Recurring Payments and Subscriptions

Not all subscriptions are the same. The billing model defines how and when you charge your customers, and it has a direct impact on retention, churn and perceived value.

Between 5% and 10% of recurring payments fail in each billing cycle. The most common causes are expired cards, insufficient funds or issuer blocks. Without a dunning strategy, these failures translate directly into involuntary churn.

An effective dunning process combines automatic retries with email communication. A typical sequence includes an immediate retry, another at 24–48 hours with customer notification, a third attempt at 5–7 days and, if it fails, service suspension with the option to update the payment method.

When a customer changes plan mid-cycle, proration calculates the difference between what was paid and what is owed. An incorrect implementation generates confusion, complaints and loss of trust.

Stripe Billing, Chargebee and Recurly handle proration automatically, calculating proportional credits and charges down to the day. The most important design decision is whether you charge the difference immediately, accumulate it on the next invoice or apply it as a credit.

There are two main approaches: using the built-in billing from your payment gateway or adopting a dedicated subscription management platform. The choice depends on the complexity of your billing model.

A solid recurring payment implementation goes beyond creating an endpoint that charges every month. It requires managing subscriber states (active, paused, cancelled, delinquent), synchronising billing with service access and maintaining an auditable record of every transaction.

Webhooks are the centrepiece of the architecture. Your system must listen for events like invoice.paid, invoice.payment_failed, customer.subscription.updated and customer.subscription.deleted to keep state synchronised. Process these events idempotently to avoid duplicate charges.

A subscription business is managed with specific metrics that go beyond gross revenue. MRR (Monthly Recurring Revenue), churn rate, LTV (Lifetime Value) and CAC (Customer Acquisition Cost) are the fundamental indicators.

To reduce involuntary churn, optimise your dunning flow and offer account updaters. To reduce voluntary churn, work on the value proposition, user experience and proactive communication. A single percentage point reduction in churn can represent a substantial increase in annual revenue.