How do you ensure you aren’t holding the shorter end of the stick when negotiating a contract with a payment processing company?
88% of people in contracts desire increased collaboration and “fair and reasonable” negotiation. While independent organizations know contracts and negotiations, they often accept the first contract they receive without negotiation. However, service providers are generally open to negotiating their standard rates.
Negotiations are not merely bargains but a way to get more out of your deal, and not just in terms of money. A good contract and partnership with payment processing companies are mutually beneficial deals.
We’ll cover the need for a contract and factors companies should look for in a payment processing partnership contract to begin a successful partnership.
Why Do You Need a Contract in the First Place?
The purpose of a contract is to get all terms and conditions, rights, and obligations in writing to ensure terms are as favorable to both parties with as little risk as possible and both parties are accountable for their actions. It is also an opportunity for businesses to align their priorities and initiate a contract on a happy note without conflicts and disagreements.
What Should Companies Look for in a Payment Processor Partnership Contract?
Before signing the contract with a payment processing company, you must consider a few factors, including:
Duration
The contract period should be sustainable for you and should not become a burden after a period when you wish to part ways.
Process
Delve into the process. While money is important, learn more about how things will work out. See if the process aligns and integrates with your services without becoming a hindrance.
Costs
Ensure rates, fees, and quotations are mentioned explicitly, including but not limited to transaction fees, chargeback fees, and any other fees that may be applicable. Ensure there are no hidden costs.
Additional Services
Most payment processors offer additional services to their clients and partners, such as:
Customer Support
Your first priority is your clients, so you must ensure that details like the hours of operation, the methods for contacting support, and the response times for inquiries or issues are explicitly mentioned so that partnership will be instrumental in your and your client’s business growth.
Restrictions on the Use of Services
Is there any condition or terms on how the services will work out? Will your clients be able to accept ACH and credit card transactions through the payment gateway?
Key Provisions and Clauses You Should Review on a Contract with a Payment Processor
While reviewing the contract, look out for the following provisions and clauses and read them thoroughly to partner with a provider whose values, goals, and priorities align with yours without conflicts:
Offer
Make sure the terms are expressed clearly — what the payment processing service will do and how it will support you and your clients. This is the section where both parties clearly state the services, responsibilities, and contract.
Term and Termination
Whether it is a one-time contract, is subject to annual renewal, or has a specific duration, the period for the contract must be mentioned explicitly. Specify if you need a cause to terminate the agreement and if so, what reasons are qualified. Mention the notice period, penalties, and other conditions so you can part ways happily.
Liability and Indemnification
The contract should allocate liability between the parties and include provisions for indemnification, including for any losses, damages, or claims arising from a breach of contract. Since the indemnification clause can impact both parties significantly, you must review it carefully before signing the contract.
Data Security and Privacy
The contract should include provisions regarding data security and privacy, including the payment processing company’s obligations to protect customer data, comply with applicable data protection laws, and notify the ISO in the event of a data breach.
Representations and Warranties
The contract must have representations and warranties from both parties, including the payment processing company’s ability to process payments, its compliance with all applicable laws and regulations, and its security measures to protect customer data.
Intellectual Property
Make sure the contract addresses intellectual property rights, including any licenses or permissions required for you to use the payment processing company’s branding or other intellectual property.
Getting the Best Deal When Negotiating a Payment Processor Partnership Contract
Be Prepared
Some of the costliest mistakes occur before businesses even get down to the negotiation table. Define your goals, priorities, and outcomes. Prepare a list of negotiable and non-negotiable terms before you get the contract to prepare strong arguments.
Assess and Analyze Previous Contracts
Reflect on your previous contracts — whether with a payment processing company or another software company, and see how things have worked out. Identify friction points, strengths, and weaknesses of your previous contracts and avoid repeating the same mistakes.
Reach Out for More
Don’t accept the first offer that comes your way. There’s always scope for more. While negotiating lower fees is one thing, you can also ask for additional services and features.
Don’t Hesitate to Ask
Many times, contracts should be written better or are templates stuffed with vague terminology that lose the flow. If the language is tricky and filled with complicated terms that do not make sense to you, ask. Ensure that you understand the terms and conditions thoroughly.
Common Pitfalls to Avoid When Negotiating a Payment Processor Partnership Contract
A little preparation never hurts anyone. Common pitfalls that independent sales organizations and vendors must avoid when negotiating a partnership contract include:
- Not reading the fine print. Sometimes, essential information is discreetly printed in smaller font sizes.
- Not fully understanding the terms and conditions.
- Not defining goals or prioritizing key objects.
- Accepting the first offer immediately.
- Focusing on substance instead of the process.
- Coming to the bargain table unprepared.
Business contracts are an indispensable part of a successful partnership. By now, we hope you know he key provisions and clauses to look for in a payment processing partnership contract. Follow us for more informative blogs to build successful partnerships that take your business to another level.
