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Merchant Services License Agreement

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MERCHANT SERVICES LICENSE AGREEMENT

This Merchant Services License Agreement (the Agreement) is made as of Effective Date: by and between Licensor Name: organized as: with principal place of business at , and Merchant Name: organized as: with principal place of business at (each a Party and together, the Parties).

RECITALS

WHEREAS, Licensor develops, licenses and provides access to payment processing software, gateways, merchant onboarding, settlement and related services and technology (collectively, the Licensed Services);

WHEREAS, Merchant operates a business that accepts payment card and electronic payment transactions and desires to obtain a limited license to use the Licensed Services and to receive associated merchant processing services under the terms set forth herein;

WHEREAS, Licensor is willing to grant Merchant a non-exclusive, non-transferable license to the Licensed Services subject to the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and other good and valuable consideration, the Parties agree as follows:

1. DEFINITIONS

1.1 Licensed Software / Services. "Licensed Services" means Licensor's proprietary payment processing platform, software, APIs, documentation, merchant portal, and any hosted or delivered services provided to Merchant under this Agreement.

1.2 Transaction Data. "Transaction Data" means payment cardholder information, transaction authorization and settlement records, chargeback records, and other data generated or collected in the course of processing transactions for Merchant.

1.3 Confidential Information. "Confidential Information" means non-public business, technical or financial information disclosed by a Party that is identified as confidential or which a reasonable person would consider confidential.

2. LICENSE GRANT

2.1 Grant. Subject to the terms and conditions of this Agreement, Licensor hereby grants Merchant a limited, non-exclusive, non-transferable license to access and use the Licensed Services solely for Merchant's internal business operations to accept and process payment transactions for Merchant's customers.

2.2 Restrictions. Merchant shall not (a) sublicense, distribute, lease or rent the Licensed Services to any third party except as expressly permitted; (b) reverse engineer, decompile or disassemble the Licensed Services except to the extent permitted by applicable law; or (c) remove or alter any proprietary notices.

3. SERVICES, SUPPORT AND IMPLEMENTATION

3.1 Provision of Services. Licensor will provide onboarding, configuration, connectivity to payment networks and settlement services as described in the Schedule of Services attached hereto and in the Merchant onboarding forms completed by Merchant.

4. FEES, CHARGES AND SETTLEMENT

4.1 Fees. Merchant shall pay Licensor fees for setup, transaction processing, monthly platform access, and any ancillary services in accordance with the fee schedule below. All fees are payable in U.S. dollars and are exclusive of taxes unless otherwise stated.

4.2 Settlement. Licensor will aggregate, settle and remit funds to Merchant in accordance with the settlement schedule: Settlement occurs within days after batch settlement, subject to holds, reserves, chargebacks and applicable network rules.

5. TAXES; WITHHOLDING

Merchant is responsible for all taxes, duties or levies arising from Merchant's use of the Licensed Services, except taxes based upon Licensor's net income. Licensor may withhold amounts as required by applicable law.

6. TERM AND TERMINATION

6.1 Term. The initial term of this Agreement shall be commencing on the Effective Date and shall automatically renew for successive periods of equal length unless either Party provides written notice of non-renewal at least days prior to the end of the then-current term.

6.2 Termination for Cause. Either Party may terminate this Agreement upon written notice if the other Party materially breaches any obligation and fails to cure within thirty (30) days after receipt of written notice of such breach; provided that a breach involving security, unauthorized access, or unlawful conduct may be subject to immediate termination.

6.3 Effect of Termination. Upon termination, Merchant's access to Licensed Services shall cease, Merchant shall pay all amounts due through the effective date of termination, and Licensor may retain Transaction Data as permitted by applicable law and this Agreement to satisfy obligations, audits, chargeback liabilities and dispute resolution.

7. CONFIDENTIALITY

Each Party shall protect the other's Confidential Information with at least the same degree of care it uses to protect its own confidential information but in no event less than reasonable care. Confidentiality obligations survive termination for a period of five (5) years, except that Transaction Data and trade secrets shall remain protected for as long as required by law or until such information becomes public through no fault of the recipient.

8. DATA SECURITY; PCI AND REGULATORY COMPLIANCE

Merchant shall comply with all applicable card brand rules, Payment Card Industry Data Security Standard (PCI DSS) requirements and applicable privacy and data protection laws in connection with collection, storage and transmission of Transaction Data. Merchant shall implement and maintain controls reasonably necessary to protect cardholder data and shall promptly notify Licensor of any security incident affecting Transaction Data.

9. INTELLECTUAL PROPERTY

Licensor retains all right, title and interest in and to the Licensed Services, including all patents, copyrights, trade secrets, trademarks, know-how and other intellectual property rights. Merchant acknowledges that no ownership interest in Licensor's intellectual property is conveyed under this Agreement and that Merchant shall not attempt to remove, obscure or modify any proprietary notices.

10. INDEMNIFICATION

10.1 Merchant Indemnity. Merchant shall indemnify, defend and hold harmless Licensor and its affiliates from and against any claim, loss, liability, damage, cost or expense (including reasonable attorneys' fees) arising out of Merchant's breach of this Agreement, Merchant's negligence or willful misconduct, unlawful processing of Transaction Data, or Merchant's failure to comply with card brand rules.

10.2 Licensor Indemnity. Licensor shall indemnify Merchant for any third-party claims alleging that the Licensed Services, as provided by Licensor and used in accordance with this Agreement, infringe a third party's issued patent or copyright. Licensor's indemnity obligations are conditioned on Merchant giving prompt written notice of the claim and permitting Licensor to control the defense and settlement of the claim.

11. LIMITATION OF LIABILITY

Except for liability arising from willful misconduct, gross negligence, indemnification obligations or breach of confidentiality, neither Party shall be liable to the other for indirect, special, incidental, punitive or consequential damages, including loss of profits, loss of business or loss of data. The aggregate liability of each Party for claims arising under this Agreement shall not exceed the total fees paid by Merchant to Licensor under this Agreement during the twelve (12) months preceding the event giving rise to the claim, up to

12. INSURANCE

Merchant shall maintain at its expense commercial general liability and cyber/privacy insurance in amounts customary for its industry and sufficient to cover its obligations under this Agreement, including limits of not less than USD per occurrence.

13. AUDIT RIGHTS; RECORDS

Licensor may audit Merchant's records and systems relating to processing transactions, compliance with this Agreement, and card brand rules upon reasonable prior notice and during normal business hours. Merchant shall retain records relating to transactions, chargebacks and settlements for at least three (3) years or longer if required by applicable law.

14. NOTICES

All notices required or permitted under this Agreement shall be in writing and delivered to the addresses below (or such other address as a Party may designate by written notice):

15. ASSIGNMENT

Neither Party may assign this Agreement without the prior written consent of the other Party, except that Licensor may assign this Agreement in connection with a merger, sale of substantially all assets, or a corporate reorganization without Merchant's consent provided that the assignee assumes Licensor's obligations hereunder.

16. AMENDMENT; WAIVER; COUNTERPARTS

Any amendment to this Agreement must be in writing and signed by authorized representatives of both Parties. Failure or delay to enforce any provision shall not constitute a waiver. This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

17. GOVERNING LAW; VENUE

This Agreement shall be governed by and construed in accordance with the laws of the State of without regard to conflict of laws principles. The Parties submit to the exclusive jurisdiction of the state and federal courts located in for resolution of disputes.

18. ENTIRE AGREEMENT; SEVERABILITY

This Agreement, including all schedules and attachments, constitutes the entire agreement between the Parties regarding the Licensed Services and supersedes all prior negotiations and agreements. If any provision is held invalid or unenforceable, the remaining provisions shall remain in full force and effect and the Parties shall substitute a valid provision reflecting the Parties' original intent as closely as possible.

19. MISCELLANEOUS PROVISIONS

The Parties acknowledge that each has had the opportunity to review this Agreement with counsel. Headings are for convenience only and shall not affect interpretation. Time is of the essence with respect to each Party's obligations hereunder.

LICENSOR:

By:

Date:

MERCHANT:

By:

Date:

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What the Merchant Services License Agreement Is

A Merchant Services License Agreement is a written contract that sets terms between a merchant and a payment services provider or acquiring bank for card acceptance, payment processing, and related services. It defines responsibilities for transaction routing, settlement, fees, chargebacks, data security, and regulatory compliance. The agreement typically covers merchant onboarding requirements, permitted business types, transaction limits, dispute handling, indemnities, audit rights, and termination conditions. Parties rely on this agreement to allocate financial risk, meet PCI and tax reporting obligations, and document operational responsibilities for both ongoing processing and audit support.

Why this Agreement Matters for Commerce and Compliance

A clear Merchant Services License Agreement reduces operational risk by documenting fee structures, chargeback procedures, and data-security responsibilities, and it supports compliance with PCI, tax reporting, and consumer-protection laws. Properly drafted terms protect merchant revenue, clarify liability for disputes, and make forensic audits and regulatory reviews more efficient.

Why this Agreement Matters for Commerce and Compliance

Who typically completes and signs this agreement

The agreement is completed by parties with commercial and legal authority to bind payment processing relationships.

  • Merchant owners, CFOs, or operations leads who control payment routing and banking relationships.
  • Payment facilitators and acquiring banks that underwrite merchant risk and set processing rules.
  • Corporate legal or compliance teams that review indemnities, data controls, and regulatory clauses.

Final signature typically follows legal review, underwriting approval, and verification of identity and bank account details.

Primary signer roles and their responsibilities

Merchant Owner

A merchant owner or authorized officer must confirm business identity, banking details, and accept fee and chargeback terms. They are responsible for ensuring permitted business activity and providing required onboarding documentation for underwriting and PCI compliance.

Processor Representative

An authorized representative of the payment processor or acquiring bank signs to confirm underwriting, risk controls, settlement timing, and support obligations, and to acknowledge technical integration and reporting responsibilities.

Core provisions every professional agreement should include

A complete Merchant Services License Agreement balances commercial terms with operational and compliance provisions so both parties know fees, risk allocation, and performance obligations.

Scope of Services

Defines accepted payment types, point-of-sale and gateway integrations, settlement timing, and transaction routing rules in measurable terms.

Fees and Settlements

Specifies interchange-plus or tiered pricing, monthly/transaction fees, reserve requirements, holdbacks, and settlement schedules.

Chargebacks and Disputes

Allocates liability for chargebacks, sets investigation timelines, and describes merchant responsibilities for evidence and response handling.

Data Security and PCI

Requires adherence to PCI DSS, details cardholder data handling, breach notification timelines, and audit cooperation.

Compliance and Reporting

Covers tax reporting cooperation, KYC/AML obligations, and any regulatory filings required by law or network rules.

Termination and Remedies

Describes termination triggers, cure periods, post-termination settlement, and surviving clauses like indemnities and confidentiality.

Step-by-step: completing the Merchant Services License Agreement

Follow a consistent sequence to reduce underwriting delays and ensure enforceability.

  • 01
    Gather Documents: Collect EIN, articles of organization, voided check, and ID for authorized signers.
  • 02
    Complete Fields: Enter legal names, bank details, processing limits, and fee selections accurately.
  • 03
    Underwriting Review: Processor verifies KYC, business model, and risk categories before approval.
  • 04
    Sign and Distribute: Execute signatures, retain final copies, and provide originals to settlement operations.

Configuring the online completion workflow

Set workflow options to match your operational needs and the required authentication level for signers.

Field Configuration
Signature Authentication Email link or SMS OTP; choose stronger auth for high-risk merchants.
Bulk Onboarding Enable bulk send for large merchant batches; map unique fields per row.
Payment Collection Enable tokenization and payment request fields when upfront fees are required.
Template Controls Lock critical clauses and use conditional fields for optional addenda.

Where to send the completed agreement and who receives it

Distribute executed copies to the parties and any internal teams that require the record.

  • Acquiring Bank: Primary contract holder for settlement and underwriting records retention.
  • Merchant: Keep a signed copy for reconciliation, tax reporting, and dispute defense.
  • Payment Gateway: Share integration and API credentials as required for processing configuration.
  • Compliance Team: Provide to legal/compliance for PCI, AML, and audit purposes.

Technical formats and platform requirements

Choose a platform that supports required formats, authentication, and retention to maintain legal validity and auditability.

  • File Formats: PDF, DOCX, and fillable forms are accepted for archival and signing.
  • Integrations: Support for Salesforce, NetSuite, Google Workspace, Microsoft 365 simplifies onboarding and record sync.
  • Authentication: Email, SMS OTP, and advanced signer authentication reduce fraud risk.

Ensure your chosen solution captures an audit trail, supports secure storage, and permits export in industry-standard formats for regulatory review.

Security and compliance checklist

Encryption In Transit: TLS 1.2/1.3
Encryption At Rest: AES-256
Audit Standards: SOC 2 Type II
Healthcare BAA: HIPAA (BAA required)
Payment Standards: PCI DSS certified
eSignature Law: ESIGN and UETA compliance

Typical timelines and notice periods to include

Define clear timing for notices, renewal, and dispute handling to avoid contract ambiguity.

Effective Date Entry:

Enter as MM/DD/YYYY; this triggers performance obligations.

Underwriting Review Window:

Allow 5–15 business days for verification and approval.

Renewal Notice:

Specify 30–90 days’ written notice for renewal or rate changes.

Termination Notice:

Include a 30-day cure period before termination for material breaches.

Dispute Response:

Require written responses within 15 business days to escalate disputes.

Common pitfalls when preparing the agreement

  • Using informal or vague fee language such as 'market rates' instead of specific fee formulas, which creates billing disputes and audit issues.
  • Failing to confirm authorized signers and corporate authority, leading to rejected contracts and settlement delays during underwriting.
  • Omitting explicit PCI and breach-notification clauses, leaving unclear responsibilities and increasing regulatory risk in the event of a data incident.
  • Neglecting to capture bank account ownership and routing accuracy, which can cause settlement failures, reversals, or bank holds.

Consequences of errors or missing provisions

Chargeback Liability: Merchant bears financial loss for disputed transactions.
Reserve Withholding: Processor may hold reserves against suspected risk.
Contract Termination: Early termination fees and loss of rates.
Regulatory Fines: Fines for PCI or AML violations possible.
Tax Reporting Errors: Incorrect TINs can trigger backup withholding.
Reputational Harm: Service interruptions and compliance failures damage trust.

eSignature vendor comparison for signing and storing the agreement

Compare vendor starting prices and feature availability. signNow appears first and includes options suitable for document signing, bulk send, and compliance workflows.

signNow DocuSign Adobe Sign PandaDoc HelloSign
Starting Price $8/user/mo $15/user/mo $14/user/mo $19/user/mo $15/user/mo
Free Trial 7-day free trial, no credit card Varies by plan Varies by plan Varies by plan Varies by plan
Bulk Send Yes (Business Premium) Yes Yes Yes No
Audit Trail Yes Yes Yes Yes Yes
HIPAA Compliant Yes Yes Yes No No

Frequently asked questions and troubleshooting

Answers to common questions about execution, e-signature validity, authentication, and retention for Merchant Services License Agreements.


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