Subscription Billing in High-Risk Industries

Subscription billing is a payment model where customers are charged automatically at regular intervals for ongoing products or services. This approach has become a cornerstone of modern commerce, especially as more businesses shift toward recurring revenue streams. According to Zuora’s Subscription Economy Index, the global subscription economy is projected to reach $1.5 trillion by 2025, underscoring its rapid expansion across diverse markets. While this growth presents significant opportunities, it also introduces unique challenges for businesses operating in high-risk industries such as travel, CBD, nutraceuticals, and online gaming. These sectors often face elevated concerns around chargebacks, regulatory compliance, and payment approvals. This guide explores the specific risks associated with subscription billing in high-risk industries. It outlines practical solutions to help businesses achieve stability, maintain customer trust, and effectively leverage the subscription model.

What Is Subscription Billing?

Subscription based billing is a payment model in which customers are automatically charged at set intervals, such as monthly, quarterly, or annually, in exchange for continuous access to a product or service. Unlike one-time purchases, this system relies on recurring revenue, which can provide stability and predictability for businesses. It is widely used across various industries, including membership services, software-as-a-service (SaaS), subscription boxes, and continuity programs. In a membership model, customers pay a monthly fee to access a gym, digital content, or a premium community. SaaS providers, such as productivity or accounting platforms, bill clients on a subscription basis to ensure ongoing access and software updates. Subscription boxes, which deliver curated products such as cosmetics, snacks, or clothing, rely on automated billing to streamline their delivery. Continuity programs extend this approach by regularly shipping replenishable goods, such as vitamins or supplements, to maintain customer convenience. This model has proven effective in growing revenue. In fact, subscription-based companies grew revenues about 4.6 times faster than the S&P 500 in the last decade, according to the Subscription Economy Index by Zuora. These figures demonstrate the appeal of recurring payments, not just for startups but also for established enterprises seeking consistent cash flow. However, with rapid adoption comes added scrutiny. Payment processors and banks are cautious when handling merchants that rely heavily on recurring billing. This is especially true for “high-risk” industries, where disputes, compliance issues, or fraud can jeopardize customer trust and processor relationships. Understanding why subscriptions are often labeled high-risk is essential before businesses adopt this model.

Why Subscriptions Are Considered High-Risk?

While subscription billing is profitable, it often triggers concerns for payment processors. Merchants in industries such as nutraceuticals, online gaming, or financial services face stricter oversight due to patterns that increase the likelihood of disputes. Subscriptions involve long-term financial commitments and delayed service delivery, raising the risk of customer dissatisfaction. Card networks and regulators closely monitor these businesses because recurring charges can result in higher-than-average disputes. Once a merchant accumulates excessive chargebacks or violates compliance rules, processors may freeze the funds or terminate the account altogether. The following points highlight why subscription merchants are frequently flagged as high-risk.

High Chargeback Ratios

One of the main concerns with subscription billing is the elevated chargeback rate. Customers often overlook ongoing charges, especially when the subscription is billed annually or semi-annually. When these charges appear on their statements, they may dispute the transaction rather than cancel it directly. According to Visa data, a chargeback occurs when a cardholder challenges a transaction and requests that the funds be returned through their bank. If subscription merchants consistently exceed Visa’s 0.9% chargeback threshold, they risk being placed in the Visa Chargeback Monitoring Program (VCMP), which can result in steep fines or account termination. This creates financial instability for businesses that rely on long-term recurring payments. It also underscores the importance of transparent billing practices, reminder emails, and clear cancellation policies.

Fraud & Friendly Fraud

Fraudulent activity is another factor that elevates risk in subscription models. Criminals may use stolen credit card details to sign up for recurring services, only for the transactions to be flagged later. This increases chargebacks and damages a merchant’s standing with processors. Equally problematic is friendly fraud. This happens when legitimate customers deny making a purchase or exploit refund policies. For example, a consumer may subscribe to a premium content service, enjoy it for a month, and then dispute the charge, claiming it was unauthorized. The Federal Trade Commission (FTC) notes that recurring payment models are especially vulnerable to disputes, as consumers may forget they opted into a continuity program or subscription. Businesses face greater regulatory and financial risks without clear disclosures and refund procedures.

Long-Term Service Commitments

Many subscription services require customers to commit to extended periods, sometimes six months or a year. While this model secures revenue for the high volume merchant, it also increases friction if customers want to cancel early. Disputes often arise when consumers believe they are locked into a contract without transparent cancellation policies. For instance, a streaming platform that bills annually may face backlash if users cannot easily opt out before the renewal date. These situations frequently escalate into chargebacks, harming the merchant’s reputation and financial stability. Merchants offering long-term subscription contracts must implement straightforward cancellation terms, reminder notifications, and prorated refund options to reduce customer dissatisfaction. Without these measures, processors classify such merchants as risk-prone.

Regulatory & Compliance Oversight

Regulators closely oversee subscription and continuity programs due to concerns about consumer protection. In the United States, the FTC enforces rules requiring companies to provide clear and conspicuous disclosures before enrolling customers in automatic billing. Businesses must also make cancellation “simple and straightforward,” according to the FTC’s Negative Option Rule guidance. Failure to comply can result in enforcement actions, fines, and lawsuits. High-profile cases against subscription-based companies have underscored the importance of processors carefully evaluating these merchants before offering payment services. Additionally, card networks like Mastercard and Visa have their own requirements. For example, Visa requires merchants to send reminder notices before annual subscription renewals. Non-compliance with these rules can result in penalties and even the termination of merchant accounts. These regulations add a layer of scrutiny to industries already considered high-risk. Businesses must invest in legal compliance, transparent billing, and customer-friendly policies to maintain trust with processors and avoid penalties.

Industries Commonly Using High-Risk Subscription Billing

Subscription billing is not limited to mainstream industries like streaming services or software. It is also a cornerstone of many sectors that payment processors consider high-risk due to regulatory concerns, customer disputes, or elevated chargeback ratios. These businesses rely heavily on recurring payments to sustain revenue and customer retention, but the very nature of their models makes them more vulnerable to scrutiny. Some of the most common high-risk industries using subscription billing include:

• Nutraceuticals and Wellness Products: Businesses selling vitamins, supplements, or herbal remedies often operate through continuity programs. Regular shipments offer convenience, but these sectors face intense regulatory oversight and a high volume of refund requests.
• Software-as-a-Service (SaaS): Although SaaS is widespread, small or lesser-known providers are sometimes flagged as high-risk due to long-term contracts, subscription auto-renewals, and disputes that arise when customers forget to renew.
• Online Dating Services: Online dating platforms typically charge recurring monthly or quarterly fees. Customer dissatisfaction or unauthorized use disputes make them frequent targets for chargebacks.
• Coaching and Online Courses: Subscription-based learning and coaching platforms lock customers into recurring payments. Cancellation requests, especially mid-program, often escalate into disputes.
• Adult Entertainment: Membership-driven adult platforms are highly reliant on subscriptions. However, stigma, high refund rates, and fraudulent attempts lead processors to classify them as high-risk.
• Fitness and Wellness Memberships: Fitness and gyms and online fitness programs commonly charge recurring fees. Complaints arise when cancellation procedures are unclear or facilities fail to deliver services.
• Subscription Box Services: From beauty boxes to meal kits, subscription boxes face challenges with shipping delays, dissatisfaction, and billing disputes that contribute to high-risk classification.

These industries thrive on the recurring model because it guarantees predictable revenue streams. But their reliance on continuous billing also amplifies risks, leading to tighter oversight by banks and card networks.

Common Challenges in Subscription Billing

According to Zuora’s Subscription Economy Index, the subscription economy is projected to reach $1.5 trillion globally by 2025. However, merchants in high-risk categories face recurring hurdles that threaten profitability. Understanding these challenges is crucial for developing sustainable billing practices. Some of the most pressing challenges include:

• Billing Failures: Payment failures often occur due to expired cards, insufficient funds, or bank declines. According to Visa, payment authorization failures can account for up to 15% of recurring billing attempts, resulting in lost revenue and increased churn. To minimize these failures, businesses must implement automated retry logic and card updater services.
• Customer Disputes: Subscription merchants frequently face disputes when customers forget about recurring charges or feel misled by unclear terms. This problem is particularly pronounced in industries with continuity programs, where charges often occur months after the initial purchase. Disputes not only trigger chargebacks but also increase regulatory scrutiny.
• Churn and Retention Issues: Even satisfied customers may cancel due to financial constraints or shifting priorities. High churn rates make it difficult for businesses to achieve predictable long-term growth. According to Statista, the average global churn rate for SaaS companies was 5-7% in 2023, indicating that even well-established subscription businesses struggle with customer retention.
• High Processing Fees: High-risk merchants pay significantly more processing fees than low-risk businesses. Processors justify this by citing greater exposure to disputes and compliance risks. While a low-risk merchant may pay around 2.9% + 30¢ per transaction, high-risk merchants often face rates between 3.9% to 5%, along with rolling reserves and stricter contract terms.

Although lucrative, these challenges underscore the need for robust risk reduction strategies in subscription billing. From preventing failed transactions to managing churn and compliance, businesses must address these hurdles to operate sustainably in high-risk industries.

Best Practices for Managing Subscriptions in High-Risk Industries

Running a subscription-based business in high-risk industries requires more than setting up recurring payments. Merchants must adopt strategies that reduce disputes, improve customer trust, and ensure long-term sustainability. By following proven best practices, businesses can minimize risks while maximizing recurring revenue.

1. Clear & Transparent Terms

Complete transparency is the foundation of a strong subscription program. Customers should see pricing, billing frequency, and renewal dates before subscribing. Hidden clauses or confusing cancellation terms often trigger disputes and regulatory penalties. The Federal Trade Commission (FTC) emphasizes that businesses must make cancellation “simple and straightforward.” Offering self-service cancellation options, upfront disclosures, and timely renewal reminders helps reduce chargebacks while boosting trust.

2. Strong Billing Descriptors

Many disputes arise because customers fail to recognize charges on their bank statements. To avoid this, merchants should use explicit billing descriptors that clearly include the company name and a detailed service description. A well-structured descriptor reduces confusion and lowers accidental chargebacks. According to Visa, unclear billing descriptors are among the top reasons consumers initiate disputes. By eliminating ambiguity, businesses can maintain healthier chargeback ratios.

3. Automated Dunning & Retry Logic

Failed payments are inevitable in subscription billing. Cards may expire, banks may decline transactions, or customers may have insufficient funds. Instead of losing revenue immediately, businesses should use automated dunning systems that send reminders and intelligently retry payments. Research from Recover Payments shows that retry logic can systematically recover up to 50% of failed subscription payments. Automated retries paired with customer notifications improve recovery rates and reduce involuntary churn.

Fraud Prevention Tools

High-risk industries face elevated exposure to both criminal fraud and friendly fraud. Implementing fraud prevention tools helps protect merchants from costly disputes. Effective measures include:

• Address Verification Service (AVS) checks to confirm billing details.
• CVV authentication to ensure cardholder presence.
• Recurring transaction flags to identify unusual patterns.
• AI-driven fraud detection tools that monitor risky transactions in real time.

According to the Federal Reserve’s 2022 Payments Study, fraud as a share of core noncash payments by value increased to 0.23% in 2018, up from 0.18% in 2015. This highlights the ongoing need for stronger fraud defenses. Subscription merchants that deploy fraud filters significantly reduce exposure.

Multiple Payment Options

Limiting payments to a single method often increases declines and churn. By offering alternatives like ACH/eCheck, debit/credit cards, and even cryptocurrency, businesses create more flexibility for customers. The National Automated Clearing House Association (NACHA) reported that over 30 billion ACH payments were processed in 2022, demonstrating the widespread adoption of this payment method by consumers. Having multiple payment rails reduces the number of failed transactions and ensures continuity during card declines.

Payment Processing Solutions for Subscription Merchants

Even with best practices, subscription businesses in high-risk industries need specialized support. Traditional processors, such as Stripe or Square, are designed for low-risk merchants. They often freeze funds or terminate accounts if chargebacks exceed thresholds or the business falls under restricted categories. Specialized providers such as 2Accept offer continuity-friendly merchant accounts tailored to high-risk subscription models. These accounts provide:

• Advanced fraud monitoring with tools built for recurring billing.
• Compliance support, ensuring adherence to FTC and card network rules.
• Flexible payment routing, which allows higher approval rates across multiple banks.
• Global payment options, helping merchants scale internationally while reducing decline rates.

Unlike mainstream platforms, these providers understand the complexity of long-term commitments and continuity programs. They work with businesses to maintain stable accounts, even during occasional spikes in chargebacks or regulatory reviews. For high-risk subscription merchants, choosing the right processor is not optional but essential. With the global subscription market projected to surpass $1.5 trillion by 2025, securing a processor that understands recurring billing challenges can make the difference between sustainable growth and costly interruptions.

Frequently Asked Questions

Why are subscriptions considered high-risk?

Subscriptions are flagged as high-risk due to their higher chargeback ratios, frequent disputes, and their fall under strict regulatory rules, such as the FTC’s Negative Option Rule. Customers often forget recurring charges or claim they didn’t authorize payments, increasing processor risk.

What industries use high-risk subscription billing?

Common industries include nutraceuticals, wellness products, SaaS platforms, dating services, online coaching, adult entertainment, fitness memberships, and subscription box businesses. These sectors rely heavily on recurring revenue but face higher oversight.

How can high-risk merchants reduce subscription chargebacks?

Merchants can reduce chargebacks by offering clear terms of service, visible refund and cancellation policies, and accurate billing descriptors. Reminder emails before renewals and easy cancellation options also lower disputes.

Can ACH/eCheck be used for subscription billing?

Yes. ACH and eCheck payments are often more stable than card transactions because they bypass card expirations and have lower decline rates. They are also cost-effective, with fees typically lower than credit card processing.

Do all processors support subscription merchants?

No. General providers, such as Stripe and Square, often restrict high-risk businesses. Specialized processors such as 2Accept offer subscription-friendly merchant accounts with fraud monitoring, continuity billing support, and compliance guidance.

What is subscription billing in MyCase?

Subscription billing in MyCase is a recurring payment system that allows law firms to automatically bill clients for ongoing services, retainers, or plans on a scheduled basis (e.g., monthly or annually).

What is an example of a high-risk transaction?

A high-risk transaction is one with a greater chance of fraud, chargebacks, or non-payment, such as large online credit card payments, cross-border payments, or transactions in industries flagged as high-risk (e.g., travel or adult services).

Build Subscription Success with the Right High-Risk Payment Partner

Subscription billing has become one of the fastest-growing business models, but it comes with elevated challenges for high-risk industries. From chargebacks and billing disputes to fraud exposure and strict compliance rules, these risks can disrupt operations and damage merchant credibility if left unaddressed. The good news is that high-risk merchants can thrive by applying best practices such as clear terms, strong billing descriptors, automated retry systems, and robust fraud prevention tools. Pairing these practices with the right payment processor makes all the difference. At 2Accept, we specialize in high-risk subscription merchant accounts and ACH/eCheck payment services tailored for continuity billing. Our solutions offer fraud monitoring, compliance support, and flexible payment options that surpass those of mainstream providers like Stripe or Square. Explore our high-risk subscription merchant accounts and ACH/eCheck payment services today to take the next step toward sustainable growth.