What is an ISO in Merchant Services?


What is an ISO?

Every business has unique needs and goals and therefore, needs specific payment processors to meet those requirements. Business owners should invest in efficient and more advanced payment technologies to provoke value to their customers.

Those days are gone when consumers used to make payments in cash. Moreover, the modern-day consumers are constantly searching for more convenient payment methods.

So, you must ensure that your payment processor system offers your buyers flexible modes like credit cards, debit cards, online payments, such as via e-Wallets And UPI. Some advanced and intelligent POS systems also have support for loyalty points or gift cards transactions.

Before getting started, learn about the pros and cons of various payment processing companies and the role of ISOs. in this article we will also give you an insight into how ISO companies are related to merchant services.

What is an Independent Sales Organization (ISO)?

An ISO or Independent Sales Organization refers to a third-party payment processing service provider, who is authorized to manage merchant accounts for various businesses. Many people consider ISOs as not so trustworthy. But the fact is, these organizations offer flexible payment solutions and are quite easy to work with. Of course, they are safe, secure and well-structured, ensuring seamless payment processes for your business.

Independent Sales Organizations have a special relationship with association member banks, large banking institutions who accept payments via various card associations like Mastercard or Visa. An ISO is responsible for handling the day-to-day business activities of a merchant account. ISOs provide support in offering payment technologies and support, setting up an account for their merchants, and helping merchants with their unique payment processing needs.

A typical ISO merchant services provider would offer –

  • Credit card processing

  • Hardware (like terminals, etc.)

  • Software (such as POS systems)

  • Online gateways

  • Analytics programs

  • Mobile apps and readers

How ISOs Work?

To get an understanding of how an ISO works, you can compare the payment ecosystem with a pyramid. While the ISO sits in the middle, at the bottom levels lie the merchants followed by the consumers, who are the primary target for any business. To put it simply, ISOs can be called the official service providers who work on behalf of the acquiring banks and cardmember associations.

ISOs work with merchants as a partner and to derive revenue, they run on the fees taken per transaction and other additional processing charges. These companies will also be the point of contact for the customers of a particular merchant. Buyers can contact them for various issues regarding credit cards or other payment disputes.

Benefits of Working with an ISO

If you are looking for a good merchant services provider, you can go for a reputed ISO. Do some research about different ISOs in the market and the facilities offered by each. Ensure that your ISO is catering to your unique requirements and is delivering tailor-made services suitable for your business model. Once you sound the right ISO company for your merchant account, you can avail the following benefits –

  • An ISO allows each individual financial institution or associations to work at their maximum levels. For example, while your ISO lets the banks focus on their area of expertise, it will utilize all its resources and time to give you the best merchant experience.

  • You may partner directly with your bank, but that would be a costly affair and moreover, you may not get the required flexibility. ISOs, on the other hand, are highly secure (since they are sponsored and authorized by a member bank). Anybody cannot become an ISO as one needs to go through rigorous vetting procedures. This is done to ensure that the ISO applicant is adhering to high standards of security and legitimacy. In fact, ISOs offer more flexibility and are less expensive than individual banks.

  • When everything else fails to provide support, an ISO will work dedicatedly to ensure a seamless merchant experience. ISOs offer support in payment technologies, customer services, and rates.

  • An ideal ISO would provide you with the required hardware devices including mobile terminals. You can even request them to create personalized hardware packages, especially suitable for your business.

  • You can receive customized services specifically designed for your business needs and your customer types.

  • If you engage with an ISO, your merchant account will be underwritten, which means you can negotiate with the fees depending upon the merits of your business. This can save you big, which may not be possible with banks or other third-party processors like Square and PayPal.

  • At times, a merchant may not even qualify for partnering with banks directly. In that case, ISOs will always offer complete support.

  • Some ISOs even provide their merchants with access to additional tools and services that are beneficial for their business.

  • ISOs can also be beneficial for the acquiring banks as they help to bridge the gap between these institutions and the merchants. In other words, ISOs help payment processors and acquiring banks in finding new merchant clients, thus acting as a buffer between them.

  • Reputed Independent Sales Organizations even provide lifetime customer support to merchants and work toward building better relationships with them.

  • Registered ISOs also solve the problem faced by small businesses whom the banks would refuse to partner with. These sales organizations take the risk upon themselves and allow these small players to have access to merchant accounts.

ISOs and Merchant Services. Are they Equivalent?

Merchant accounts refer to those official accounts in which your business revenues get deposited before being sent to your preferred business account. In other words, you cannot really accept credit card payments without having a merchant account.

Both ISOs and MSPs (Merchant Service Providers) have relationships with acquiring banks. Both of them refer to companies that deal with an array of merchant services. The confusion lies in their definitions and usage of terms by different cardmember associations. For example, Visa refers to ISOs, which is the same thing as Mastercard refers to MSPs.

Final Words

So, choose your Independent Sales Organization wisely and make sure they are offering full support in the above-mentioned areas. Also, avoid investing in those companies that make fake promises or levy hidden charges. Your ISO should be transparent with you and provide genuine support and services.

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