What is a subscription business model and how does it work?

Subscription business models give businesses a steady income stream through recurring payments. A business offers a product or service which a customer pays a recurring monthly fee to receive. This benefits both the consumer and business. 

In recent years, there have been some staggering statistics related to the rise of subscription business models.

• 79% of UK adults are signed up to at least one subscription service, equivalent to around 42.4 million people
• 29% of UK consumers are subscribed to a subscription box delivery service
• By the end of 2024, UK consumers collectively held 155 million active subscriptions
• The UK spends an estimated £29.5 billion per year on subscription services
• Younger consumers show the highest adoption rates, with UK millennials and Gen Z holding an average of 3–4 subscriptions per person

In 2024, overall UK consumer card spending grew by around 1.6% year‑on‑year, reflecting ongoing pressure on household budgets and a continued focus on value. Against this muted backdrop, digital subscriptions stood out as the strongest growth category, rising by 13.2%, driven by sustained demand for streaming, gaming and online content.

Subscriptions are proving more resilient than one‑off purchases. Rather than cancelling outright, many consumers are consolidating spend, retaining services they perceive as essential, affordable and easy to manage.

This value‑led behaviour is also shaping food‑related subscriptions and repeat‑use services. Around 60% of UK adults have used a food delivery service in the past year, while the prepared and ready‑to‑eat meal market is forecast to grow at around 11–12% annually, as convenience continues to drive repeat usage.

Overall, the UK B2C subscription market is maturing. Growth is increasingly led by retention, flexibility and perceived value rather than rapid acquisition, as consumers become more selective about recurring spend.

It is not just the B2C sector which is seeing a huge surge in interest around subscription services. While lots of commercial software or service providers may be wondering what these trends have to do with their business, the increased level of consumerisation of commercial tech is helping to drive interest around B2B subscription services. The Software as a Service (SaaS) market, a business model in which cloud-based software is delivered on a pay-for-use service or as a subscription, has grown significantly:

• 99% of organisations now use at least one SaaS solution.
• 78% of small businesses have already invested in SaaS options.
• The UK SaaS market grew from £6.4 billion in 2020 to over £13 billion in 2024, more than doubling in four years.
• The global B2B SaaS market was valued at over $250 billion in 2024 and is forecast to exceed $800 billion within the next decade.

These services are used across a range of sectors and departments including accounting, marketing, HR, recruitment, manufacturing, and, of course, payments. By simply opting for a relevant subscription model, businesses can start operating without having to install expensive, on-site software. 

• Simplicity: easy setup and predictable payments
• Better cash flow: recurring revenue supports forecasting
• More scalable: easier to grow than one‑off sales models
• Improved customer retention: longer‑term relationships
• Upsell opportunities: 
  add‑ons, upgrades and cross‑selling
• Build customer insights: richer data on behaviour and preferences

A subscription model perfectly suits brands that are providing an ongoing service, such as a software package or gym membership, or sell a product which is purchased frequently, such as groceries or laundry products, but there are a number of factors to consider.

Know your customers

Will your customers be happy paying on a monthly basis and will they value a subscription service? This model will only work if it also makes logistical and financial sense to the consumer.

Utilise your data

A subscription model allows brands to form a much stronger relationship with consumers, understanding more about popular product lines and seasonal trends. It’s important to use this insight and data to guide future sales and marketing activity, as well as identifying new opportunities.

Make your terms and conditions clear

There must be a clear understanding of the terms and conditions surrounding the payment arrangement. Often, subscription services will entice customers with an introductory offer or deal.
It’s important that these offers are upheld, to build consumer confidence and hopefully secure repeat subscriptions when it comes to renewal.

Implement the right systems

The process must be frictionless, with payments happening seamlessly in the background. Any business considering a subscription model needs to be prepared to invest time and money in their payment processing software.

1. Think carefully about your pricing and do your research
2. Simplify sign-up
3. Establish a clearly defined list of terms and conditions
4. Get the communication right
5. Implement systems

As we’ve seen, there are many benefits to a subscription model for both merchants and consumers.

With discretionary spending on the rise, these services provide the perfect opportunity for businesses to up- or cross-sell products and services, as well as providing the consumer with a convenient way to purchase both essential and ‘nice-to-have’ products.

Aside from the convenience and ease, a subscription model can also improve cash-flow and forecasting. Businesses do, however, need to ensure that the correct elements are in place as highlighted in our top tips, as well as a secure and trusted method of collecting these monthly Direct Debit payments.

Interested in finding out more?

Get in touch today and find out how Access PaySuite can help your business.