customer has to manually pay their bill every month rather than setting up auto payments)
• Limited customer reach due to limited payment methods

Businesses That Need Both One-Time and Recurring Payment Processing

Many businesses require a mix of recurring and one-time payments to accommodate different customer needs and revenue streams. 

Using both can give you strategic opportunities to attract customers to your subscription services with an initial offer followed up with a simple recurring payment experience.

For instance, subscription-based companies (such as streaming services, SaaS providers, and digital news platforms) primarily rely on recurring billing but often offer one-time purchases for add-ons, premium content, or lifetime access. At the same time, eCommerce and retail businesses with membership programs or subscription boxes need recurring payments for ongoing services while maintaining one-time transactions for standalone purchases. 

The following business use cases can also benefit from using both types of payment processing:

• Online learning platforms often charge subscriptions for ongoing or live course access, as well as one-time sales of individual courses, certifications, or tutoring sessions.
• Service-based industries, including fitness centers, must balance both models by offering monthly memberships as well as daily or weekly passes. 
• Healthcare providers, such as telemedicine platforms and therapy services, may charge recurring fees for ongoing care while allowing one-time payments for standalone consultations.
• Travel and hospitality businesses can offer loyalty programs and priority memberships via recurring billing while using one-time payments for standard bookings and additional services. 
• B2B enterprises and providers can use both types of payment processing to set up service subscription plans and one-time sales of specific products. 

Spreedly Makes Recurring Credit Card Payments Easy

If your business relies on income from subscription payments, you need a payments platform that can handle all of the ins and outs of recurring payment processing on your behalf. 

Subscription payments offer more time flexibility than one-time payments, giving you more operational flexibility to resolve payment issues if and when they occur. For example, if you run a customer’s payment information and it gets rejected by your primary gateway, you can use secondary gateways to quickly and automatically reroute that transaction for a greater chance at success. 

Spreedly’s provider-independent approach gives you the freedom to integrate as many gateways as you deem necessary for your customer base and their preferences. We add additional layers of protection via our customizable that help you capture as many payments and as much revenue as possible. 

As mentioned earlier, our advanced vault solution provides everything you need to streamline your storage of customer payment data while also offloading the burden of compliance onto our team. Features of our Vault solution include: 

• Creation of network tokens to secure payment data during the transaction, leading to higher authorization rates and smoother payment processing. 
• Automatic updates of expired card details, as well as automatic alerts when a customer’s credit card nears expiration, that allow the system to refresh the data without disruption. 
• Data enrichment additions that make it easier to assess the risk level of each transaction and customize the transaction to the customer. 
• Managed PCI compliance 

Spreedly also offers innovative solutions like Protect, offering real-time fraud detection and prevention, and Composer, a low-to-no-code tool designed to help you simplify your open payments workflows.

Read all about our latest features and updates in our Winter 2025 Product Release. 

Connect with Spreedly Today to Drive Performance Tomorrow

Whether your recurring payments are domestic or cross-border, B2C or B2B, Spreedly’s open payments platforms can help make them happen. 

Request a Spreedly demo today.

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