One important question that every B2B software company should be asking before deciding on a payments partner is, is your data portable? And by that we mean, what happens if, for any reason known or unknown, at some point you decide to leave your current payment processor and move to another platform, can you bring all your data with you?
For many processors, it’s likely no. This can manifest itself in any or all of three ways:
Cardholder data
If your merchants have customers that utilize payment plans, recurring charges or subscriptions, their credit card data is stored in a PCI compliant vault most likely hosted by your payments processor. If you ever choose to migrate to a different processor, it’s highly likely that card data won’t move with you, leading to huge — and often expensive — headaches for your merchants. By forcing your merchants to return to their customers to get the credit card data again, they could see huge churn. But — and we’ve seen it first hand — it’s likely something your processor won’t budge on once you’ve signed an agreement without noticing the fine print.
Merchant data
When you add a new merchant to your system and set them up with your processor, do you retain a copy of their underwriting application and data? If you referred them off to your payments processor and never saw any of it, it’s likely you don’t. Which means you’ll have to go back to each of your merchants and get all that information again if you ever decide to switch, leading to churn and friction for your own customers as well.
Merchant accounts
This is a big one — can you even move your merchant accounts to a new provider at all? The answer may surprise you. Oftentimes, written in tiny print, large payments processors like First Data will claim any merchants you sign up on their platform as THEIR customers, and they’ll sue you if you try to take them elsewhere. Even if you found the customers and did the work to bring them on board, you are not allowed to move them to another platform later if you choose to switch. This means you’ll either need to start all over again, leaving your customers behind, or remain stuck with a partner you don’t want or don’t like (probably both).
It pays to have portable data
If you do have some portability in one or all of the above situations, most likely it won’t come for free. Large payment platforms often hold their data hostage, forcing you to pay portability or breakup fees that could add up to months or even years of revenue.
And if you’re reading this and thinking, “well, none of this matters, we’ll just stay with the same provider,” think again. Even if you like your provider and want to stay, there’s a greater than zero chance thanks to high consolidation in the payment processing industry that at a certain point your provider may be bought by someone else, and then everything will change. But while the new processor may no longer be a good fit for your business, your previous agreements will still remain in place.
Even if your processor isn’t sold to the highest bidder, at a certain point you may still outgrow them. There may be new features or equipment you’d like that they don’t have available, or you may want to negotiate better economics they can’t provide.
There are also implications for the value of your business when it comes to portability as well. If at some point you’re looking to sell your business, your sale price could be impacted if your data can’t be moved to the processor your acquirer wants to use. By locking yourself in with a payments processor, you’re tying the reputation of your business to theirs, for good and bad.
Bottom line: the chances that the provider you use in your pre-seed round will still be a good fit in your Series B is small, but you may not have any choice once you get there if you don’t ask questions first.
With Tilled, we can answer these questions right here, right now: We will never withhold your data from you, and will work with you to transfer all of your data if you ever choose to leave for a different platform at any time, for any reason. All of our software partners are free to come and go as you please, and you can take your merchant accounts with you.
In the meantime, we’ll do everything we can to make sure you never want to use that aspect of our business. We’re not here to hold you or your data hostage, but to operate as a true partner in payments processing for your business.
