Updated September 19, 2024

Travis Credit Union reveals in a recent study that 59% of Americans say debit cards or credit cards are their favorite payment method. In fact, they prefer to only pay with cards. 52% of the respondents say that this is because of convenience. It can be more convenient for merchants too, especially with a continuity subscription merchant account business model.

While convenient, continuity subscriptions are not without challenges if you do not have the right business model and credit card processing solutions to help you.

Keep reading this article and it will explain everything you want to know about a continuity subscription. It begins now!

What Is the Continuity Subscription Business Model?

There are major benefits to this model. It is a recurring payment system, where a consumer will sign up for a subscription option at one time, adding his or her credit card details.

From then on, the user will incur a charge weekly, monthly, or annually, depending on the cadence per the details of the subscription they agreed to. These recurring payments happen automatically and remotely using the credit card on file. Usually, after a period, a customer can renew a subscription and continue to make those subscription payments regularly.

How the Subscription Payment Processing Works

Processing subscription payments may seem simple and instantaneous, but it is actually a complex process. To process recurring payments, the merchant must send the customer's credit card information through a financial network that involves the credit card company, a payment gateway, and a third-party billing platform, often provided by ecommerce merchant account providers.

Recurring Payment Processing Step-by-Step

There are multiple options for recurring payment processing. These include a subscription management system, accounting software, and payment gateways. Accounting software is typically used by smaller companies, so that might not be the best option for you. The two other options revolve around the use of payment gateways. If using one of these payment processing options for processing recurring payments, this is usually how it works:

1. When processing recurring payments, the merchant first sends the credit card information on file to a third-party billing platform.
2. That platform stores the payment information and sends an online payment request to the payment gateway.
3. The payment gateway then communicates with the payment processor, issuing a request to them.
4. That request is passed along to the payment services provider.
5. They then send the info to the issuing bank.
6. The bank decides whether or not the transaction is approved based on whether the customer has sufficient funds and whether their credit card data is correct.
7. If the transaction was approved, the customer will see it on their monthly statement.

Typically, this process runs smoothly through the issuer, payment gateways, and financial institutions, and the recurring payment takes place.

Benefits of a Continuity Subscription

It offers a steady stream of revenue for a business, and customers have the convenience of automatically making recurring payments. This helps keep customers in the future.

Further, your company could make a better prediction of revenue, while also decreasing the costs of customer acquisition. Plus, subscriptions may attract even more customers who prefer to make smaller recurring payments. Customers also appreciate that they get to enjoy their service without experiencing interruptions or having to think about the billing cycle. Many businesses find that a recurring payment system actually increases customer satisfaction, making customer relationship management easier.

However, if the consumer is unaware that they signed up for a subscription, they can get aggravated when they see the charges the next month. They may also sign up for a free trial, input their information, and then cancel before the trial ends. These are some of the most challenging parts of subscription payment processing.

Challenges of Recurring Payment Processing for Continuity Subscription

While recurring payments offer benefits, your business also runs a higher risk of chargebacks.

Because of the high risk of chargebacks, your credit card processing solutions provider may decide to freeze your assets or close your account if you decide to go to a recurring payment model. If this happens, it would make processing future transactions impossible.

One main reason subscription businesses can have a hard time finding payment processing is that a merchant who offers continuity subscriptions can be a target for billing scams.

Here are some more disadvantages that come along with a subscription business model and solutions to overcome these challenges.

Increasing Competition

No doubt that this is a popular business model, which also means you have competition. With more competitors offering subscriptions with recurring payments, you risk losing a valued customer. Don't let this discourage you, it just means you need more than a subscription to set you apart.

You need a unique brand identity and value proposition to make your company stand out from the pack. Customers prefer working with merchants who have impeccable customer service. The human connection is important, even if billing is automatic.

Make sure that you answer your customer concerns quickly and with courtesy. This will set you apart from other subscription businesses.

High Cancellation Rates

When you first embark on a brand-new business venture, customer retention is critical. This is no different, even in a continuity subscription model.

When beginning a subscription-based company, consider that you will have customer turnover. Once you do that, you will want to consider how you will avoid high cancellation rates.

There are many ways to keep your customers. Great customer service and offering new products is a good starting point.

It's also important to be transparent about your subscription models and pricing. Along with that, make sure your customers clearly understand the payment schedule. Transparent pricing is key for retention.

Make it easy for customers to cancel, too. When you make it difficult, they will only resent you and give negative feedback to anyone who will listen. This will affect your ability to attract new customers.

To avoid this, you want a transparent cancellation policy.

Uncertain Revenue

Continuity subscription business models help with building a steady revenue stream, but that is over time. In the startup phase, it is still uncertain. You may question if subscriptions were a good idea.

Stay positive. Get through the storms. Once you start to see a reliable income, the challenges will have been worth the while.

Ensure that you have a solid investment strategy before you launch. Marrying successful pricing models with great customer service and transparency will lead to success. Upon building a loyal customer base, you will be in a solid position to grow and thrive.

Avoiding Your Sign-Up Agreement

When there is no commitment, it is much easier for a customer to agree to a one-time purchase. If unsatisfied, they can return their purchase and get their money back.

Things are not so simple with a contract, though, which is why customers can fear signing a service agreement. Customers are hesitant to commit if they are unsure they will receive value. The last thing a customer wants is to be stuck in a contract they are not happy with.

Therefore, merchants typically offer a free trial with no commitment to continue, making it simple to cancel.

Provide New Value

Customers today get bored quickly. As the merchant, you must consistently prove value, or your customers will leave. When this happens, it makes managing subscriptions difficult and predicting cash flow even harder.

Overcome this hurdle. Continue adding new and interesting products that are a part of your business model.

For example, Netflix changes the movies and shows they offer to stay relevant to their viewers.

Credit Card Processing Solutions

Financial institutions and traditional banks may turn up their nose to a merchant who offers subscription billing, recurring billing, and automatic payments because they are at high risk of chargebacks. As most payment processors won't work with you, you'll need high risk merchant accounts.

One way that you, as the merchant, can avoid it is to make sure customers are aware and remember that they have signed up for a subscription, using a recurring billing cycle. If they forget, try not to reverse the charges. Rather, let your customers know you will stop billing them in the future.

If your customer does not clearly understand the terms they agreed to, they may try to dispute the charge directly through their credit card company, not you. It is better for you, the merchant, to inform your customers of how to cancel billing or request a refund easily by contacting you, not their credit card company.

Stricter Requirements

Some financial institutions have tightened loose ends with their requirement regarding the free trial continuity business model. You need credit card processing solutions that give you multiple payment options besides a robust payment gateway.

Why Choose Zen Payments For Your Continuity Subscription Business Model?

If you are concerned with how to process credit cards for a continuity subscription, there is no need to worry anymore. Zen Payments has been helping high-risk merchant accounts be successful in processing credit and debit card payments for the past 15 years.

We are confident in our services. Zen Payments will provide you with the best credit card processing solutions. Don't let chargebacks and the label of “high risk” weigh you down any longer. We'll get you set up and processing payments quickly.

Let's get started on a payment processing solution now.