What Does Merchant Portability Mean?

As a software company, you’ve put a lot of work into creating a top-notch, tailored experience for your customers. Adding payments also adds another layer to their relationship with you, their trusted service provider.

Because of that relationship, you might think that you can easily move your customers from one payments platform to another as needed as your relationship to payments grows and evolves.

Unfortunately, that’s not always the case. That’s why – before you sign with any payments provider – it’s important to know about the concept of merchant portability.

What is merchant portability?

Simply put, merchant portability means that you have the right to take your merchant customers with you wherever you go for payments. This becomes important when you want to make changes to your payments program – whether you’re growing and taking more on yourself, or you’re simply switching to payments providers that work better for you.

It might be surprising that this is a thing. After all, they’re your customers, right? You’ve nurtured them and developed relationships with them.

But unfortunately, merchant portability isn’t a given. If you sign with an outside provider to manage your payments, and then you decide to make a switch – or even move your merchants to your own platform – you might run into issues.

When does merchant portability come up?

Let’s say a software company has signed with an outside provider to handle their customers’ payments. But at some point, they decide they want to make a change.

Maybe they’re unhappy with the service, or maybe they’ve simply grown and evolved and think a different provider would better suit their needs. They might want to use different technology or offer options to their customers that their current provider doesn’t have.

Or perhaps the software provider has decided they want to start slowly with payments. Initially, they opt to rely more on an outside provider to do the heavy lifting of providing the payments platform, conducting underwriting, and managing risk.

But eventually they might want to take over more control of their payments program. Many software providers choose to graduate to become full Payfacs, which means operating their own payments program and platform.

In either of these scenarios, if the right to merchant portability hasn’t been established with the first provider, freely migrating their existing customer base to the new platform may not be possible. Some payments providers use practices such as early termination fees and non-solicitation agreements to restrict movement of merchants from platform to platform.

This means that software companies can find themselves locked in with a single payments provider that isn’t necessarily serving their needs. Not only is this frustrating for the software company, but it also puts a dent in customer satisfaction if it means customers aren’t getting the service or the options they’re looking for.

If you enjoy merchant portability, you can freely make changes to your payments program and bring your merchant customers with you.

What can software companies do?

It’s important to fully understand the terms – and the implications – of any contract you’re signing. When choosing payments providers, look for situations where you are able to migrate your merchants to your next step, whether you’re becoming a Payfac yourself or simply making changes to your stack.

Your relationships are your relationships, so be sure you’re not being locked in. Seek out providers that instead earn your continued business by helping you deliver on your strategy and grow your business.

Contact the experts at Infinicept to learn more about the paths to payments and how to know what’s right for your business.