The pandemic-induced shift to online and contactless payments has been a boon for credit card providers and their sales agents. The industry depends on those agents, called “independent sales organizations” — ISOs — to market payment services to businesses.
In this post, I will examine the role of ISOs. Understanding how ISOs operate will help merchants secure the best payment processing.
This follows from my 3-part series on credit card processing, which explains the participants and pricing methods and offers money-saving suggestions. My 2-part primer on merchant accounts addresses their purpose and how to select the best provider.
Banks that issue credit cards rely on ISOs to sell their services. A good ISO will use its experience in an industry to tailor solutions for merchants. ISOs that specialize in payment processing for restaurants are an example.
ISOs can sell the services of many issuing banks, picking and choosing the best solution for a merchant. ISOs are similar to independent insurance agencies that find the best policies for their clients.
ISOs are supposed to understand the circumstances of their merchant clients and propose suitable solutions, such as pricing, equipment, and technology. The best ISOs take the time to understand their clients and build long-term relationships.
ISOs must register with the card brands — Visa, Mastercard, American Express, Discover. Registration fees are approximately $5,000 per year, per brand. ISOs frequently have their own agents, who do not have to register.
ISOs range in size. Some are huge, with hundreds of agents and employees; others are small, with just a few employees or even one employee. Larger ISOs sometimes subcontract parts of their business to smaller ISOs. To add to the confusion, Visa and Mastercard do not use the acronym ISO. Instead, Mastercard uses MSP (member service provider), and Visa uses TPA (third-party agent).
Understanding how ISOs are compensated will help merchants receive the best pricing and services. ISO revenue comes from:
I’ve worked in the payments industry for roughly 20 years. Most ISOs and their agents are honest, hard-working experts who want their merchant clients to succeed. Unfortunately, a few are not.
When dealing with ISOs:
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