Recurring payments: how subscriptions get paid

A fixed recurring payment has the same amount every cycle, a variable one changes with use, such as an electricity bill (Adyen). Cards are the default for most subscription businesses, SEPA direct debit is the standard for bank-to-bank recurring payments in Europe, and pay by bank is the lower-cost option some merchants push, according to the same source. Each method fails differently and costs differently.

With a card, the first charge is customer-initiated, and every renewal after it is merchant-initiated and flagged that way to the card network (Solidgate). The flag on the first payment decides whether later charges fall outside strong customer authentication and how retries work. With SEPA direct debit, the customer signs a mandate once and the merchant pulls each amount.

Expired and reissued cards are the most common reason a renewal fails. A merchant that stores network tokens in place of card numbers gets the new card details from Visa or Mastercard without asking the customer, and a token also reduces the merchant's scope under PCI DSS.

Open banking adds a bank-account route with the customer in control. Variable recurring payments let a customer give a provider a standing permission, with limits, to start payments from the account through an API, and the planned SEPA Payment Account Access scheme carries the idea to the euro area. Instant transfers settle such payments within seconds.

A failed renewal goes into dunning: the system retries the charge and asks the customer to update the payment details (Solidgate). CCBill advises merchants to keep written proof of the customer's permission, to send a notice before each charge and before a card expires, and to state cancellation terms plainly, because a missed cancellation tends to come back as a refund or a chargeback (CCBill).

German law sets one rule for the cancellation side. A business that lets consumers sign a paid, ongoing contract on its website must offer a cancellation button there, labeled "Verträge hier kündigen" or with words as clear, under Section 312k of the German Civil Code (in German). Financial services contracts are exempt.

Finance Loop is the meeting place for people who run recurring payments in Germany: payment teams at subscription and e-commerce businesses, payment service providers, banks that collect direct debits, and the fintechs that build open banking APIs. It connects the finance, IT and AI communities in Germany, Austria and Switzerland, with events in Frankfurt, Munich, Berlin and Hamburg.

Visa is an event and network partner of Finance Loop. At Capital & Code in Frankfurt, where Finance Loop is a media partner, Mastercard, PayPal and Worldline speak with AllUnity on the future of payments, payments started by AI agents among them.

A payment that the customer authorizes once and the business then collects automatically at set intervals until the customer cancels or the contract ends. Subscriptions, memberships, insurance premiums and utility bills are the common cases.

A recurring card payment charges a stored card, flagged as merchant-initiated, and runs through the card network. A SEPA direct debit pulls the amount from a bank account under a signed mandate and runs through the banks' clearing; the customer can ask the bank for a refund within eight weeks.

Customers lost because their payment failed, not because they wanted to cancel: an expired card, a reissued card or a decline. Network tokens and retries are the usual answers.

The first payment, when the customer agrees to the subscription, needs it in the EEA. Later merchant-initiated charges generally do not, if they are flagged correctly.