ISO for Merchant Services & Payment Processing 101

ISO merchant services are just one of the many options businesses have in the world of payment technology. Because there are so many ways to accept credit cards, it’s important to understand what each type of payment processor does and which works best for the unique characteristics of your business.

ISO in payment processing stands for “independent sales organisation”. It is one type of payment processor that can work for you. Because a good payment processor will meet the needs of your business as it grows, understanding how ISOs and other types of merchant service providers can help you is an important first step.

What Is An ISO?

An ISO (independent sales organisation) is a third-party payment processing company that handles merchant accounts for different businesses. Through their relationships with acquiring banks, ISOs can provide merchant services to their customers.

An ISO offers businesses an alternative to working with large banking institutions directly. While some businesses may prefer large banks, many other businesses feel that working with an ISO is easier and more flexible.

How ISOs Are Registered

Acquiring the status of registered ISO requires going through an extensive and thorough vetting process by a member bank. This ensures that the organisation or individual who wishes to become an ISO can provide the necessary legitimacy and security, and can reach the strict standards required of an ISO. When the ISO completes this process, the member bank then authorises and sponsors them and they can begin operations.

Other Important Terminology to Understand

ISOs work with other organisations within the world of payment processing. To understand the role of an ISO and how one could work for your business, you must understand the other players involved in credit card processing:

Credit Card Associations

Visa and Mastercard are examples of credit card associations. These companies are responsible for setting interchange fees, maintaining and widening their card networks, and arbitrating disputes between card-issuing and acquiring banks.

Association Member Banks

There are more than 160 Euro Banking Association (EBA) members including HSBC and Banco Santander. These banks accept credit card transactions from Visa, Mastercard, and other card associations.

Independent Sales Organisations

ISOs have a close relationship with association member banks. The banks provide backing for the money that ISOs transact. The ISO manages the everyday activities of a merchant account like setting up the account, providing the relevant technology, and maintaining operations.

ISO vs MSP

An MSP—or merchant service provider—is the same thing as an ISO. The terms can be used interchangeably. Visa tends to use the term ISO whereas Mastercard refers to the same concept as an MSP.

Benefits of Working With an ISO Payment Processor

Business owners can take advantage of a variety of benefits from working with an ISO for payment processing:

• Customer Service
  ISOs can offer more personalised customer service than large banks or card processors. Getting in touch with large banks can be a long-winded process whereas ISOs offer accessibility and the ability to address your concerns and problems as they arise.
• Flexibility
  Because ISOs provide personalised services, the solutions they offer are typically tailored to your business’s needs. ISOs typically offer various equipment options, payment processing solutions, and pricing structures.
• Assistance for High-Risk Businesses
  Traditional banks may be wary of taking on higher-risk businesses. ISOs may be able to step in and help this type of business process payments.
• Value-Added Services
  As well as providing payment processing functions, many ISOs also offer analytics and fraud prevention services, among others.

Things to Look for in an ISO

If your business is searching for an approved payment processor to help it grow, the following are important features to look for:

1. Personalised Customer Service

ISOs with personalised customer service will become familiar with your business and provide timely help if any issues arise with your account. Often, the personal relationships ISOs forge with their clients means they’re able to address problems very quickly and efficiently.

2. Help with Onboarding

Acquiring banks often enforce an extremely rigorous onboarding process that leaves many legitimate businesses out in the cold. Look for an ISO that works hard to onboard genuine businesses and assists with things like payment gateway integration and setup.

3. Cutting-Edge Payment Technology

Traditional banks can be slow on the uptake when it comes to the most modern innovations in payment processing. In this sense, ISOs have a great advantage over big banks as they are willing and able to invest in the most cutting-edge technology for their operations.

Look for an ISO that provides:

• A global payment gateway that allows you to track your data from any device
• A wide range of payment methods
• High acceptance rates for international cards
• Integrations with your e-commerce, CRM, and accounting software for significant time savings
• Payment collection tools that cut down on the time spent following up on due payments
• Customer payment portals or e-mail payment links to speed up the process of getting paid

4. Individual Underwriting

Many aggregators like PayPal use a single merchant account for all of their merchants, meaning that every customer pays the same rate and transaction fees to process credit cards. This doesn’t work well for some businesses that may need adjusted variables taking into account the industry they’re in, their processing volume, and the level of risk associated with their business (i.e. reputable businesses can end up covering the cost of higher-risk businesses that pay the same rates as they do).

For the most personalised rates, look for an ISO that issues separate merchant accounts to each business. This will give you the freedom to negotiate the best rate based on your business’s characteristics.

5. Flexible Pricing

ISOs usually offer different pricing structures so that their customers can choose the plan that best suits their business. A small business or startup may find an ISO much more accessible than a large bank or payment processor that charges a high monthly subscription fee and/or hefty early termination fees.

Value, Flexibility, and Personalisation

ISOs or MSPs can be an excellent option for businesses that require ongoing payment processing services. The payments industry is changing and newer merchant services providers are often better equipped to adapt to these changes than traditional institutions.

The best third-party payment processor or ISO will offer your business a tailored service that meets your needs and ensures any issues are resolved promptly. It will also provide ongoing support and scale with you as you grow.