As a business owner, you have a lot of options when it comes to payment technology. There are a number of different ways you could accept credit cards, and it pays to understand which type of provider is best for your business.
Your small business has unique needs, so it is important that your payment processor can meet those needs and be a true partner as your business grows. Understanding the different types of merchant services providers is the first step to making the best choice.
What Exactly Is an Independent Sales Organization?
Simply speaking, an ISO—or Independent Sales Organization—is a third-party payment processing company that is authorized to handle merchant accounts for businesses. ISOs have relationships with acquiring member banks, and this allows them to provide merchant services to their customers.
These types of organizations sometimes get a bad reputation, and in some cases, business owners feel like it is better to go with a large banking institution for their payment processing. This is not always the better option, as ISOs are typically more flexible and easier to work with than large banks, and are just as structured, safe, and secure.
In order to really understand what an independent sales organization is, we must first define some terms.
Credit Card Associations are major brands like Visa or Mastercard. They are governing bodies with responsibilities such as setting interchange fees, arbitrating between issuing and acquiring banks, and maintaining and improving their card networks.
We also have association member banks. These are large banking institutions like Bank of America or Wells Fargo that accept transactions from Visa, Mastercard, and other card associations.
Independent Sales Organizations have special relationships with these association member banks. The banks provide backing for the billions of dollars that the ISO’s merchants transact, while the ISO handles the day-to-day activities of a merchant account—setting up the account, providing the payment tech
Not just anyone can become an ISO.
In order to become one, an individual or organization goes through a rigorous vetting process by the member bank to ensure security, legitimacy, and a number of other strict standards. Once that process is complete, the ISO is considered a “registered ISO” and will then be authorized and sponsored by the member bank.
ISOs vs MSPs: What’s the Difference?
ISOs are often mentioned in the same breath as MSPs (Member Service Providers), and for good reason: they’re very similar entities. In fact, some may use ISO/MSP interchangeably.
The only real difference between the two is that Visa uses the term ISO to refer to their approved merchant account providers, while Mastercard prefers to use the term MSP. But for all intents and purposes, ISOs and MSPs are the same things.
Why Should You Work with an ISO or a Third-Party Payment Processor?
At this stage, you may be wondering why you should consider working with an ISO. Wouldn’t it be more productive to simply go directly to the bank and cut out the middle man? The answer: not quite.
Here’s why.
ISOs Offer Greater Flexibility than Banks.
While some businesses prefer to partner with their bank for payment processing instead of a third-party organization like an ISO, banks are more expensive and less flexible than third-party processors, and no more secure.
What’s more, ISOs can partner with different acquiring banks and other providers in the payments industry—including POS system vendors, hardware specialists, eCommerce platforms, and other financial institutions.
This allows them to create tailored offerings based on your needs.
The benefit of an ISO is that it allows each separate institution to perform at maximum levels, as each entity is focused on its area of expertise. While banks are able to focus on their unique and vast set of responsibilities,
your ISO is able to dedicate the time and resources necessary to deliver the best merchant experience. This allows them to offer true value in places like technologies, rates, and customer support, where banks are unable to.
What’s more, ISOs are in an excellent position to leverage their existing relationships to give clients (i.e., businesses like you) access to better rates and packages.
Related Post: Everything You Need to Know About Credit Card Processing
Higher Support Availability with ISOs.
Big banks aren’t known for providing superb customer service. Because of their scale, it’s often difficult to get personalized support from an actual human being. Independent Sales Organizations typically work at a smaller scale and are thus more accessible to merchants.
You’re able to build stronger relationships with ISOs and can count on them for reliable support.
The bottom line: when looking into a merchant services provider for your business, consider an ISO. Do your research, and make sure you keep all of the unique needs of your business in mind as you explore your options.
Considerations for Assessing an Independent Sales Organization
Not all ISOs are created equal. To unlock the benefits mentioned above, it’s important to partner with an organization that has:
- Strong industry relationships
- Robust technology capabilities
- Dedicated team members
- Your business’ best interests at heart
With that in mind, here are the factors you should consider when choosing who to work with. If you’re currently in discussions with an ISO agent, be sure to bring up the following considerations:
1. Hardware and Software
Ensure that the ISO offers solutions that play nicely with the tools and platforms you’re using in your business. For example, if you’re selling in-store, then your ISO should offer you a point of sale software and hardware that allows you to take payments with ease.
If you’re selling online, then your provider should connect with the right eCommerce platforms and payment gateways, so you can take online payments.
2. Payment Types and Methods Supported
While being able to facilitate credit card payments are table stakes, your business may benefit from additional payment services. Capabilities like ACH transfers, invoicing, recurring billing, etc., can all come in handy, so it’s best to work with an ISO that has a wide breadth of payment offerings.
3. Pricing and Fees
There are a range of costs associated with working with ISO’s. These can include things like transaction fees, registration fees, admin costs, markups, etc. Make sure you outline these costs when shopping around for your ISO, then compare them with other providers. This will enable you to figure out the right vendor to choose.
Stax is an ISO and proud to deliver the best payment technology solutions to drive success for every business type at scale. From flat subscription-style pricing to unmatched customer support, learn more about Stax by giving us a call at 855-550-3288. Stax does not currently take on other ISOs as partners.
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Quick FAQs about an ISO
Q: What is an ISO in payment processing?
An ISO, or Independent Sales Organization, is a third-party company authorized to handle merchant accounts on behalf of businesses. These organizations work with acquiring banks to provide merchant services, allowing businesses to accept credit card payments and manage transactions efficiently.
Q: How do ISOs differ from traditional banks in payment processing?
ISOs offer greater flexibility and often more personalized service compared to traditional banks. Unlike banks, ISOs can partner with various acquiring banks and other providers, allowing them to offer tailored solutions that meet unique business needs. While banks focus on a broad range of financial services, ISOs specialize in payment processing, ensuring businesses receive focused support and competitive rates.
Q: What are the benefits of working with an ISO for payment processing?
Working with an ISO provides several benefits, including greater flexibility, access to a variety of payment solutions, and typically better customer service than large banks. ISOs can offer competitive rates and packages by leveraging their relationships with multiple banks and financial institutions. They also provide dedicated support, making it easier for businesses to manage their payment processing needs.
Q: Are ISOs and MSPs the same in the context of payment processing?
ISOs and MSPs (Member Service Providers) are essentially the same, with the primary distinction being their terminology usage by different card associations. Visa refers to these entities as ISOs, while Mastercard uses the term MSP. Both serve as intermediaries between merchants and payment processors, facilitating credit card payments.
Q: How should a business choose the right ISO for their needs?
When choosing an ISO, businesses should consider factors such as the range of payment methods supported, pricing and fees, technology capabilities, and the quality of customer support. It’s crucial to partner with an ISO that aligns with your business needs and offers solutions that integrate seamlessly with your existing systems.
Q: Why might a business prefer an ISO over a direct bank relationship for payment processing?
Businesses might prefer an ISO over a direct bank relationship due to the flexibility, personalized service, and competitive pricing that ISOs can offer. ISOs often have the ability to tailor services to specific business needs, providing more targeted solutions than traditional banks.
Q: What role do ISOs play in the payment processing ecosystem?
ISOs act as intermediaries that facilitate the relationship between merchants and acquiring banks. They manage merchant accounts, handle transaction processing, and provide necessary technology and support to ensure smooth payment operations. Their role is crucial in enabling businesses to accept and process credit card payments efficiently.
Q: What should businesses be aware of when evaluating ISO costs?
When evaluating ISO costs, businesses should be aware of various fees, including transaction fees, registration fees, and potential markups. It’s important to compare these costs across different ISOs to ensure you’re getting the best value for your payment processing needs. Additionally, understanding the pricing structure—whether it’s flat-rate, tiered, or interchange-plus—can help in making an informed decision.
