Independent sales organizations (ISOs) are companies that manage the sales and marketing of credit card processing products and services. Unlike Payment Facilitators, which provide one shared merchant account to all of their customers, ISOs underwrite each business they work with to provide them with an individual merchant account. ISOs are synonymous with Merchant Service Providers.
There are two additional types of ISOs: registered and super ISOs. Registered ISOs are allowed to use their own logos and marks on merchant agreements and are required to note their acquiring banks on their websites. In contrast, super ISOs have a direct agreement with a member acquiring bank and may have sub-ISOs nested beneath them.
Because ISOs individually underwrite each of their merchants, they’re able to provide various rate plans. This setup is beneficial for larger businesses that process high credit card volume because the alternatives provided by Payment Facilitators are not cost-effective. Payment Facilitators typically offer Flat-rate pricing. While simple to understand, this plan charges one high rate for every transaction to cover all price points. This plan prevents businesses from paying the true cost of each transaction and saving money on low- and medium-risk transactions.
Additionally, because their financial risk is assessed up front, these businesses don’t face the risk of held funds — the practice of freezing a high-ticket transaction in the event that the transaction is fraudulent. Businesses that experience held funds suffer from delayed cash flow, which can complicate bookkeeping and make sustaining and growing their businesses challenging.
The process of being underwritten typically requires an application, a voided check, current merchant statements or proof of legitimacy, processing volume estimates, and financial history information.
While there’s more work involved, the perks of partnering with an ISO are evident in the lower processing costs and faster access to funds. Additionally, ISOs typically offer a more boutique customer service experience, ensuring that your needs are met and your questions are answered in a timely and easy manner.
Brand-new businesses that lack an established financial history may not qualify for ISO credit card processing. In these cases, opting for a Payment Facilitator is the best choice. Setup is fast and the higher credit card fees are less of a concern for low-processing companies.
Once you have an established business location, client base and strong financial history, you can start looking for ways to save money. Switching to ISO credit card processing allows for cost-effective Tiered or Interchange-plus plans and heightened support — benefits that matter most when you’re established and looking to grow.
Because the best fit for your business will change as you grow, we recommend avoiding contracts, especially ones that auto-renew. It can be challenging to cancel within the allowed window of time, which can make it harder to justify making the switch to a better-fit provider.
If you find yourself in this position, there’s still hope. Some providers will match or beat your existing rates, allowing for a smooth transition from one provider to another. You can simply use the ISO’s credit card processing services alongside your current provider to test their system and break even over time.
Where is your business in its development? We’d love to provide answers to any questions you have.