The Hidden Complexities of Recurring Payments: Why a Universal Vault Matters

Over the past two years, I’ve had conversations with hundreds of product leaders in mid-market recurring businesses. Across these discussions, the same key challenges in payments kept surfacing:

💡 Managing multi-vendor tokens
💡 Improving authorization rates
💡 Navigating chargeback disputes
💡 Optimizing the cost of payments

At the core of these challenges, one principle was universally understood: A payment-agnostic, universal vault is the foundation of a strong recurring payments strategy.

But here’s where things get nuanced. Not all stored card transactions are the same.

🔹 The Many Faces of Recurring Payments

Recurring transactions aren’t just about subscriptions. When categorized by purpose, they can include:

✅ Installments – Scheduled payments split over time
✅ Reauthorized Payments – A transaction reattempted after an initial hold
✅ Incremental Payments – A merchant-requested increase to an authorized amount
✅ Delayed Transactions – Payments processed long after an initial authorization
✅ Resubmitted Payments – Transactions resubmitted after a decline
✅ No-Show Payments – Charges applied when a customer fails to fulfill a reservation

While these all seem like variations of the same theme, their transaction flow, dispute rights, and authorization logic vary significantly.

🔹 The 2 Buckets That Define Recurring Payments

At a high level, all recurring transactions fall into two categories based on how they are initiated:

1️⃣ Customer-Initiated Transactions (CIT)

This occurs when the customer is actively making a purchase.

Example:
💳 A customer buys a product for $100 and opts to store their card.
🔁 A month later, they return and buy another item for $80 using the stored card.

In this scenario, the customer is present and actively approving the transaction at the time of purchase.

2️⃣ Merchant-Initiated Transactions (MIT)

These transactions are triggered by the merchant, without the customer actively making a payment.

Example:
🔁 A Netflix subscription renews automatically.
📄 A business invoices a customer, and the payment is deducted from their saved card.

MIT transactions require an established relationship between the merchant and issuer.
For approvals, issuers need clear data links to the original customer-initiated transaction—typically via Network Transaction ID (NTID) or 3DS authentication data.

🔹 The Role of a Universal Vault in MIT Transactions

This is where a well-designed, universal vault adds exponential value.

✅ It doesn’t just store cards—it stores critical transaction data
✅ It flags transactions properly across the payment ecosystem
✅ It ensures issuers have the right data to approve MIT transactions
✅ It provides evidence in case of disputes, strengthening merchant rights

Without these data points, MIT transactions are more likely to fail, leading to higher declines, disputes, and lost revenue.

🔹 Why Understanding Payment Flows Matters

To build an effective recurring payments engine, merchants need to align their payment flows with card scheme rules.

🔹 Higher Authorization Rates – Properly flagged MIT transactions see better approvals
🔹 Fewer Chargeback Losses – Stronger data links improve dispute resolution
🔹 Lower Operational Costs – Optimized flows reduce reliance on manual interventions
🔹 Better Cash Flow – Consistent payment success leads to predictable revenue

Recurring payments aren’t just about storing a card—they’re about storing the right transaction data, optimizing flows, and reducing revenue leakage.

Merchants who get this right win big. Those who ignore it? They struggle with declines, disputes, and customer churn.

💡 What’s your biggest challenge with recurring payments? Let’s discuss. 🚀