In the ever-evolving landscape of digital commerce, recurring payments and subscription billing are reshaping the way businesses and consumers interact. In fact, the global subscription ecommerce market is forecasted to grow to $2,419.69 billion by 2028.

Subscriptions follow a business model in which customers and merchants engage in an ongoing relationship rather than one-time payments–and it has become a win-win for both parties. While companies get a steady stream of revenue and stronger brand loyalty, subscribers enjoy the convenience of frictionless billing for ongoing products or services that bring them value.

In this article, we’ll dive deeper into the definition of recurring payments and subscription billing, its advantages for customers and companies, and how to implement this business model. 

Key takeaways: 

  • Recurring payments are automated transactions scheduled at regular intervals, serving as the backbone of the subscription industry. They have become the preferred method for ensuring seamless and consistent billing.

  • Recurring payments offer benefits for both customers and companies. Customers enjoy lower monthly payments and easy access to products while companies can offer more flexibility while improving monthly revenue.

  • Recurring payments works best when customers have multiple payment options to choose from including credit/debit cards, digital wallets, ACH, and more.

Recurring payments definition

Recurring payments are automatic transactions at regular intervals–typically monthly or annually. This model is commonly associated with subscription-based services, where customers enter their billing information once and grant the merchant permission to charge them at an agreed-upon payment schedule.

The convenience of recurring payments lies in their automated nature, reducing the need for manual transactions and providing a predictable revenue stream for businesses while offering customers continuous access to the services they've subscribed to.

Subscription billing definition

Subscription billing is the automatic, regular billing process that occurs after a customer signs up to use a service. The owed amount is automatically transferred from their account to the business rather than being periodically hounded for payment.

Subscription billing and recurring payments exist hand-in-hand. When customers sign up for a service–like a gym membership, a box of the month, or a video streaming service–they agree to provide regular payments for uninterrupted access to a service. The client is issued a receipt and can cancel at any time.

How do recurring payments work?

Recurring payments are scheduled transactions that work on a daily, weekly, monthly, quarterly, or yearly basis. A company charges a payment method such as a credit card to pay for ongoing services. Recurring payments are mostly commonly found in industries like streaming, software, music, and more. There are usually multiple types of recurring payments: 

  • Fixed: A consistent recurring payment amount (e.g., $15 monthly for a streaming service).

  • Variable: The charged amount fluctuates each billing cycle, typically dependent on usage, quality, or ramp pricing (e.g., an electric bill is a usage-based recurring payment).

Examples of different types of recurring payments

Recurring payments aren’t just related to subscriptions, they can also be things like utilities, loan repayments, insurance premiums, installment plans, more. Recurring payments are the backbone of many industries. 

Payment modes

Credit/debit card payments: This is the most common payment method. A customer provides their card details, which the merchant securely stores (usually as a "token") and then automatically charges on the scheduled billing date.

Digital wallets: These act as an intermediary, storing a customer's payment information securely. The customer authorizes the recurring payment through the wallet, and the merchant charges the wallet (e.g., PayPal, Apple Pay, Google Pay), which then pays using the customer's linked card or bank account.

ACH (Automated Clearing House): This method facilitates direct bank-to-bank transfers. The customer provides their bank account and routing numbers to authorize a merchant to pull funds directly from their account. In the U.S., ACH is a popular, lower-cost alternative to card payments, often used for bills and payroll.

SEPA direct debit: ACH is the system that enables direct debit in the United States. In Europe, the equivalent is typically SEPA (Single Euro Payments Area) Direct Debit.

How can customers benefit from recurring payments?

The subscription business model has many benefits for customers. Let’s review the top five:

Recurring payments help with cost savings and budgeting

Subscription services contribute to predictable expenditure and cost savings for one-time payments, especially for products and services they regularly use–like a gym membership or a monthly coffee subscription. By paying a fixed amount each billing cycle, customers can budget more effectively, knowing the exact amount they will be charged.

Subscribers get seamless access to products

Subscriptions provide customers with continuous access to the products or services they've subscribed to–like a streaming service or an online magazine. This eliminates the need for repeated manual transactions, ensuring uninterrupted usage and convenience.

Customers receive exclusive content and regular updates

Depending on the subscription product, some offerings provide exclusive content, features, or early access to new releases for their subscribers.

Companies that work under a recurring payment model are motivated to enhance their offerings continually, providing customers with a more valuable and up-to-date experience. This added value builds customer loyalty and gives subscribers a sense of being part of an exclusive community.

Subscriptions offer payment flexibility and customization

Many subscription models offer flexible plans, allowing customers to choose the type of service that best fits their needs. This flexibility enables customers to customize their subscriptions, adjusting features or plans as their requirements change over time.

This flexibility, however, can be found from trial to cancel. Subscription billing often comes with free trials or introductory periods that let customers test a product before committing to a long-term subscription. Once subscribed, consumers can pause or cancel their service at any time without incurring significant penalties.

Check this out: According to recent data from our What subscribers want report, 55% of consumers consider the option to pause their subscription a top priority when selecting a new service. However, only 37% currently have access to this feature. Additionally, 43% of consumers ranked free trials as the most appealing promotional offer. 

Consumers find convenience in recurring payments

The automatic renewal feature ensures that customers do not experience service interruptions due to forgetting to renew their subscriptions manually. This convenience is particularly valuable for services that customers rely on regularly.

How can your business benefit from recurring subscription payments & billing?

The recurring payments business model has many benefits for companies. Let’s review the top five:

Improve your subscriber retention & brand loyalty

Sustainable business owners can recognize the difference between making a sale and building ongoing relationships with customers. What’s the difference? Customer retention.

Subscription billing fosters customer loyalty. This model encourages long-term relationships with customers, reducing the need to constantly acquire new customers and thereby lowering customer acquisition costs. Customers only enter their billing information once, and automatic payments take it from there. 

Consumers benefit from a seamless and uninterrupted experience, enjoying access to the products or services they've subscribed to. This convenience can lead to increased customer satisfaction and positive word-of-mouth referrals.

Offer an enhanced & flexible customer experience

Subscription billing models are adaptable, allowing you to adjust subscription plans, pricing, and features. Offering various payment plans allows you to appeal to your customers’ specific needs without forcing them to pay for bells and whistles they’re not interested in.

Additionally, providing different payment methods – not just debit card and credit card payments–meets your customers where and how they prefer to pay.  According to our 2025 State of Subscriptions report, customer demand for alternative payment methods like Apple Pay rose to overall 2.2% of all transactions in 2024. 

Provide diversified and personalized offerings

Subscription models and recurring payments generate valuable data on customer behavior, preferences, and usage patterns. These insights can later be leveraged to personalize your offerings, improve product or service quality, and tailor marketing strategies to meet the specific needs of your subscriber base.

Recommended reading: Five subscription business stories where customer insights played a key role in success

Get a more accurate budgeting outlook

A clean-cut view of monthly or annual expenses helps your customers budget. There are no unexpected charges or service costs. And while that helps them, it also helps the businesses they pay. 

Guaranteed income goes a long way, and not just because subscribers become more valuable the longer they use the service. Subscription billing offers businesses a stable outlook on revenue. The ability to forecast allows businesses to scale. Plus, the foresight that comes with subscription billing can mean better planning, less product waste, and higher ROI. 

Enable faster product development and scalability

Subscription billing models are adaptable, allowing businesses to adjust subscription plans, pricing, and features based on customer feedback, market demands, and evolving business strategies. 

With the guaranteed revenue a subscription model brings, businesses are able to provide a more regular stream of improvements to their products and services. For example, services like Paramount+ continually release new content, while companies like Apple that get consumers to sign up for a subscription (such as iCloud storage) offer consumers a better product every year.

Additionally, subscription billing provides businesses with a consistent and predictable income, as they can anticipate and plan for regular payments from subscribers. This stability is particularly valuable for budgeting, forecasting, and overall financial planning.

If you’re wondering if recurring payments and subscription billing are right for your business, consider this: How often do you think of your business as a one-off sale? Hopefully never. 

FAQ about recurring payments

What is the difference between recurring payments and subscription billing?

Recurring payments: These are automatic payments at regular intervals usually assigned to a billing cycle. 

Subscription billing: The process of automatically billing customers on a regular schedule after they have subscribed to a service. While related, recurring payments are the transaction itself, and subscription billing is the entire process of managing those transactions. Subscription billing can also entail churn, payments orchestration, pricing models, and more. 

Are recurring payments secure?

Yes, recurring payments are secured when processed through a reputable payment processor that adheres to PCI DSS (Payment Card Industry Data Security Standard) and other compliance standards.

What are some examples of businesses that use recurring payments?

Many successful businesses use a recurring payment model, including:

  • Streaming services like Paramount Plus

  • Software-as-a-Service (SaaS) companies like Lucid

  • Subscription box services like Birchbox 

  • Ecommerce stores like Nuuly

  • Membership-based organizations and publications

How Recurly makes subscription billing implementation easy

While a lackluster payment system might not be driving customers away from your unique business offerings, a great payment system is an added incentive and can help drive customer retention.

Recurly’s subscription management and billing technology keep customers and businesses connected. At the same time, it allows companies to offer seamless subscriptions to spend more time delivering valuable products and services and less time managing a broken payment system.

While the payment process is quick and simplistic from the customer’s viewpoint, there are a few behind-the-scenes steps involved on the other end:

  • During checkout, your customer chooses their preferred billing cycle and payment option. Then, enter their payment and billing information.

  • Your company receives the order information and uses a service like Recurly to manage subscription billing and connect with the right payment provider.

  • Recurly handles the payment from there. We store the payment details securely and connect the request to the gateway, payment service provider, card association, and financial institution–this process takes only seconds.

  • Once the payment is approved, the customer is billed and issued regular statements each cycle.

Regardless of how awesome your service may be, no one wants to give up their hard-earned cash. So, why make payment processing harder than they need to be?

See how Recurly’s recurring payments and subscription billing solutions have helped businesses like yours show customers they’re in it for the long run.