According to McKinsey’s 2020 Global Payments Report, cash use is way down in the wake of COVID-19, and consumer demand for electronic payment options is driving a huge surge in demand for merchant services among SMEs. On the front lines of that explosion in demand are the independent sales organizations – or ISOs – that often act as the first, or only point of contact most merchants will have when seeking out payment services. That all represents a huge opportunity in merchant acquisition in the years ahead, but what exactly is an ISO, what do they do, and how can hungry entrepreneurs looking to enter the game get a piece of the action?

 

What is an ISO?

An independent sales organization is a company (or independent agent) that sells merchant services on behalf of a larger ISO or one of the big payment processors like TSYS, Fiserv, or Worldpay. These companies provide merchant accounts to businesses – a process that is more involved, and more selective than signing up for third-party systems like PayPal. Rather than do all the work themselves, those payment processors partner with ISOs who take on the work of finding and recruiting new merchants, vetting them, passing them on for approval, and then providing most of the ongoing customer service. That creates a hierarchy in which merchants, at the bottom, interact with ISOs, who then interact with a much smaller number of payment processors, who in turn deal directly with the card-issuing and acquiring banks. 

 

How do they make money?

The primary way ISOs make money is by generating residuals on the transactions processed by each merchant. When a merchant puts through a card transaction, a small fraction of the transaction amount is paid to the processor in exchange for their role in facilitating the sale. The ISO that signed the merchant is also entitled to a small slice of that commission. Further down the line, if an independent agent was involved in the merchant recruiting process, that agent is also entitled to part of the commission – known in the industry as a split. While small, those commissions are owned for the life of the merchant’s relationship with the processor, and residuals can really build up over time!

 

Are all ISOs the same?

Not all ISOs operate in the same way. There are two distinct types of independent sales organizations: those that are registered and those that are not. Registered ISOs are vetted and approved by the card companies and partnered directly with a payment processor. As a result of those partnerships and the additional scrutiny they require, registered ISOs gain the right to subcontract their merchant recruiting to their own independent agents. Unregistered ISOs, on the other hand, can’t contract anyone out below them, meaning unregistered ISOs effectively are independent agents. 

 

How do I get into the business?

A lot goes into becoming a registered ISO, and the barriers to entry can be significant. Hopeful registered ISOs have to form a legal corporation, find and sign on with a major processing partner, and, most importantly, go through the long, arduous, and fairly expensive process of being vetted and approved by Visa and Mastercard. 

Becoming an unregistered ISO is a much easier task, making it a more attractive option for many would-be entrants, especially at the outset of their careers. Becoming an independent agent working under a larger ISO and earning a split of the commission on each merchant’s sales is really just a matter of finding a registered ISO looking for new help with their acquisition efforts. 

 

What tools do ISOs and agents need to succeed?

Strong sales skills are always the primary key to success, especially for independent agents out on the frontlines signing up merchants. But there are certain tools that act as major force multipliers and turn good agents into great ones. Customer resource management software is one of those tools because it’s designed to augment and enhance the entire sales process and all customer-facing activities. A good CRM makes prospecting faster and more efficient, shrinks the length of the sales process, makes closing deals frictionless, and maintaining strong long-term relationships easy. IRIS CRM, the payments industry’s leading CRM, is also designed specifically to tackle the unique challenges faced by ISOs, including merchant onboarding, residual calculations, and even underwriting. 

To find out more about how IRIS CRM can help you land more new merchants, serve your existing merchants better, and maximize the value of your residuals portfolio, get in touch with us today to schedule your free guided demonstration of the platform!