What is recurring payment? Definition and example

Recurring payment

A recurring payment is a charge the merchant takes on a schedule, such as a monthly subscription or a series of instalments, using payment details the customer agreed to store, with the first payment made by the customer and later ones started by the merchant.

Also called: subscription payment, recurring billing, recurring transaction, subscription billing, repeat billing, scheduled payment

Updated 29 October 2026

How does a recurring payment work?

The customer pays the first time, agrees to the terms and the merchant stores the payment credential, usually as a token. Visa Acceptance Solutions’ guide says credential-on-file payments begin with a customer-initiated transaction and that later merchant-initiated transactions reference the transaction ID of the original. Each later charge is flagged as merchant-initiated and recurring, so the issuer knows the customer is not present and an agreement exists.

Why does it matter?

For subscription and membership businesses, renewals are most of the revenue, and every failed renewal is a customer who may never come back. As an illustrative example: a service with 15,000 monthly subscribers sees 6% of renewals fail on the first attempt. If retries, card updates and reminders recover half of them, 450 subscriptions a month are kept, which over a year adds up to more revenue than most acquisition campaigns.

What can go wrong?

Cards expire or are replaced, so stored credentials need updating. Payments flagged as the wrong type, customer-initiated instead of merchant-initiated or the reverse, can be declined. Customers who forget a subscription dispute the charge, which is why clear descriptors, reminders before renewal and easy cancellation reduce chargebacks.

Where does Omno use it?

Recurring payments through Omno are not available yet; they are on the roadmap. Today Omno stores saved cards as tokens at the orchestration layer, so returning customers can pay without re-entering their card details. A payment with a saved card follows the merchant’s routing rules like a newly entered one, and if a provider is unavailable or rejects the request, the payment moves to the next provider in the rule until one accepts. Issuers can still request 3-D Secure where needed, and each payment’s final status arrives by webhook.

Frequently asked questions

What does the customer have to agree to?

Stripe's documentation lists what the terms should cover: the customer's agreement to payments started on their behalf, the expected timing and frequency, how the amount is determined and the cancellation policy. The merchant should keep a record of each agreement, because it is the evidence if a payment is disputed as a cancelled recurring transaction, which Visa codes as 13.2.

Do recurring payments need 3-D Secure every time?

Usually not. The first payment is customer-initiated and can be authenticated. Later merchant-initiated payments reference that original transaction and rely on the customer's earlier consent, although an issuer can still decline one and the merchant then has to bring the customer back.

Can local payment methods be used for recurring payments?

Some can. Stripe's Pix documentation describes Pix Automático, where the customer authorizes a mandate with an amount and billing cycle in their banking app. Many other methods, such as cash vouchers and one-off bank transfers, need the customer to act each time.