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An ISO can help companies elevate the customer experience they’re providing by offering stellar payment processing services. A good ISO offers extensive support to its clients, both in regard to technical solutions and day-to-day merchant services. Many businesses, ranging in size and industries they’re operating in, benefit significantly from ISOs partnerships.
But not every company can become an ISO. Entities that want to operate as registered Independent Sales Organizations must jump through a lot of hoops to achieve that. For this reason, ISOs are considered reliable and effective support in managing merchant accounts and facilitating payments through various services.
These organizations operate by partnering with other entities, like acquiring banks and financial platforms, that provide the necessary infrastructure for payment processing to take place.
But what exactly are ISOs, and how to become an ISO partner? We will answer these questions in this article. If you want to learn more about this topic, we invite you to stay and keep on reading.
What Is an Independent Sales Organization (ISO)?
First and foremost, we should clarify what role ISOs play in the financial industry. We do have an article on our blog titled What Are Independent Sales Organizations? (ISO) that goes into more detail about this exact topic, so if you wish to access more information on ISOs, we recommend checking it out.
In this article, we will briefly explain what ISOs are and what type of services they provide for their clients.
Independent Sales Organization is an entity that is a third-party merchant service provider. ISOs act as middle-man between acquiring member banks (and other payment processing companies) and merchants, offering their clients access to payment platforms, accounting software, and various payment processing services.
Why is there a need for ISOs in the modern financial ecosystem? In a traditional setting, large banks (for example, Bank of America) that are members of credit card associations (Visa and Mastercard) handled all the payment processing services for merchants. Companies were entering into direct partnerships with banks, which has drawbacks to this day.
Large financial institutions are limited in providing flexible payment solutions and a “hands-on” type of customer service to merchants, which is why many companies prefer to handle their payment processing through ISOs.
Independent Sales Organizations make payment processing services more accessible and cheaper for businesses. They offer better customer service, focusing on the needs and requirements of their clients, with whom they build more personal relationships.
But the important thing to keep in mind is that ISOs do not process payments independently. These organizations have no infrastructure to operate like that. They intermediate between merchants and large financial institutions. ISOs don’t have access to the money that’s flowing through merchant accounts.
ISOs represent banks and other payment processors and resell their services to merchants. They make a profit in transaction fees and offer versatile payment services and ongoing support in the exchange.
What Is the Role of ISO Partners?
As mentioned above, there is actually considerable value in ISOs and the type of services they provide. They are the first point of contact for business owners when it comes to the management of their merchant accounts.
ISOs represent their member banks and other financial services providers by entering into partnerships with them. Based on these partnerships, they offer payment processing services to businesses and make their profit through revenue sharing.
ISO partners (banks and other payment processors) are responsible for handling the actual payment processing.
What type of services do ISOs offer to their clients? In the simplest terms, ISOs offer support and infrastructure for businesses to accept payments from their clients. In more detail, ISOs are responsible for:
- conducting application processes for merchants
- setting up merchants’ accounts
- providing hardware and software to facilitate various types of payments
- offering access to different payments platform
- setting up the terminals
- offering stellar customer service
- providing assistance in resolving disputes and chargebacks
All this to say, ISOs are equipped and ready to handle day-to-day merchant services. Due to the fact that these entities are limited in the range of services they offer, ISOs have the capacity and resources to really focus on your business’s needs.
For this reason, many companies prefer to partner with an ISO than to handle their merchant services directly with banks and other larger payment processors.
How To Become an ISO Partner?
To become an ISO partner, you must meet certain requirements and undergo a rigorous vetting process. Once you accomplish that, you will be a registered ISO. Operating in the US as an unregistered ISO is possible, but comes with limitations.
For example, unregistered ISOs can offer merchant services to their clients, but they cannot hire sub-agents to work with them.
What does the process of becoming a registered ISO look like?
The Preparation Stage
The initial stage of the vetting process is focused on ensuring that you, as a future ISO partner, have a strong enough standing to provide merchant services in a partnership with a bank and other ISO partners.
You must present yourself as a reliable partner, which means you must file the necessary documentation (business licenses, taxes, incorporation papers, etc.). You should have a good credit history, as well as all the required permissions and permits to conduct business in your area.
A bank or other entity you wish to partner with will likely want to access your financial records. You may be obligated to supply the financial records of your partners as well.
Additionally, you will be asked to file a detailed business plan.
Finding Sponsors to Create a Partnership With
Once you have all your documentation ready, it’s time to search for partners you’ll be able to enter a partnership with. These will be the entities whose products you’ll be reselling to your clients.
As an ISO, you can partner with a large bank or bigger ISO. In most cases, it’s worth applying for partnerships with multiple parties, as this will allow you to create a more robust offer for your customers.
Find the potential partners you would like to represent and follow their instructions for the application process.
Registering with Card Associations
The last and potentially the most demanding stage of becoming a registered ISO is to register with card associations – Visa and Mastercard. This can be a lengthy process and one that often requires legal assistance.
Once you get approved, the last step is to pay a fee of $10,000. This is in the first year of your operation. Each year you’ll be required to pay a fee of $5000 for every card network you’re operating.
ISO Partnership – How To Choose ISO Partners?
A successful merchant partnership can offer your customers a lot of freedom in how they conduct their business. But to ensure that you’re competitive in this regard, there are some crucial things to consider when you choose your partners.
As an ISO, you should pay attention to the following:
- Safety protocols. Choose a partner that is PCI DSS compliant.
- Innovative solutions that support your merchants’ growth. Easy billing, solid reporting features, various payment solutions like ACH payments, chargeback prevention, or multiple payments getaways are all a welcomed sight.
- 24/7 customer support. If you cooperate with partners that provide customer support only during business hours, you’re essentially deeming yourself unreliable. Your clients will want to resolve any financial issues as soon as possible, which means 24/7 support is a considerable advantage.
- Competitive rates. You might be enticed to enter a partnership with an entity that offers higher rates because that results in a more significant profit for you as an ISO. But that is not the most optimal scenario since most of your clients will be looking for ISOs with competitive rates. That is why it’s better for you to partner with an organization or platform that offers a lower margin, so you can keep your services affordable.
- Reviews of other clients. When you’re looking for sponsors to build a lasting and fruitful professional relationship with, you’re essentially conducting your own vetting process. As an ISO, you must ensure you can rely on your ISO partners. For this reason, it’s helpful to familiarize yourself with ratings and customer testimonials regarding the quality of services these entities provide.
Merchant Partnership – Final Words
Merchant partnerships are beneficial for merchants, ISOs, and large institutions, and payment processors. To become a registered ISO partner, your organization has to meet many requirements and go through a lengthy vetting process. If you want to become an ISO, you need to partner with organizations that offer solid payment services and customer support, so you can be a reliable partner for merchants that work with you.
In the end, the process is worth it. As a registered ISO, you can offer robust payment services to clients in various industries, making their merchant experience easier and more affordable. Check our blog for more resources on this topic, and contact us if you want to learn more about the benefits of merchant partnerships.