Merchant Payment Services Agreements: Key Provisions for Retailers, Banks, and Payment Processors

Engaging a service provider to provide point-of-sale payment services for a retail operation can be a daunting task, especially without an adequate understanding of the complex roles and relationships of those involved in the payments chain.

The merchant is typically presented with a form payment services agreement from the provider. Still, merchant’s counsel should work to obtain a full understanding of how the service will work, what implementation obligations the merchant will have, the full range of applicable fees and costs, and to review and negotiate key provisions relating to compliance with industry standards, data security, confidentiality, use of third parties, reserves, and more. Additional standards and guidelines are often incorporated by reference and should be part of the review.

Among other things, data security is a fundamental issue in these agreements, and a merchant's obligations under PCI Data Security Standards or otherwise may vary depending on the size of its business and the payment types accepted. Contractual liabilities that flow from a data breach often exceed all other financial liabilities, including the cost to defend litigation or regulatory investigation.

Listen as our authoritative panel discusses key negotiation points in these agreements, provisions that may be non-negotiable due to regulatory or network requirements, and the negotiating points that may mitigate the merchant’s potential liability.

1. Point-of-sale payment services agreements: understanding the parties and their roles
2. Standard provisions: what you should expect to see
3. Issues for review for each service type
   1. Regulatory compliance
   2. Card network compliance (where applicable)
   3. Data security responsibilities
   4. Assignment rights; subcontractors
   5. Confidentiality
   6. Exclusivity
   7. Fee structures (discount rates, interchange, reserves)
   8. Indemnity obligations
   9. Additional terms and conditions incorporated by reference
4. Data protection: reviewing internal controls to ensure compliance with applicable requirements, policies and agreements

The panel will review these and other key issues:

• What are the roles and responsibilities of the banks, card networks, payment processors, payment service providers and merchants under these agreements?
• Which provisions in standard form agreements are problematic for merchants and which are negotiable?
• What are the parties' obligations concerning data security under the agreement, and how might the merchant limit its exposure?
• What does the merchant need to understand fee structures and financial liability under an agreement?