How Do Subscription Payments Work?
Subscription payments are recurring payments a customer makes for ongoing access to a product or service — insurance premiums, gym memberships, software, security services, medical aid contributions and streaming are common South African examples.
The defining feature of a subscription is that the customer authorises payment once, at sign-up, and the business then collects each billing period without the customer having to act again.
What happens when a customer signs up?
A subscription starts with capturing the customer's payment authority:
- The customer chooses a plan with an amount and billing frequency.
- They provide a payment method: a bank account for a debit order, or a card.
- For a debit order, a mandate is created recording the amount, frequency and collection date. DebiCheck mandates are also confirmed with the customer's bank. See how DebiCheck works.
- For a card, the card is tokenised and stored for future merchant-initiated charges. See card tokenisation and network tokens.
- The first payment is taken, either immediately or on the first billing date.
Debit order billing vs card billing
South African subscription businesses typically bill by debit order, card-on-file, or both.
| Debit order (EFT / DebiCheck) | Card-on-file | |
|---|---|---|
| Customer authority | Mandate against a bank account | Tokenised card with consent for recurring charges |
| Collection | You submit a payment instruction for the action date | You initiate a merchant-initiated transaction (MIT) |
| Variable amounts | Governed by mandate terms and, for DebiCheck, maximum amounts | Charge what was agreed with the customer |
| Common failure | Insufficient funds on the action date | Declines, expired or reissued cards |
| Recovery options | Resubmission, and tracking for DebiCheck | Retries and account updater services |
Debit orders suit essential services collected near salary dates; cards suit digital products and customers without a preference for bank debits. Kwik supports both, so a subscription can run on whichever method the customer provides. For the card side in detail, see recurring card payments.
How does each billing cycle run?
On every billing date, the billing system:
- Calculates the amount due for the period, including any proration or usage charges.
- Checks that the amount is allowed — for DebiCheck, that it does not exceed the mandate's maximum collection amount.
- Submits the collection: a debit order payment instruction or a card MIT.
- Records the outcome and updates the subscription status.
- Routes failed payments into a recovery process. See dunning and payment recovery.
Debit order timing matters in South Africa. Most consumers are paid between the 25th and the 1st, so collecting on or just after salary date significantly improves success rates. Mandates should record the agreed collection day and any date adjustment rule, such as moving to the previous business day when the date falls on a weekend or public holiday.
What happens when a subscription payment fails?
Failed payments are normal and most are recoverable:
- Debit orders returned unpaid can be resubmitted according to the mandate, and DebiCheck collections can be tracked, where the bank re-attempts the collection for a period as funds become available. See collections, tracking and retries.
- Card declines can be retried on a schedule, ideally timed around salary dates.
- The customer should be notified and given an easy way to pay or update their details.
How do cancellations work?
When a customer cancels, stop billing from the agreed end date, cancel or suspend the debit order mandate, and stop initiating card charges. Collecting after a customer has cancelled or withdrawn a mandate leads to disputes and reversals, so cancellation must flow through to the payment method immediately.
Related topics
Invoice Payments
How businesses collect invoice payments using EFT, payment links, cards and debit orders, and how to match payments to invoices automatically.
Recurring Card Payments
How card-on-file billing works for subscriptions, including tokenised card storage, merchant-initiated transactions and rules for retrying declines.