Continuity & Subscription Merchant Account

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In recent years, subscription accounts have taken the e-commerce world by storm, as consumers have embraced the convenience of having products automatically sent on a regular basis. Through continuity marketing, which is based on the traditional magazine subscription model, people can now get everything from flowers and food items to clothing, cosmetics, streaming channels, and internet services. These products and services are paid at a basic rate through continuity (or recurring) billing that’s typically monthly, but can also be quarterly or annually. And as internet shopping becomes even more popular nationwide, studies show that the continuity subscription market is slated to grow to 7,813 million USD by 2025. Likewise, the e-commerce subscription market is experiencing an annual growth rate of more than 17 percent, making it an attractive business model for startups and new entrepreneurs.

Despite these statistics, however, banks and financial institutions continue to be reluctant to offer payment processing services to subscription companies. If you own or manage a subscription business, you may have already discovered the difficulties in getting a continuity and subscription merchant account. This is due to a number of factors, all of which contribute to a “high-risk” designation for the continuity subscription industry.

Given the industry’s monumental success, it’s hard to understand why continuity subscription merchants would be considered high-risk for credit card processing. The subscription model has worked tremendously well for businesses like Amazon Prime, Netflix, and Spotify, subscription box services like HelloFresh, Dollar Shave Club, and FabFitFun, and countless others that have become household names in a relatively short time. In fact, industry analysts report that by the end of 2022, more than half of software revenue in the US will be generated from a subscription platform.

Yet continuity and subscription merchant accounts continue to be out of reach for many entrepreneurs, even if they have a stellar business record. But fortunately, Zenti can help. As a leading merchant account specialist for high-risk industries, Zenti offers a complete line of payment processing services, including credit card, debit card, and e-check processing, for all types of high-risk merchant accounts, including subscription billing companies.

Why are subscription companies high-risk?

A large number of highly successful industries are considered high-risk for merchant account services. These include:

As with many of these industries, subscription businesses are considered to be especially high-risk because they’re prone to an unusually large chargeback ratio.

How chargebacks impact a continuity subscription merchant account

Chargebacks are refunds issued on credit cards that occur when customers want their money back because they’re not satisfied with a product or service. At least, that’s the reason why chargebacks are supposed to occur but, unfortunately, a growing number of chargebacks are due to a phenomenon known as “friendly fraud.”

Friendly fraud occurs when a customer claims they didn’t authorize a credit card charge and that it was made fraudulently. Of course, in many cases, these are legitimate claims, and credit card processing companies are only too glad to help. But in a friendly fraud scenario, the customer actually did make the purchase, and either had second thoughts about it or wanted to hide it (as in the case of a charge from an adult entertainment company). In friendly fraud, a customer will typically bypass the merchant and go straight to the credit card company to demand a refund.

Subscription merchant services are especially prone to chargebacks — including friendly fraud — because of cancellations. Customers may change their minds about a subscription, or they may find that they can no longer afford it. And in some cases, a subscription may skyrocket in price after the first few months. This is especially true with magazine subscriptions, in cases where a promotional price is offered for the first three to six months, only to be more than doubled afterward. In the subscription industry, where everything depends upon a successful recurring billing model, a cancellation is tantamount to a chargeback and greatly impacts revenues for the company, as well as the payment processor.

Significantly, chargebacks continue to increase every year, with analysts predicting that by 2023, one in 10 chargebacks will involve some form of friendly fraud. And here’s another staggering statistic: Each year, some type of fraud costs merchants almost five percent of their revenues worldwide, reflecting a cost of 3.7 trillion USD annually.

Here’s a look at why excessive chargebacks are so bad for merchants and merchant processors

Revenue loss

In 2017, chargeback loss totaled a whopping 31 billion USD, making a significant impact on business owners, as well as payment gateway companies. As a merchant, with every chargeback that’s transacted, you lose all the revenue from that sale.


Criminals can use chargebacks to get money that isn’t theirs or get something for free.

High fees

If chargebacks are excessive, payment processors will typically raise their merchant fees. And in some cases, a payment processor may cancel an account altogether because of high chargeback rates. Fortunately for high-risk businesses, Zenti is able to provide a wide range of payment processing solutions at affordable rates, so these industries can get merchant account services at fair and reasonable prices.

There’s another important reason why chargebacks are such a nightmare for merchant account providers, and it has to do with something called underwriting.

Underwriting and payment processors

Underwriting is simply another term for financial backing. Credit card processing companies are all underwritten, or backed financially, by the nation’s major banks and financial institutions. Think of it this way: If you apply for a business loan, the bank underwrites your loan, so you need to have stellar credit and prove that you’re a low risk, or the bank will deny the loan. In much the same way, banks underwrite payment processors — and they’re wary of accepting merchant accounts from high-risk industries.

Toward this end, payment processors usually charge higher fees for high-risk merchant accounts, and this is where Zenti can help. With years of working in high-risk industries, Zenti specializes in providing a full line of payment management solutions at fair and reasonable rates that businesses can afford.

Tips for preventing chargebacks

Give full descriptions of your subscription services

Whether you’re selling subscription gift boxes, streaming services, or other types of products, it’s vital to give complete information about exactly what you’re selling, and what customers should expect to receive from their subscription. Chargebacks typically occur when customers feel that their needs weren’t met, so it’s important to provide a full description that includes photos and videos.

Give full disclosure on returns and cancellations

As a subscription service provider, you already know that cancellations are inevitable with the type of business you’re in. You can make these easier for yourself and your customers by giving full disclosure on your refund, return, and cancellation policy. By making everything crystal clear, you have a better chance of mitigating customer complaints, as well as a better chance of getting customers to come back later.

Be fair and accurate in your pricing

If you’re running a promotional sale or an introductory offer, make it clear exactly when the price will revert back to normal rates. Also, let people know exactly what they can expect to pay each month, and provide added perks and benefits for customers who decide to stay on past the introductory phase.

Be flexible, and offer attractive replacement options

If you offer a subscription box service and a customer isn’t happy with one of the products included, have the flexibility to provide an appealing alternative that the customer might like. For example, if you sell cosmetics or food products, a customer might be allergic to an item in last month’s box and ask for a full refund. Be prepared for this by having a variety of replacement items on hand that you can offer. This may help you avoid having to issue a chargeback for that month’s subscription box.

Issue refunds promptly

There will always be dissatisfied customers along the way, and returns often can’t be helped. You can make the process better for everyone by issuing refunds promptly, as well as sending an immediate email or letter to let the customer know that the charge has been refunded. With this level of service, a customer will be more inclined to come back. This is especially true if a customer discontinues a subscription for financial reasons. When their finances are better, they’ll remember how courteous you were, and this may influence them to purchase another subscription.

Communicate with your customers

It’s important to be there for your customers — and that means having someone available to answer questions, either personally or via phone and email, depending on your business. By providing fast email responses and return phone calls, you can go a long way toward generating a feeling of trust and goodwill with your customers.

Ultimately, one of the best ways you can prevent chargebacks is by using a high-risk merchant account specialist. Zenti offers a variety of user-friendly payment tracking tools so you can stay on top of every transaction, from the point of sale to its successful completion. Zenti also offers a secure payment system, with encoding and encryption to ensure that you’re protected from scams.

How a merchant account benefits a subscription business

As the owner or manager of a subscription business, you probably already spend a lot of time with administrative work online. With a continuity subscription merchant account, you can greatly streamline your operations, as well as offer customers a wide variety of payment options and services, including:

Multiple methods of payment

Not surprisingly, studies show that 90 percent of customers prefer the convenience of multiple credit card payment options, whether they want to use VISA, Mastercard, Discover, or American Express. A merchant account will enable you to provide your customers with all types of credit and debit card payment choices, as well as mobile app and e-check payments.

Streamlined subscription services

These include a variety of benefits for your customers, including:

Billing and tracking tools

With a continuity and subscription merchant account, you’ll be able to send automated bills according to your preferred schedule — which means you won’t have to spend hours sending manual invoices every month. In addition, a merchant account will give you the tools you need to track every transaction, so you won’t have to waste time tracing and chasing down late payments.

If you’re ready to enjoy the benefits of having a high-risk merchant account provider, Zenti can help. Zenti specializes in providing high-risk industries with a full roster of payment processing services, including credit card, debit card, mobile app, and e-check payment options. Plus, Zenti offers secure payment tracking and convenient automated billing tools, as well as security protections like encryption and encoding, so you can safely track and monitor your financial accounts.

To learn more, contact Zenti and find out how we can provide you with the payment solutions you need to reach a whole new level of success.