Payments exclusivity is a bad deal for software companies. Most founders know this now and the industry has responded with a new generation of providers loudly advertising that they don’t require exclusivity clauses or non-solicit tails that lock you in for years.
But there’s a catch.
Some of those same providers are burying something just as damaging in the fine print: escalating monthly minimums.
One of our founders was recently reviewing a proposal from one of these “we’re different” providers. It didn’t have an exclusivity clause and was clean on the surface.
But buried in the terms were minimums climbing into the tens of thousands of dollars per month.
That’s not freedom. That’s just exclusivity with better marketing.
Here’s how it works, and why it’s a trap
Software companies are typically optimistic when they sign a new payments deal. You believe in your product, you believe your customers will adopt payments, and the projections in the deck feel achievable.
What’s harder to appreciate at signing is how long it actually takes to build a great payments business. Attach rate and volume take time. Operationalizing a payments program, which means pricing it correctly, selling it to existing customers, handling the edge cases, takes diligence that’s easy to underestimate when you’re excited about the opportunity.
So you sign, and the minimums look reachable. But then reality sets in.
Volume builds slower than projected, and you start hearing about a competitor offering better terms, or a provider with capabilities that would genuinely improve your customers’ experience.
You want to make a move, but you can’t, because in order to stay compliant with your monthly minimum, you need every dollar of volume you have.
Boarding merchants on a new platform would drop you below the threshold and trigger a financial penalty. You’re not contractually exclusive, you’re just economically trapped.
The outcome is identical.
What to look for
If you’re a software company CEO or a PE sponsor evaluating a payments deal, escalating minimums deserve the same scrutiny as an exclusivity clause, because the effect is the same.
Ask directly: what are the minimums in year one, year two, year three? What happens if we miss them? What’s our path to switching providers if we need to?
If the answers make you uncomfortable, trust that instinct. A provider that’s genuinely confident in the value they deliver doesn’t need contractual mechanisms to keep you around.
We built Forward around the opposite principle: no minimums, exclusivity or non-solicits. If we’re not earning your business, you should be able to leave and we should have to work harder to keep you.
The providers who fight hardest to lock you in are usually the ones who know they can’t win on merit alone.
