What Are Independent Sales Organizations? (ISO)

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      Key Takeaways

      • Role of Independent Sales Organizations (ISOs): ISOs are third-party entities that handle payment processing and merchant accounts for businesses, serving as intermediaries between acquiring banks and merchants.
      • ISOs vs. MSPs: ISO (used by Visa) and MSP (Member Service Provider, used by MasterCard) are terms that can be used interchangeably, as they both facilitate payments and provide merchant services.
      • Benefits of Using ISOs: ISOs offer personalized payment solutions, robust security measures comparable to large banks, and excellent customer service.
      • Choosing the Right ISO: When selecting an ISO, it’s important to consider their technological capabilities, industry relationships, service flexibility, compatibility with your business model, and cost structure.

      Choosing the most suitable payment processor for your business is crucial. Since the majority of merchant accounts are being opened by ISOs or MSPs, you may already be familiar with these acronyms.

      Understanding the basis on which ISOs operate and how they can be beneficial for your business can help you in deciding which payment processing solutions make sense for you. From this article, you’ll learn about ISOs and MSPs, their roles in the payments industry, and the advantages of working with a third-party payment processor.

      What Are Independent Sales Organizations?

      card and terminal with contactless of pay

      Starting from the very beginning, Independent Sales Organization is a third-party organization responsible for processing payments and handling merchant accounts for companies. ISOs are alternatives for large banks, providing the same level of service for business owners.

      ISOs facilitate payments and provide ongoing support for their clients, which makes them a quality solution for many businesses that don’t want to directly cooperate with a large banking institution. ISOs sell and lease hardware/software and take a percentage from all merchants’ transactions, which is how these companies make a profit.

      ISOs can offer companies payment processing services as they are partnered with acquiring member banks or payment processors. They don’t perform payment processing themselves, as these organizations don’t actually have the infrastructure to do that.

      Essentially, Independent Sales Organizations take the role of middle-man between acquiring banks and merchants, taking on the responsibilities of connecting merchandisers with banks or other payment processors.

      How’s that working? Large financial institutions, like acquiring banks, enable ISOs to facilitate payments by providing them with backing for all the money that is being processed through the merchants’ accounts. Merchant accounts are actually issued by banks, and all the money that flows through them is also processed by these financial entities. ISOs provide services like setting up accounts and offering tech support directly to merchants.

      How Trustworthy Are ISOs?

      Merchant services provider has to be reliable, secure, and trustworthy, as all of these aspects will inevitably influence their clients’ work and livelihood. Some may consider ISOs an inferior solution compared to institutions like banks that are offering the utmost standards regarding the safety of transactions and the quality of services.

      But that reputation ISOs may have is not meritorious. To become an Independent Sales Organization, a company must meet high safety issues requirements and go through a rigorous vetting process conducted by a member bank.

      This process aims to eliminate organizations that are not equipped to offer sufficient and safe services. Once an organization goes through the vetting process, it becomes a registered ISO.

      Registered ISOs are authorized and sponsored by their member banks. They are safe and legitimate merchant service providers, offering flexible payment services to their clients.

      ISOs and MSPs – Are They The Same?

      Often when we talk about ISOs, the term MSPs is used, either interchangeably or in a similar context. This, of course, is not a coincidence. In fact, both terms describe parties that provide the same type of services. One can ask, then, what is the difference between ISOs and MSPs, if there is any?

      MSP stands for a Member Service Provider, and it’s a term used by MasterCard to describe an entity that is a payment facilitator for MasterCard’s members. ISO is a term used by Visa that refers to a party that offers the same services to its partners and members.

      With that being said, yes, we can consider ISOs and MSPs as the same entities and use these terms interchangeably.

      What Are the Benefits of Using a Third-party Organization For Your Payment Processing?

      When you are preparing to open your merchant account, there are a lot of factors you need to consider. You might be under the impression that choosing an Independent Sales Organization is not worth it since you can work directly with a bank and omit the intermediate payment facilitators.

      But that’s not entirely the truth. Here are some of the reasons why third-party processors present value to merchants.

      Flexible Solutions

      In the payments industry, banks are known for their stability and high-security norms. However, being flexible and offering tailored solutions are not exactly their strongest suit. That’s where Independent Sales Organizations shine.

      For example, ISOs often partner with various acquiring banks, eCommerce platforms, POS system vendors, and other parties, offering a whole range of services and different solutions. It’s easier for ISOs to provide more personalized services for merchants that need this type of flexibility. This, in addition to the lower costs for payment processing, makes them a justifiable alternative for banks.

      Same Level of Security

      It’s also crucial to point out that although an ISO/MSP is a third-party service provider, it doesn’t mean its security measures are lesser than in the case of merchant services facilitated by large financial institutions.

      An Independent Sales Organization has authorization from their acquiring bank, meaning they are obligated to comply with rigorous security measures to be able to operate. When selecting an ISO to manage your merchant account, you’re not compromising on this area.

      Additionally, as we mentioned earlier, your money is not being processed directly by your ISO but by the bank or institution that is partnered with the Independent Sales Organization. This is the reason why partnering with an ISO means you’re receiving the same level of security as if you were working directly with a bank.

      Stellar Customer Service

      Another considerable advantage ISOs offer is the quality of their services. When you’re choosing to partner with a smaller entity, like an ISO, you can expect to receive stellar customer service. Third-party organizations have resources and a considerable level of expertise in providing merchant services to various businesses.

      Unlike larger institutions that provide much broader financial services, ISOs specialize in payment processing intermediation. Since their area of expertise is more contained, they can ensure you receive the assistance you need in a shorter time.

      To summarize these points, there are many benefits to working with ISOs – tailored solutions, a high level of security, more affordable payment processing, and excellent customer service being some of the most substantial.

      How To Choose an ISO To Partner With?

      How to know which Independent Sales Organization is suitable to partner with? What to pay attention to when you’re selecting the entity that will facilitate your payment processing?

      To gain the most from this type of partnership, you should look for a company that offers the following:

      • Solid technology solutions
      • Extensive and strong industry relationships
      • Flexible and versatile services

      ISO Payments That Are Compatible With Your Business Model

      When choosing ISO, make sure the company offers technical support to process your payments. For example, if you’re selling in-store, choose a partner that offers software to facilitate these types of transactions.

      The same goes for online payments. If you’re an e-commerce company, ensure your ISO is equipped with compatible eCommerce platforms, as well as multiple payment getaways, to facilitate credit card processing and other types of payments.

      Pay attention to the quality of these solutions, as they will largely affect the customer experience. Choose payment ISO with sophisticated and versatile software to help you meet your clients’ expectations and improve the workflow in your company.

      Additional Payment Services

      No matter how large your company is, having access to various payment solutions is always an advantage. Choosing an ISO that offers ACH payments, credit card payments, online web payments, integrated voice response, etc., will help you grow in your industry and explore various solutions as you develop.

      With Payment Savvy you can benefit from tailored payment processing services that fit your needs and support your vision of how you want to run your business. Check our Services page to see what we can do for you.

      Transaction Fees and Other Costs

      Merchant service providers charge for their services in various ways. You can expect to issue ISOs payments via transaction fees, registration fees, cancellation fees, and other operational costs. Before selecting an ISO, compare these expenses with different payment processing providers and see which offer matches your goals and budgetary requirements the most.

      Be careful during the evaluation process. If the provider you’re considering offers you free hardware or very low transaction fees, they will likely profit from the hidden fees, etc.

      Final Thoughts

      ISOs are an essential part of the payment ecosystem, offering substantial benefits for business owners and larger financial institutions. Both ISOs and MSPs are third-party organizations offering credit card processing and other merchant services to their clients, providing them with the necessary equipment and support to facilitate transactions.

      The critical thing to remember is that ISOs are not directly responsible for payment processing, as they partner with payment processors and banks that process merchants’ transactions.

      Choosing to partner with an ISO can be very advantageous for your company. Benefit from modern, flexible payment solutions offered by Payment Savvy and take your payment processing to another level. See what we can do for you today.

      Jason Rabago

      Jason Rabago

      With close to two decades of experience in sales and operations, Jason never hesitates to go above and beyond to meet our client’s expectations. He is our payment solution guru and attentively listens to a prospect’s current concerns to create a custom product offering guaranteed to check every want and need off the list. Reducing risk and increasing revenue is the name of Jason’s game and he loves providing solutions that substantially affect a company’s bottom line. Looking for an insight as to how your company can operate in a more streamlined manner? Reach out to Jason either at one his regularly attended conferences or give him a ring to discuss how Payment Savvy can elevate your business’ potential.