Everything You Need to Know About Payment Processing Agreements (PSP Contracts)
Everything You Need to Know About Payment Processing Agreements (PSP Contracts)
Everything You Need to Know About Payment Processing Agreements (PSP Contracts)
Everything You Need to Know About Payment Processing Agreements (PSP Contracts)
Oct 4, 2024
Oct 4, 2024
Oct 4, 2024
Oct 4, 2024
For a long time in the business world, cash was king. But not so much anymore.
Accepting debit and credit cards has become a basic requirement for any business today. According to a 2022 market intelligence report by S&P Global, 56% of customers use cards as their primary payment method.
Also, the Federal Reserve reports that payments from card brands like Visa, Mastercard, American Express, and Discover reached USD 128.51 trillion in 2021.
These statistics demonstrate why just about any business—including SaaS companies—should be able to process electronic payments.
To that end, if you’re working with a payments partner to power your platform’s fintech capabilities, it's crucial to have a solid understanding of the payment processing agreement you’re entering into.
Many payment service providers (PSPs) boast lower fees, mobile options, and many other features. But choosing a suitable PSP for your business takes more than that.
That’s why it’s important to analyze the payment processing agreement carefully.
In this comprehensive post, we’ll look at what a payment processing agreement is, important clauses, and common pitfalls to avoid.
Understanding the Basics of Payment Processing Agreements
When a business starts accepting or processing electronic payments, it creates a partnership with a payment processor. A payment processing agreement or PSP contract is a legally binding document that lays out the terms and conditions between the business and the payment processor.
The main purpose of a PSP contract is to provide a blueprint for how the relationship between the merchant and the payment processor will work, the fees that will be paid for each transaction, when payments will be made, and who will be responsible for what.
A typical processing agreement involves many layers, including fees, settlement terms, chargeback and refund policies, termination clauses, data security and compliance, and dispute resolution, among others.
Understanding the terms of a payment processing agreement is crucial because it ensures you’re getting the best deal from a PSP.
Key Clauses to Watch Out For
Here are some important clauses to look for in a payment processing agreement:
Transaction fees and pricing structure
This clause explains all the fees the payment processor charges for their services. The fees can vary depending on the provider.
You can generally expect these fees:
Transaction fees - The processor might charge a flat fee or a percentage of every transaction. The amount may vary for credit cards, debit cards, and other payment methods.
Recurring fees - These are annual or monthly fees for maintaining the service.
Interchange fees - These are fees paid by the merchant to the card issuer of the payment being processed. They vary based on the card network and are not always clearly stated.
Chargeback fees - Your PSP may charge you a fee for chargebacks or handling disputes. This can be a huge annoyance, especially if you’re in a high-risk industry.
It’s important to look at this clause closely and understand the financial implications of getting into the PSP contract. High transaction fees or hidden charges may eat into your profits, especially if yours is a high-volume business.
Also, understand the pricing model and how it can impact your business. Pricing models vary based on several factors, including card networks (Mastercard, Visa, American Express, etc.) and financial institutions.
Some PSPs may base their pricing on a blended model consisting of a flat fee, often called a Gateway Fee, and a variable fee, also referred to as a Processing Fee.
Another pricing model known as Interchange Plus is increasingly becoming popular due to its transparency and consistency. With this model, the processor passes the interchange and card association fees to the merchant, plus an agreed markup to cover their cost. Each transaction has a standard interchange fee charged by that specific card, plus the provider’s fee.
Service level agreements (SLAs)
The Service Level Agreements (SLAs) cover the payment processor’s performance guarantees and benchmarks for service. Many merchants overlook this clause, but it’s important since it demonstrates the processor’s commitment to accountability and performance.
Important SLA considerations to look out for include:
Uptime guarantees - The processor should provide a guarantee of the percentage of time the payment processing system will be operational. A good SLA can provide an uptime guarantee of 99% while accounting for regular maintenance.
Response times - Another vital aspect of SLAs is support and maintenance, including response times for outages and any other issues. A good SLA should guarantee 24/7 support and a response time of less than one hour for serious issues.
Transaction processing time - The SLA should provide an estimate of the maximum allowable time for processing a transaction. This is the period from when a customer initiates a payment to when the funds are credited into the merchant’s account. For example, an SLA could provide a processing time guarantee of 2 hours on business days.
Compensation clause - The PSP should provide a compensation clause for service lapses. This enforces accountability on their side. Such compensations could be refunds or credits for future services.
Performance metrics and reporting - Performance metrics give the merchant an idea of how to evaluate the PSP’s performance. Regular reporting allows both parties to monitor each other’s adherence to the agreement. This is crucial for maintaining trust and enhancing continuous improvement.
Keep in mind that having an SLA clause in your PSP contract is only half of the equation. The other half is completed by enforcing the SLAs. It’s not just about holding the provider accountable. It’s also about protecting your own interests.
You can enforce warranties for failure to meet SLAs, such as monetary fines or payment deductions.
Define these penalties beforehand, specify conditions that trigger them, and negotiate to have them included in the PSP contract.
Data security and compliance requirements
Data security breaches can be expensive. According to IBM, the average cost of a data breach in 2024 is USD 4.88 million. Yet, Fool.com reports that 277,739 Americans have already reported credit card fraud in the first half of 2024.
This emphasizes the need for robust data security measures and obligations.
A typical PSP contract has to include a clause outlining the data security measures the payment processor has in place. It also includes a commitment from the processor to comply with industry standards, such as the Payment Card Industry Data Security Standard (PCI DSS).
PCI DSS is a set of policies and procedures that optimize the security of credit and debit card transactions and protect cardholders’ data. The policies set standards on things like:
Data security of every device used in electronic payments
Physical security for payment forms and unattended devices
Storage procedures for clearing old data and retaining recurring payment details
Staff restrictions based on roles to ensure cardholder information is only accessible to the right users
Some common data security measures to look for include data encryption and tokenization which ensure that data is protected during transmission and storage.
Also, find whether the clause mentions which party is responsible for data security breaches, security incidents, and implementing any security measures to protect cardholders against misuse of personal information.
Breaching PCI DSS standards could attract penalties, fines, or loss of the ability to process payments.
Termination and renewal terms
The account termination clause states the contract length, grounds for contract terminations, how both parties could cancel your account, and the length of prior notice needed before suspending the account for any reason.
Some reasons why you may terminate your contract with the payment processor include delayed processing times, frequent and extended downtimes, lack of customer support, or breaching SLAs.
The PSP may also terminate its contract with you due to a breach of terms and conditions, engagement in high-risk activities, too many chargebacks, and failure to provide accurate information about your business.
Take note of any early termination fees in the contract. The industry standard for a PSP agreement is three years. Penalties might apply for termination of this agreement before this period has lapsed.
Early termination fees in the industry range from $200 to $500.
Some PSPs could try to mitigate the impact of a termination trigger by introducing events that only lead to the termination of certain services.
For example, excessive chargebacks could lead to the termination of payment processing services and not affect the gateway services. This is because chargebacks may only be relevant to payment processing, not gateway services.
The clause should also include conditions for auto-renewal. Typically, this clause states that the contract automatically renews if the contract period has lapsed and neither of the parties has terminated or wishes to terminate the contract.
The PSP might set a condition for a written notice period if you wish to stop the auto-renewal.
Liability and indemnification
Indemnification or “hold harmless” clauses, place the responsibility of defending or paying costs on one party if certain circumstances happen (often a claim or dispute).
Be sure to understand the indemnification since it outlines the liability of both parties in case of service failure, fraud, or security breaches. It explains how the indemnifying party will compensate or protect the indemnified party if these specific events or claims happen.
The indemnifying party is the party accepting to take responsibility for the indemnification event, while the indemnified party is the party relieved of responsibility.
You need to be aware of what your responsibilities are in case of damages or losses and what the PSP will be liable for.
Most PSPs have a limitation of liability or indemnification waiver clause. If you get into such a contract, your business will be left to settle any losses caused by data breaches, service interruptions, or fraud.
What to Do Before Signing a Payment Services Agreement
Let’s look at some steps to take before getting into a PSP contract:
Due diligence checklist
Before getting into an agreement with any PSP, you need to conduct your due diligence to ascertain that the payment processor is credible and reliable. Due diligence also helps you avoid unforeseen costs, liabilities, and downtimes.
Here’s a checklist to help you make the right decision:
Have you understood the pricing structure, including transaction fees, chargeback fees, setup fees, and monthly service charges? Do you understand their pricing structure as well?
Do you understand the payment processing time?
Does the PSP provide a payment gateway that integrates seamlessly with your website, eCommerce platform, accounting software, and CRM tool?
What data security measures are in place to protect your customers’ data? Is the system PCI DSS compliant?
What payment methods do you want to accept and does the PSP support those methods?
Does the payment processor provide 24/7 support via phone, email, or live chat?
Do you understand the processor’s chargeback and refund policies?
Have you carefully analyzed the SLA clause and understood the uptime guarantees, customer support availability, and performance metrics?
Does the PSP provide a user-friendly interface that’s compatible with mobile devices and supports mobile payments?
Can the PSP support your growing business needs? Can it support high transaction volume, customize its payment solutions, and integrate with additional tools as you scale?
How easy is it to set up and use the PSP’s tools?
Do you understand the term of this agreement? Are there any termination clauses?
Don’t forget to look at the processor’s reputation, financial stability, and track record. Look for reviews, feedback, and testimonials from other businesses like yours. You can find these on review sites like G2, TrustPilot, and Capterra.
Seeking legal advice
Contracts and agreements are often complex and technical. Given the legal implications, it’s wise to seek legal advice before signing the document.
You can hire an experienced attorney to review the agreement and spot any unfavorable terms or red flags, such as hidden fees, unfair penalties, early termination fees, and vague clauses. They can ensure both party’s responsibilities are well-defined, reducing your liability in case of issues like data breaches.
A legal expert can also help you negotiate to include more favorable amendments, such as reduced fees or lenient termination conditions. They might also help you amend some clauses to protect your business, especially in cases involving chargebacks.
They can help you assess the risk of getting into the contract based on liability limitations and indemnity clauses.
Most importantly, a legal professional ensures that the contract aligns with applicable laws and regulations, including consumer protection laws and payment industry standards, such as PCI DSS.
Common Pitfalls to Avoid
There are several common pitfalls that you may encounter when signing a payment processing agreement. They include:
Focusing only on rates and ignoring other factors like headcount and/or fraud risk
While rates could be the biggest factor for most merchants, there are many other crucial considerations to make.
One crucial factor many merchants overlook is headcount. How many employees or customer service reps does the processor have to help you handle any issues? Does the PSP have a dedicated team of fraud and risk management experts?
Also, don’t assume the platform’s security is robust. Just because the PSP is PCI DSS certified doesn’t mean that the level of security is high. Some additional measures that reduce fraud risk include fraud scrubbing and payer authentication.
Don’t focus so much on rates and lose focus on other important factors.
Overlooking hidden fees and costs
Fees and costs are some of the most understood areas of payment processing areas. Most merchants make the mistake of focusing only on rates and overlooking other costs.
Most PSP contracts include other hidden fees that ultimately impact your bottom line. They may not seem significant at first but slowly build up over time. Some hidden costs might include:
Crossborder transaction fees - These are charged for international payments
Minimum monthly processing fees - Some payment processors may charge you a fee if your monthly transactions don’t meet a certain threshold
Account maintenance charges - These fees may apply even when you’re not actively using the service
Also, don’t assume that the PSP with the lowest transaction fees is the most affordable option or that the most expensive one is the most reliable and effective. The problem with this approach is that you forget to account for so many charges beneath the surface.
To avoid hidden fees and costs, ask the PSP for a detailed breakdown of all possible fees before signing the contract. Calculate your own estimates based on your transaction volumes to see how they might impact your finances.
Failing to plan for scalability
Your business needs may grow over time. You might need to accommodate new payment methods, higher transaction volumes, or even expand to new markets. If you don’t consider scalability, you might later find that the PSP won’t accommodate your growth or may come with restrictive conditions.
Ensure the contract is flexible to accommodate your growing business. You should be able to adjust transaction limits, add new payment methods such as ACH, and integrate with other business solutions seamlessly.
Ignoring termination clauses
Many PSP contracts come with termination clauses with early termination fees or long-term commitments. This may lock you into the contract even when you find another PSP with better services or you’re frustrated with their services.
Carefully scrutinize the termination clause and understand its conditions, especially fees and notice periods needed to exit the contract. Don’t get into contracts that lock you in the long term unless it’s absolutely necessary.
Conclusion
Reading through your payment processing agreement is as important as finding a good PSP. Carefully scrutinizing the fine details can help you avoid getting into an unfavorable contract.
Pay attention to the terms and conditions, transaction fees and pricing structure, Service Level Agreements (SLAs), data security and compliance, termination and renewal terms, and liability and indemnification.
Don’t only focus on rates. Look at everything from a wide lens to avoid missing any crucial details.
Most importantly, seek legal advice.
For a long time in the business world, cash was king. But not so much anymore.
Accepting debit and credit cards has become a basic requirement for any business today. According to a 2022 market intelligence report by S&P Global, 56% of customers use cards as their primary payment method.
Also, the Federal Reserve reports that payments from card brands like Visa, Mastercard, American Express, and Discover reached USD 128.51 trillion in 2021.
These statistics demonstrate why just about any business—including SaaS companies—should be able to process electronic payments.
To that end, if you’re working with a payments partner to power your platform’s fintech capabilities, it's crucial to have a solid understanding of the payment processing agreement you’re entering into.
Many payment service providers (PSPs) boast lower fees, mobile options, and many other features. But choosing a suitable PSP for your business takes more than that.
That’s why it’s important to analyze the payment processing agreement carefully.
In this comprehensive post, we’ll look at what a payment processing agreement is, important clauses, and common pitfalls to avoid.
Understanding the Basics of Payment Processing Agreements
When a business starts accepting or processing electronic payments, it creates a partnership with a payment processor. A payment processing agreement or PSP contract is a legally binding document that lays out the terms and conditions between the business and the payment processor.
The main purpose of a PSP contract is to provide a blueprint for how the relationship between the merchant and the payment processor will work, the fees that will be paid for each transaction, when payments will be made, and who will be responsible for what.
A typical processing agreement involves many layers, including fees, settlement terms, chargeback and refund policies, termination clauses, data security and compliance, and dispute resolution, among others.
Understanding the terms of a payment processing agreement is crucial because it ensures you’re getting the best deal from a PSP.
Key Clauses to Watch Out For
Here are some important clauses to look for in a payment processing agreement:
Transaction fees and pricing structure
This clause explains all the fees the payment processor charges for their services. The fees can vary depending on the provider.
You can generally expect these fees:
Transaction fees - The processor might charge a flat fee or a percentage of every transaction. The amount may vary for credit cards, debit cards, and other payment methods.
Recurring fees - These are annual or monthly fees for maintaining the service.
Interchange fees - These are fees paid by the merchant to the card issuer of the payment being processed. They vary based on the card network and are not always clearly stated.
Chargeback fees - Your PSP may charge you a fee for chargebacks or handling disputes. This can be a huge annoyance, especially if you’re in a high-risk industry.
It’s important to look at this clause closely and understand the financial implications of getting into the PSP contract. High transaction fees or hidden charges may eat into your profits, especially if yours is a high-volume business.
Also, understand the pricing model and how it can impact your business. Pricing models vary based on several factors, including card networks (Mastercard, Visa, American Express, etc.) and financial institutions.
Some PSPs may base their pricing on a blended model consisting of a flat fee, often called a Gateway Fee, and a variable fee, also referred to as a Processing Fee.
Another pricing model known as Interchange Plus is increasingly becoming popular due to its transparency and consistency. With this model, the processor passes the interchange and card association fees to the merchant, plus an agreed markup to cover their cost. Each transaction has a standard interchange fee charged by that specific card, plus the provider’s fee.
Service level agreements (SLAs)
The Service Level Agreements (SLAs) cover the payment processor’s performance guarantees and benchmarks for service. Many merchants overlook this clause, but it’s important since it demonstrates the processor’s commitment to accountability and performance.
Important SLA considerations to look out for include:
Uptime guarantees - The processor should provide a guarantee of the percentage of time the payment processing system will be operational. A good SLA can provide an uptime guarantee of 99% while accounting for regular maintenance.
Response times - Another vital aspect of SLAs is support and maintenance, including response times for outages and any other issues. A good SLA should guarantee 24/7 support and a response time of less than one hour for serious issues.
Transaction processing time - The SLA should provide an estimate of the maximum allowable time for processing a transaction. This is the period from when a customer initiates a payment to when the funds are credited into the merchant’s account. For example, an SLA could provide a processing time guarantee of 2 hours on business days.
Compensation clause - The PSP should provide a compensation clause for service lapses. This enforces accountability on their side. Such compensations could be refunds or credits for future services.
Performance metrics and reporting - Performance metrics give the merchant an idea of how to evaluate the PSP’s performance. Regular reporting allows both parties to monitor each other’s adherence to the agreement. This is crucial for maintaining trust and enhancing continuous improvement.
Keep in mind that having an SLA clause in your PSP contract is only half of the equation. The other half is completed by enforcing the SLAs. It’s not just about holding the provider accountable. It’s also about protecting your own interests.
You can enforce warranties for failure to meet SLAs, such as monetary fines or payment deductions.
Define these penalties beforehand, specify conditions that trigger them, and negotiate to have them included in the PSP contract.
Data security and compliance requirements
Data security breaches can be expensive. According to IBM, the average cost of a data breach in 2024 is USD 4.88 million. Yet, Fool.com reports that 277,739 Americans have already reported credit card fraud in the first half of 2024.
This emphasizes the need for robust data security measures and obligations.
A typical PSP contract has to include a clause outlining the data security measures the payment processor has in place. It also includes a commitment from the processor to comply with industry standards, such as the Payment Card Industry Data Security Standard (PCI DSS).
PCI DSS is a set of policies and procedures that optimize the security of credit and debit card transactions and protect cardholders’ data. The policies set standards on things like:
Data security of every device used in electronic payments
Physical security for payment forms and unattended devices
Storage procedures for clearing old data and retaining recurring payment details
Staff restrictions based on roles to ensure cardholder information is only accessible to the right users
Some common data security measures to look for include data encryption and tokenization which ensure that data is protected during transmission and storage.
Also, find whether the clause mentions which party is responsible for data security breaches, security incidents, and implementing any security measures to protect cardholders against misuse of personal information.
Breaching PCI DSS standards could attract penalties, fines, or loss of the ability to process payments.
Termination and renewal terms
The account termination clause states the contract length, grounds for contract terminations, how both parties could cancel your account, and the length of prior notice needed before suspending the account for any reason.
Some reasons why you may terminate your contract with the payment processor include delayed processing times, frequent and extended downtimes, lack of customer support, or breaching SLAs.
The PSP may also terminate its contract with you due to a breach of terms and conditions, engagement in high-risk activities, too many chargebacks, and failure to provide accurate information about your business.
Take note of any early termination fees in the contract. The industry standard for a PSP agreement is three years. Penalties might apply for termination of this agreement before this period has lapsed.
Early termination fees in the industry range from $200 to $500.
Some PSPs could try to mitigate the impact of a termination trigger by introducing events that only lead to the termination of certain services.
For example, excessive chargebacks could lead to the termination of payment processing services and not affect the gateway services. This is because chargebacks may only be relevant to payment processing, not gateway services.
The clause should also include conditions for auto-renewal. Typically, this clause states that the contract automatically renews if the contract period has lapsed and neither of the parties has terminated or wishes to terminate the contract.
The PSP might set a condition for a written notice period if you wish to stop the auto-renewal.
Liability and indemnification
Indemnification or “hold harmless” clauses, place the responsibility of defending or paying costs on one party if certain circumstances happen (often a claim or dispute).
Be sure to understand the indemnification since it outlines the liability of both parties in case of service failure, fraud, or security breaches. It explains how the indemnifying party will compensate or protect the indemnified party if these specific events or claims happen.
The indemnifying party is the party accepting to take responsibility for the indemnification event, while the indemnified party is the party relieved of responsibility.
You need to be aware of what your responsibilities are in case of damages or losses and what the PSP will be liable for.
Most PSPs have a limitation of liability or indemnification waiver clause. If you get into such a contract, your business will be left to settle any losses caused by data breaches, service interruptions, or fraud.
What to Do Before Signing a Payment Services Agreement
Let’s look at some steps to take before getting into a PSP contract:
Due diligence checklist
Before getting into an agreement with any PSP, you need to conduct your due diligence to ascertain that the payment processor is credible and reliable. Due diligence also helps you avoid unforeseen costs, liabilities, and downtimes.
Here’s a checklist to help you make the right decision:
Have you understood the pricing structure, including transaction fees, chargeback fees, setup fees, and monthly service charges? Do you understand their pricing structure as well?
Do you understand the payment processing time?
Does the PSP provide a payment gateway that integrates seamlessly with your website, eCommerce platform, accounting software, and CRM tool?
What data security measures are in place to protect your customers’ data? Is the system PCI DSS compliant?
What payment methods do you want to accept and does the PSP support those methods?
Does the payment processor provide 24/7 support via phone, email, or live chat?
Do you understand the processor’s chargeback and refund policies?
Have you carefully analyzed the SLA clause and understood the uptime guarantees, customer support availability, and performance metrics?
Does the PSP provide a user-friendly interface that’s compatible with mobile devices and supports mobile payments?
Can the PSP support your growing business needs? Can it support high transaction volume, customize its payment solutions, and integrate with additional tools as you scale?
How easy is it to set up and use the PSP’s tools?
Do you understand the term of this agreement? Are there any termination clauses?
Don’t forget to look at the processor’s reputation, financial stability, and track record. Look for reviews, feedback, and testimonials from other businesses like yours. You can find these on review sites like G2, TrustPilot, and Capterra.
Seeking legal advice
Contracts and agreements are often complex and technical. Given the legal implications, it’s wise to seek legal advice before signing the document.
You can hire an experienced attorney to review the agreement and spot any unfavorable terms or red flags, such as hidden fees, unfair penalties, early termination fees, and vague clauses. They can ensure both party’s responsibilities are well-defined, reducing your liability in case of issues like data breaches.
A legal expert can also help you negotiate to include more favorable amendments, such as reduced fees or lenient termination conditions. They might also help you amend some clauses to protect your business, especially in cases involving chargebacks.
They can help you assess the risk of getting into the contract based on liability limitations and indemnity clauses.
Most importantly, a legal professional ensures that the contract aligns with applicable laws and regulations, including consumer protection laws and payment industry standards, such as PCI DSS.
Common Pitfalls to Avoid
There are several common pitfalls that you may encounter when signing a payment processing agreement. They include:
Focusing only on rates and ignoring other factors like headcount and/or fraud risk
While rates could be the biggest factor for most merchants, there are many other crucial considerations to make.
One crucial factor many merchants overlook is headcount. How many employees or customer service reps does the processor have to help you handle any issues? Does the PSP have a dedicated team of fraud and risk management experts?
Also, don’t assume the platform’s security is robust. Just because the PSP is PCI DSS certified doesn’t mean that the level of security is high. Some additional measures that reduce fraud risk include fraud scrubbing and payer authentication.
Don’t focus so much on rates and lose focus on other important factors.
Overlooking hidden fees and costs
Fees and costs are some of the most understood areas of payment processing areas. Most merchants make the mistake of focusing only on rates and overlooking other costs.
Most PSP contracts include other hidden fees that ultimately impact your bottom line. They may not seem significant at first but slowly build up over time. Some hidden costs might include:
Crossborder transaction fees - These are charged for international payments
Minimum monthly processing fees - Some payment processors may charge you a fee if your monthly transactions don’t meet a certain threshold
Account maintenance charges - These fees may apply even when you’re not actively using the service
Also, don’t assume that the PSP with the lowest transaction fees is the most affordable option or that the most expensive one is the most reliable and effective. The problem with this approach is that you forget to account for so many charges beneath the surface.
To avoid hidden fees and costs, ask the PSP for a detailed breakdown of all possible fees before signing the contract. Calculate your own estimates based on your transaction volumes to see how they might impact your finances.
Failing to plan for scalability
Your business needs may grow over time. You might need to accommodate new payment methods, higher transaction volumes, or even expand to new markets. If you don’t consider scalability, you might later find that the PSP won’t accommodate your growth or may come with restrictive conditions.
Ensure the contract is flexible to accommodate your growing business. You should be able to adjust transaction limits, add new payment methods such as ACH, and integrate with other business solutions seamlessly.
Ignoring termination clauses
Many PSP contracts come with termination clauses with early termination fees or long-term commitments. This may lock you into the contract even when you find another PSP with better services or you’re frustrated with their services.
Carefully scrutinize the termination clause and understand its conditions, especially fees and notice periods needed to exit the contract. Don’t get into contracts that lock you in the long term unless it’s absolutely necessary.
Conclusion
Reading through your payment processing agreement is as important as finding a good PSP. Carefully scrutinizing the fine details can help you avoid getting into an unfavorable contract.
Pay attention to the terms and conditions, transaction fees and pricing structure, Service Level Agreements (SLAs), data security and compliance, termination and renewal terms, and liability and indemnification.
Don’t only focus on rates. Look at everything from a wide lens to avoid missing any crucial details.
Most importantly, seek legal advice.
For a long time in the business world, cash was king. But not so much anymore.
Accepting debit and credit cards has become a basic requirement for any business today. According to a 2022 market intelligence report by S&P Global, 56% of customers use cards as their primary payment method.
Also, the Federal Reserve reports that payments from card brands like Visa, Mastercard, American Express, and Discover reached USD 128.51 trillion in 2021.
These statistics demonstrate why just about any business—including SaaS companies—should be able to process electronic payments.
To that end, if you’re working with a payments partner to power your platform’s fintech capabilities, it's crucial to have a solid understanding of the payment processing agreement you’re entering into.
Many payment service providers (PSPs) boast lower fees, mobile options, and many other features. But choosing a suitable PSP for your business takes more than that.
That’s why it’s important to analyze the payment processing agreement carefully.
In this comprehensive post, we’ll look at what a payment processing agreement is, important clauses, and common pitfalls to avoid.
Understanding the Basics of Payment Processing Agreements
When a business starts accepting or processing electronic payments, it creates a partnership with a payment processor. A payment processing agreement or PSP contract is a legally binding document that lays out the terms and conditions between the business and the payment processor.
The main purpose of a PSP contract is to provide a blueprint for how the relationship between the merchant and the payment processor will work, the fees that will be paid for each transaction, when payments will be made, and who will be responsible for what.
A typical processing agreement involves many layers, including fees, settlement terms, chargeback and refund policies, termination clauses, data security and compliance, and dispute resolution, among others.
Understanding the terms of a payment processing agreement is crucial because it ensures you’re getting the best deal from a PSP.
Key Clauses to Watch Out For
Here are some important clauses to look for in a payment processing agreement:
Transaction fees and pricing structure
This clause explains all the fees the payment processor charges for their services. The fees can vary depending on the provider.
You can generally expect these fees:
Transaction fees - The processor might charge a flat fee or a percentage of every transaction. The amount may vary for credit cards, debit cards, and other payment methods.
Recurring fees - These are annual or monthly fees for maintaining the service.
Interchange fees - These are fees paid by the merchant to the card issuer of the payment being processed. They vary based on the card network and are not always clearly stated.
Chargeback fees - Your PSP may charge you a fee for chargebacks or handling disputes. This can be a huge annoyance, especially if you’re in a high-risk industry.
It’s important to look at this clause closely and understand the financial implications of getting into the PSP contract. High transaction fees or hidden charges may eat into your profits, especially if yours is a high-volume business.
Also, understand the pricing model and how it can impact your business. Pricing models vary based on several factors, including card networks (Mastercard, Visa, American Express, etc.) and financial institutions.
Some PSPs may base their pricing on a blended model consisting of a flat fee, often called a Gateway Fee, and a variable fee, also referred to as a Processing Fee.
Another pricing model known as Interchange Plus is increasingly becoming popular due to its transparency and consistency. With this model, the processor passes the interchange and card association fees to the merchant, plus an agreed markup to cover their cost. Each transaction has a standard interchange fee charged by that specific card, plus the provider’s fee.
Service level agreements (SLAs)
The Service Level Agreements (SLAs) cover the payment processor’s performance guarantees and benchmarks for service. Many merchants overlook this clause, but it’s important since it demonstrates the processor’s commitment to accountability and performance.
Important SLA considerations to look out for include:
Uptime guarantees - The processor should provide a guarantee of the percentage of time the payment processing system will be operational. A good SLA can provide an uptime guarantee of 99% while accounting for regular maintenance.
Response times - Another vital aspect of SLAs is support and maintenance, including response times for outages and any other issues. A good SLA should guarantee 24/7 support and a response time of less than one hour for serious issues.
Transaction processing time - The SLA should provide an estimate of the maximum allowable time for processing a transaction. This is the period from when a customer initiates a payment to when the funds are credited into the merchant’s account. For example, an SLA could provide a processing time guarantee of 2 hours on business days.
Compensation clause - The PSP should provide a compensation clause for service lapses. This enforces accountability on their side. Such compensations could be refunds or credits for future services.
Performance metrics and reporting - Performance metrics give the merchant an idea of how to evaluate the PSP’s performance. Regular reporting allows both parties to monitor each other’s adherence to the agreement. This is crucial for maintaining trust and enhancing continuous improvement.
Keep in mind that having an SLA clause in your PSP contract is only half of the equation. The other half is completed by enforcing the SLAs. It’s not just about holding the provider accountable. It’s also about protecting your own interests.
You can enforce warranties for failure to meet SLAs, such as monetary fines or payment deductions.
Define these penalties beforehand, specify conditions that trigger them, and negotiate to have them included in the PSP contract.
Data security and compliance requirements
Data security breaches can be expensive. According to IBM, the average cost of a data breach in 2024 is USD 4.88 million. Yet, Fool.com reports that 277,739 Americans have already reported credit card fraud in the first half of 2024.
This emphasizes the need for robust data security measures and obligations.
A typical PSP contract has to include a clause outlining the data security measures the payment processor has in place. It also includes a commitment from the processor to comply with industry standards, such as the Payment Card Industry Data Security Standard (PCI DSS).
PCI DSS is a set of policies and procedures that optimize the security of credit and debit card transactions and protect cardholders’ data. The policies set standards on things like:
Data security of every device used in electronic payments
Physical security for payment forms and unattended devices
Storage procedures for clearing old data and retaining recurring payment details
Staff restrictions based on roles to ensure cardholder information is only accessible to the right users
Some common data security measures to look for include data encryption and tokenization which ensure that data is protected during transmission and storage.
Also, find whether the clause mentions which party is responsible for data security breaches, security incidents, and implementing any security measures to protect cardholders against misuse of personal information.
Breaching PCI DSS standards could attract penalties, fines, or loss of the ability to process payments.
Termination and renewal terms
The account termination clause states the contract length, grounds for contract terminations, how both parties could cancel your account, and the length of prior notice needed before suspending the account for any reason.
Some reasons why you may terminate your contract with the payment processor include delayed processing times, frequent and extended downtimes, lack of customer support, or breaching SLAs.
The PSP may also terminate its contract with you due to a breach of terms and conditions, engagement in high-risk activities, too many chargebacks, and failure to provide accurate information about your business.
Take note of any early termination fees in the contract. The industry standard for a PSP agreement is three years. Penalties might apply for termination of this agreement before this period has lapsed.
Early termination fees in the industry range from $200 to $500.
Some PSPs could try to mitigate the impact of a termination trigger by introducing events that only lead to the termination of certain services.
For example, excessive chargebacks could lead to the termination of payment processing services and not affect the gateway services. This is because chargebacks may only be relevant to payment processing, not gateway services.
The clause should also include conditions for auto-renewal. Typically, this clause states that the contract automatically renews if the contract period has lapsed and neither of the parties has terminated or wishes to terminate the contract.
The PSP might set a condition for a written notice period if you wish to stop the auto-renewal.
Liability and indemnification
Indemnification or “hold harmless” clauses, place the responsibility of defending or paying costs on one party if certain circumstances happen (often a claim or dispute).
Be sure to understand the indemnification since it outlines the liability of both parties in case of service failure, fraud, or security breaches. It explains how the indemnifying party will compensate or protect the indemnified party if these specific events or claims happen.
The indemnifying party is the party accepting to take responsibility for the indemnification event, while the indemnified party is the party relieved of responsibility.
You need to be aware of what your responsibilities are in case of damages or losses and what the PSP will be liable for.
Most PSPs have a limitation of liability or indemnification waiver clause. If you get into such a contract, your business will be left to settle any losses caused by data breaches, service interruptions, or fraud.
What to Do Before Signing a Payment Services Agreement
Let’s look at some steps to take before getting into a PSP contract:
Due diligence checklist
Before getting into an agreement with any PSP, you need to conduct your due diligence to ascertain that the payment processor is credible and reliable. Due diligence also helps you avoid unforeseen costs, liabilities, and downtimes.
Here’s a checklist to help you make the right decision:
Have you understood the pricing structure, including transaction fees, chargeback fees, setup fees, and monthly service charges? Do you understand their pricing structure as well?
Do you understand the payment processing time?
Does the PSP provide a payment gateway that integrates seamlessly with your website, eCommerce platform, accounting software, and CRM tool?
What data security measures are in place to protect your customers’ data? Is the system PCI DSS compliant?
What payment methods do you want to accept and does the PSP support those methods?
Does the payment processor provide 24/7 support via phone, email, or live chat?
Do you understand the processor’s chargeback and refund policies?
Have you carefully analyzed the SLA clause and understood the uptime guarantees, customer support availability, and performance metrics?
Does the PSP provide a user-friendly interface that’s compatible with mobile devices and supports mobile payments?
Can the PSP support your growing business needs? Can it support high transaction volume, customize its payment solutions, and integrate with additional tools as you scale?
How easy is it to set up and use the PSP’s tools?
Do you understand the term of this agreement? Are there any termination clauses?
Don’t forget to look at the processor’s reputation, financial stability, and track record. Look for reviews, feedback, and testimonials from other businesses like yours. You can find these on review sites like G2, TrustPilot, and Capterra.
Seeking legal advice
Contracts and agreements are often complex and technical. Given the legal implications, it’s wise to seek legal advice before signing the document.
You can hire an experienced attorney to review the agreement and spot any unfavorable terms or red flags, such as hidden fees, unfair penalties, early termination fees, and vague clauses. They can ensure both party’s responsibilities are well-defined, reducing your liability in case of issues like data breaches.
A legal expert can also help you negotiate to include more favorable amendments, such as reduced fees or lenient termination conditions. They might also help you amend some clauses to protect your business, especially in cases involving chargebacks.
They can help you assess the risk of getting into the contract based on liability limitations and indemnity clauses.
Most importantly, a legal professional ensures that the contract aligns with applicable laws and regulations, including consumer protection laws and payment industry standards, such as PCI DSS.
Common Pitfalls to Avoid
There are several common pitfalls that you may encounter when signing a payment processing agreement. They include:
Focusing only on rates and ignoring other factors like headcount and/or fraud risk
While rates could be the biggest factor for most merchants, there are many other crucial considerations to make.
One crucial factor many merchants overlook is headcount. How many employees or customer service reps does the processor have to help you handle any issues? Does the PSP have a dedicated team of fraud and risk management experts?
Also, don’t assume the platform’s security is robust. Just because the PSP is PCI DSS certified doesn’t mean that the level of security is high. Some additional measures that reduce fraud risk include fraud scrubbing and payer authentication.
Don’t focus so much on rates and lose focus on other important factors.
Overlooking hidden fees and costs
Fees and costs are some of the most understood areas of payment processing areas. Most merchants make the mistake of focusing only on rates and overlooking other costs.
Most PSP contracts include other hidden fees that ultimately impact your bottom line. They may not seem significant at first but slowly build up over time. Some hidden costs might include:
Crossborder transaction fees - These are charged for international payments
Minimum monthly processing fees - Some payment processors may charge you a fee if your monthly transactions don’t meet a certain threshold
Account maintenance charges - These fees may apply even when you’re not actively using the service
Also, don’t assume that the PSP with the lowest transaction fees is the most affordable option or that the most expensive one is the most reliable and effective. The problem with this approach is that you forget to account for so many charges beneath the surface.
To avoid hidden fees and costs, ask the PSP for a detailed breakdown of all possible fees before signing the contract. Calculate your own estimates based on your transaction volumes to see how they might impact your finances.
Failing to plan for scalability
Your business needs may grow over time. You might need to accommodate new payment methods, higher transaction volumes, or even expand to new markets. If you don’t consider scalability, you might later find that the PSP won’t accommodate your growth or may come with restrictive conditions.
Ensure the contract is flexible to accommodate your growing business. You should be able to adjust transaction limits, add new payment methods such as ACH, and integrate with other business solutions seamlessly.
Ignoring termination clauses
Many PSP contracts come with termination clauses with early termination fees or long-term commitments. This may lock you into the contract even when you find another PSP with better services or you’re frustrated with their services.
Carefully scrutinize the termination clause and understand its conditions, especially fees and notice periods needed to exit the contract. Don’t get into contracts that lock you in the long term unless it’s absolutely necessary.
Conclusion
Reading through your payment processing agreement is as important as finding a good PSP. Carefully scrutinizing the fine details can help you avoid getting into an unfavorable contract.
Pay attention to the terms and conditions, transaction fees and pricing structure, Service Level Agreements (SLAs), data security and compliance, termination and renewal terms, and liability and indemnification.
Don’t only focus on rates. Look at everything from a wide lens to avoid missing any crucial details.
Most importantly, seek legal advice.
For a long time in the business world, cash was king. But not so much anymore.
Accepting debit and credit cards has become a basic requirement for any business today. According to a 2022 market intelligence report by S&P Global, 56% of customers use cards as their primary payment method.
Also, the Federal Reserve reports that payments from card brands like Visa, Mastercard, American Express, and Discover reached USD 128.51 trillion in 2021.
These statistics demonstrate why just about any business—including SaaS companies—should be able to process electronic payments.
To that end, if you’re working with a payments partner to power your platform’s fintech capabilities, it's crucial to have a solid understanding of the payment processing agreement you’re entering into.
Many payment service providers (PSPs) boast lower fees, mobile options, and many other features. But choosing a suitable PSP for your business takes more than that.
That’s why it’s important to analyze the payment processing agreement carefully.
In this comprehensive post, we’ll look at what a payment processing agreement is, important clauses, and common pitfalls to avoid.
Understanding the Basics of Payment Processing Agreements
When a business starts accepting or processing electronic payments, it creates a partnership with a payment processor. A payment processing agreement or PSP contract is a legally binding document that lays out the terms and conditions between the business and the payment processor.
The main purpose of a PSP contract is to provide a blueprint for how the relationship between the merchant and the payment processor will work, the fees that will be paid for each transaction, when payments will be made, and who will be responsible for what.
A typical processing agreement involves many layers, including fees, settlement terms, chargeback and refund policies, termination clauses, data security and compliance, and dispute resolution, among others.
Understanding the terms of a payment processing agreement is crucial because it ensures you’re getting the best deal from a PSP.
Key Clauses to Watch Out For
Here are some important clauses to look for in a payment processing agreement:
Transaction fees and pricing structure
This clause explains all the fees the payment processor charges for their services. The fees can vary depending on the provider.
You can generally expect these fees:
Transaction fees - The processor might charge a flat fee or a percentage of every transaction. The amount may vary for credit cards, debit cards, and other payment methods.
Recurring fees - These are annual or monthly fees for maintaining the service.
Interchange fees - These are fees paid by the merchant to the card issuer of the payment being processed. They vary based on the card network and are not always clearly stated.
Chargeback fees - Your PSP may charge you a fee for chargebacks or handling disputes. This can be a huge annoyance, especially if you’re in a high-risk industry.
It’s important to look at this clause closely and understand the financial implications of getting into the PSP contract. High transaction fees or hidden charges may eat into your profits, especially if yours is a high-volume business.
Also, understand the pricing model and how it can impact your business. Pricing models vary based on several factors, including card networks (Mastercard, Visa, American Express, etc.) and financial institutions.
Some PSPs may base their pricing on a blended model consisting of a flat fee, often called a Gateway Fee, and a variable fee, also referred to as a Processing Fee.
Another pricing model known as Interchange Plus is increasingly becoming popular due to its transparency and consistency. With this model, the processor passes the interchange and card association fees to the merchant, plus an agreed markup to cover their cost. Each transaction has a standard interchange fee charged by that specific card, plus the provider’s fee.
Service level agreements (SLAs)
The Service Level Agreements (SLAs) cover the payment processor’s performance guarantees and benchmarks for service. Many merchants overlook this clause, but it’s important since it demonstrates the processor’s commitment to accountability and performance.
Important SLA considerations to look out for include:
Uptime guarantees - The processor should provide a guarantee of the percentage of time the payment processing system will be operational. A good SLA can provide an uptime guarantee of 99% while accounting for regular maintenance.
Response times - Another vital aspect of SLAs is support and maintenance, including response times for outages and any other issues. A good SLA should guarantee 24/7 support and a response time of less than one hour for serious issues.
Transaction processing time - The SLA should provide an estimate of the maximum allowable time for processing a transaction. This is the period from when a customer initiates a payment to when the funds are credited into the merchant’s account. For example, an SLA could provide a processing time guarantee of 2 hours on business days.
Compensation clause - The PSP should provide a compensation clause for service lapses. This enforces accountability on their side. Such compensations could be refunds or credits for future services.
Performance metrics and reporting - Performance metrics give the merchant an idea of how to evaluate the PSP’s performance. Regular reporting allows both parties to monitor each other’s adherence to the agreement. This is crucial for maintaining trust and enhancing continuous improvement.
Keep in mind that having an SLA clause in your PSP contract is only half of the equation. The other half is completed by enforcing the SLAs. It’s not just about holding the provider accountable. It’s also about protecting your own interests.
You can enforce warranties for failure to meet SLAs, such as monetary fines or payment deductions.
Define these penalties beforehand, specify conditions that trigger them, and negotiate to have them included in the PSP contract.
Data security and compliance requirements
Data security breaches can be expensive. According to IBM, the average cost of a data breach in 2024 is USD 4.88 million. Yet, Fool.com reports that 277,739 Americans have already reported credit card fraud in the first half of 2024.
This emphasizes the need for robust data security measures and obligations.
A typical PSP contract has to include a clause outlining the data security measures the payment processor has in place. It also includes a commitment from the processor to comply with industry standards, such as the Payment Card Industry Data Security Standard (PCI DSS).
PCI DSS is a set of policies and procedures that optimize the security of credit and debit card transactions and protect cardholders’ data. The policies set standards on things like:
Data security of every device used in electronic payments
Physical security for payment forms and unattended devices
Storage procedures for clearing old data and retaining recurring payment details
Staff restrictions based on roles to ensure cardholder information is only accessible to the right users
Some common data security measures to look for include data encryption and tokenization which ensure that data is protected during transmission and storage.
Also, find whether the clause mentions which party is responsible for data security breaches, security incidents, and implementing any security measures to protect cardholders against misuse of personal information.
Breaching PCI DSS standards could attract penalties, fines, or loss of the ability to process payments.
Termination and renewal terms
The account termination clause states the contract length, grounds for contract terminations, how both parties could cancel your account, and the length of prior notice needed before suspending the account for any reason.
Some reasons why you may terminate your contract with the payment processor include delayed processing times, frequent and extended downtimes, lack of customer support, or breaching SLAs.
The PSP may also terminate its contract with you due to a breach of terms and conditions, engagement in high-risk activities, too many chargebacks, and failure to provide accurate information about your business.
Take note of any early termination fees in the contract. The industry standard for a PSP agreement is three years. Penalties might apply for termination of this agreement before this period has lapsed.
Early termination fees in the industry range from $200 to $500.
Some PSPs could try to mitigate the impact of a termination trigger by introducing events that only lead to the termination of certain services.
For example, excessive chargebacks could lead to the termination of payment processing services and not affect the gateway services. This is because chargebacks may only be relevant to payment processing, not gateway services.
The clause should also include conditions for auto-renewal. Typically, this clause states that the contract automatically renews if the contract period has lapsed and neither of the parties has terminated or wishes to terminate the contract.
The PSP might set a condition for a written notice period if you wish to stop the auto-renewal.
Liability and indemnification
Indemnification or “hold harmless” clauses, place the responsibility of defending or paying costs on one party if certain circumstances happen (often a claim or dispute).
Be sure to understand the indemnification since it outlines the liability of both parties in case of service failure, fraud, or security breaches. It explains how the indemnifying party will compensate or protect the indemnified party if these specific events or claims happen.
The indemnifying party is the party accepting to take responsibility for the indemnification event, while the indemnified party is the party relieved of responsibility.
You need to be aware of what your responsibilities are in case of damages or losses and what the PSP will be liable for.
Most PSPs have a limitation of liability or indemnification waiver clause. If you get into such a contract, your business will be left to settle any losses caused by data breaches, service interruptions, or fraud.
What to Do Before Signing a Payment Services Agreement
Let’s look at some steps to take before getting into a PSP contract:
Due diligence checklist
Before getting into an agreement with any PSP, you need to conduct your due diligence to ascertain that the payment processor is credible and reliable. Due diligence also helps you avoid unforeseen costs, liabilities, and downtimes.
Here’s a checklist to help you make the right decision:
Have you understood the pricing structure, including transaction fees, chargeback fees, setup fees, and monthly service charges? Do you understand their pricing structure as well?
Do you understand the payment processing time?
Does the PSP provide a payment gateway that integrates seamlessly with your website, eCommerce platform, accounting software, and CRM tool?
What data security measures are in place to protect your customers’ data? Is the system PCI DSS compliant?
What payment methods do you want to accept and does the PSP support those methods?
Does the payment processor provide 24/7 support via phone, email, or live chat?
Do you understand the processor’s chargeback and refund policies?
Have you carefully analyzed the SLA clause and understood the uptime guarantees, customer support availability, and performance metrics?
Does the PSP provide a user-friendly interface that’s compatible with mobile devices and supports mobile payments?
Can the PSP support your growing business needs? Can it support high transaction volume, customize its payment solutions, and integrate with additional tools as you scale?
How easy is it to set up and use the PSP’s tools?
Do you understand the term of this agreement? Are there any termination clauses?
Don’t forget to look at the processor’s reputation, financial stability, and track record. Look for reviews, feedback, and testimonials from other businesses like yours. You can find these on review sites like G2, TrustPilot, and Capterra.
Seeking legal advice
Contracts and agreements are often complex and technical. Given the legal implications, it’s wise to seek legal advice before signing the document.
You can hire an experienced attorney to review the agreement and spot any unfavorable terms or red flags, such as hidden fees, unfair penalties, early termination fees, and vague clauses. They can ensure both party’s responsibilities are well-defined, reducing your liability in case of issues like data breaches.
A legal expert can also help you negotiate to include more favorable amendments, such as reduced fees or lenient termination conditions. They might also help you amend some clauses to protect your business, especially in cases involving chargebacks.
They can help you assess the risk of getting into the contract based on liability limitations and indemnity clauses.
Most importantly, a legal professional ensures that the contract aligns with applicable laws and regulations, including consumer protection laws and payment industry standards, such as PCI DSS.
Common Pitfalls to Avoid
There are several common pitfalls that you may encounter when signing a payment processing agreement. They include:
Focusing only on rates and ignoring other factors like headcount and/or fraud risk
While rates could be the biggest factor for most merchants, there are many other crucial considerations to make.
One crucial factor many merchants overlook is headcount. How many employees or customer service reps does the processor have to help you handle any issues? Does the PSP have a dedicated team of fraud and risk management experts?
Also, don’t assume the platform’s security is robust. Just because the PSP is PCI DSS certified doesn’t mean that the level of security is high. Some additional measures that reduce fraud risk include fraud scrubbing and payer authentication.
Don’t focus so much on rates and lose focus on other important factors.
Overlooking hidden fees and costs
Fees and costs are some of the most understood areas of payment processing areas. Most merchants make the mistake of focusing only on rates and overlooking other costs.
Most PSP contracts include other hidden fees that ultimately impact your bottom line. They may not seem significant at first but slowly build up over time. Some hidden costs might include:
Crossborder transaction fees - These are charged for international payments
Minimum monthly processing fees - Some payment processors may charge you a fee if your monthly transactions don’t meet a certain threshold
Account maintenance charges - These fees may apply even when you’re not actively using the service
Also, don’t assume that the PSP with the lowest transaction fees is the most affordable option or that the most expensive one is the most reliable and effective. The problem with this approach is that you forget to account for so many charges beneath the surface.
To avoid hidden fees and costs, ask the PSP for a detailed breakdown of all possible fees before signing the contract. Calculate your own estimates based on your transaction volumes to see how they might impact your finances.
Failing to plan for scalability
Your business needs may grow over time. You might need to accommodate new payment methods, higher transaction volumes, or even expand to new markets. If you don’t consider scalability, you might later find that the PSP won’t accommodate your growth or may come with restrictive conditions.
Ensure the contract is flexible to accommodate your growing business. You should be able to adjust transaction limits, add new payment methods such as ACH, and integrate with other business solutions seamlessly.
Ignoring termination clauses
Many PSP contracts come with termination clauses with early termination fees or long-term commitments. This may lock you into the contract even when you find another PSP with better services or you’re frustrated with their services.
Carefully scrutinize the termination clause and understand its conditions, especially fees and notice periods needed to exit the contract. Don’t get into contracts that lock you in the long term unless it’s absolutely necessary.
Conclusion
Reading through your payment processing agreement is as important as finding a good PSP. Carefully scrutinizing the fine details can help you avoid getting into an unfavorable contract.
Pay attention to the terms and conditions, transaction fees and pricing structure, Service Level Agreements (SLAs), data security and compliance, termination and renewal terms, and liability and indemnification.
Don’t only focus on rates. Look at everything from a wide lens to avoid missing any crucial details.
Most importantly, seek legal advice.
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