Business Models
Recurring Payments
Definition
Recurring Payments transactions that repeat automatically at set intervals using stored payment credentials. Includes subscription billing and installment plans. Requires proper cardholder consent and clear terms. SCA exemptions may apply for fixed-amount recurring in Europe. Card updater services essential to maintain payment continuity when cards are reissued.
Related Terms
Subscription Billing
A payment model where customers are charged on a recurring schedule (monthly, annually, etc.) for ongoing access to products or services. Requires card-on-file capability and careful attention to authorization rates, dunning, and involuntary churn. Card networks have specific rules for subscription billing including clear disclosure and easy cancellation. Higher risk classification due to chargeback patterns.
Card-on-File
Storing customer payment credentials for future transactions without requiring re-entry. Essential for recurring billing, one-click checkout, and repeat purchases. Must use tokenization for PCI compliance. Card networks have specific rules including obtaining consent and identifying stored credential transactions. Network tokens improve approval rates for card-on-file.
Card Updater
Services that automatically update stored card credentials when cards are reissued or replaced. Visa Account Updater (VAU) and Mastercard Automatic Billing Updater (ABU) provide new card details to merchants. Essential for subscription businesses to reduce involuntary churn from expired cards. Updates happen during batch processes - not real-time.
MIT (Merchant Initiated Transaction)
A transaction initiated by the merchant using stored credentials without cardholder involvement at the time of transaction. Includes subscription renewals, auto-replenishment, and delayed charges. Requires prior cardholder consent and proper flagging in the authorization request. MITs may be exempt from SCA in Europe. Distinct from CIT (customer-initiated transactions).
CIT (Customer Initiated Transaction)
A transaction initiated by the cardholder at the time of purchase, with the cardholder actively present (physically or online). The initial enrollment for recurring payments is a CIT even though subsequent charges are MITs. SCA typically applies to CITs in Europe. Proper classification affects authorization rates and compliance.
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