What Is an ISO? Everything You Should Know about Independent Sales Organizations

by Stax

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.

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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 are more flexible compared to 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.

Access to a higher level of support

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.

What to Consider in 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. Supported Payment Types and Methods

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.

Interested in integrating payments into your own software? Speak to our Stax Connect team to learn how partnering with Stax can help you leverage the power of payments for your SaaS platform.