There’s a reason vertical software and AI founders consistently feel like they’re getting a worse deal than they signed up for. They usually are.
The payments industry has spent decades perfecting a set of tactics designed to obscure the true economics of a deal. Not through outright deception, but through complexity, buried language, and the information asymmetry. When a provider offers a concession on one line, the margin almost always reappears somewhere else.
At Forward when we see this in agreements, we call it squeezing the balloon.
Payments providers operate on thin but predictable economics. When they offer you a better rate, better terms, or a better revenue share, that concession doesn’t evaporate. It gets redirected and might show up as:
- A lower fee schedule paired with an unfavorable payout arrangement
- A competitive rate with exclusivity or minimums (same thing) buried in the contract
- Reduced platform fees offset by charges quietly passed to your merchants, whose revenue upside you do not get to participate in.
The balloon always gets squeezed somewhere. The tactics below are just the different places it pops.
Legacy Providers: The Classics
Reverse Revenue Share Deals
This one has been around for years and remains surprisingly common. Here’s how it works.
A provider quotes you an attractive headline rate: interchange-plus pricing, a competitive buy rate, a 50/50 revenue share. What they don’t always make explicit is what gets taken out before the split happens.
The contract language often reads something like: your share is calculated on net revenue, after interchange and any other applicable costs. The phrase “any other applicable costs” is doing a lot of work. It might include padding on top of interchange, fees owed to a referring agent, or internal cost allocations you never negotiated. By the time those deductions are applied, the 50/50 split on paper becomes something closer to 30/70 (software:PSP) in practice.
The marker to watch: if a provider isn’t willing to show you exactly what the denominator is before the revenue share is applied, that’s your signal to push harder.
Junk Fees Passed to Your Merchants
This tactic is particularly damaging because it’s invisible to you until your merchants start complaining.
Rather than charging you directly, some legacy providers route additional fees through to your end customers. These might appear as statement fees, batch fees, network access fees, or a dozen other line items that don’t appear in your master agreement. The provider captures that revenue independently, your merchant’s effective rate creeps up, and your customers quietly start to wonder whether your payments offering is actually a good deal for them.
The downstream effects: lower adoption, more support tickets, and erosion of the trust you’ve built with your customers. You’re absorbing reputational cost for fees you didn’t know were being charged nor have line of sight into.
Egregious Price Hikes Over Time
Legacy providers often price competitively to win the deal, then renegotiate from a position of strength once you’ve completed the integration. Once your customers are onboarded, your team is trained, and switching feels expensive, the economics shift. Annual rate adjustments, new fee line items, and payout schedule changes add up and each one individually feels small enough to absorb.
The cumulative effect over three to five years can be substantial. The ask at the start was reasonable. The reality at renewal rarely is.
Modern PSPs: New Providers, Familiar Tricks
Newer, developer-friendly providers present themselves as a clean break from legacy complexity. In some ways, they are. In others, they’ve simply repackaged the same underlying dynamics.
Squeezing the Balloon Through Contract Terms
A modern provider might offer transparent per-transaction pricing with no monthly minimums and then offset that flexibility with contractual lock-in. This can appear as:
- Exclusivity clauses: prohibiting you from offering any competing payments options to your customers
- Non-solicit tails: provisions that extend 12, 18, or 24 months beyond contract end, preventing you from moving merchants to a new provider for a significant period of time
- Monthly minimums structured as de facto exclusivity: If the minimum is set at or near your expected volume, you’re effectively exclusive even if the contract doesn’t say so explicitly. This means that if you agree to minimums and your provider sells, or has to reduce staff, service to your customer suffers and you have no choice but to endure it.
- Do-it-yourself (DIY) without support: The technology lift in payments is less than 4 weeks with 2 FTEs or less (we’ve had a CTO do it in a weekend), the real lift is in building and supporting the business. Here are the APIs – good luck? That just doesn’t work.
These clauses tend to appear late in contract review, framed as standard. They are not always standard, and they are always negotiable.
The Payout Fee
Some modern providers charge a fee on every payout to your merchants. This is a per-transfer cost that sits outside the headline processing rate. On a platform with high transaction frequency or a large number of small merchants, this adds up quickly. It’s not hidden, exactly, but it’s rarely the number anyone is talking about when pricing conversations happen.
The Token Problem
Regardless of provider type, token portability deserves its own section because it affects your ability to leave more than almost any other factor.
When a merchant saves a payment method in your platform, that card number is stored as a token with your payments provider. If you ever want to switch providers, you need to transfer those tokens. In theory, this is possible. In practice, providers create friction through contract language, through delay, high migration fees or occasionally through explicit policy.
We’re now seeing a new variation of this: software platforms themselves adding token restrictions to their terms. The logic is self-interested: if merchants can’t easily port their payment credentials, they’re less likely to leave the platform. The result is a stack of lock-in where the payments provider makes it hard to leave, and the software layer adds another layer on top.
For operators with high-recurring-billing businesses like subscriptions, memberships, anything with a card on file, the practical effect is significant. Asking customers to re-enter payment information is possible, but costly in conversion and trust.
The framing used to discourage portability is often deliberate. Providers may suggest that transferring tokens is technically impossible, legally risky, or a violation of network rules. In most cases, none of these are accurate. Token portability is achievable. The friction is manufactured.
What To Do With This
None of these tactics require malicious intent on the part of the providers using them. They’re structural. They exist because the incentives reward complexity over clarity, and because most operators evaluate payments deals once rather than continuously.
A few things that help:
Ask for the full economics in writing, before the revenue share is applied. If a provider shows you a rev share percentage, ask to see the exact calculation. What’s included in costs, what’s excluded, and whether any third parties take a cut first.
Read the termination and non-solicit provisions as carefully as you read the pricing. The economics might be competitive. The contract terms might make the relationship functionally permanent.
Get clarity on token portability before you sign. Ask directly: if we decide to switch providers, what is the process for transferring tokens? How long does it take? Is there a fee? What contractual conditions apply?
Request a full statement analysis. If you’re currently with a provider, have someone walk through your actual statements, not your contract, and identify every fee line item. What you find is often different from what was originally represented.
The payments industry is not going to simplify itself. But operators who know what to look for can negotiate better terms, avoid the worst structures, and build payments businesses that actually perform the way they were promised to.
Forward works with software platforms to build transparent, high-performing payments businesses. If you want a no-obligation analysis of your current payments deal, we’ll do that for you.
