Payment processing is big business, and while independent sales organizations (ISOs)  only earn a fraction of a percent on each of their merchants’ transactions, those residuals add up quickly into a lucrative monthly revenue source. But, if you’re looking at entering the industry to take advantage of the opportunity electronic payments represent, you may be wondering, how do I become an ISO in the first place? The answer to that question isn’t necessarily complicated, but it does depend greatly on how you want to engage with merchants, payment processors, and the market as a whole. The following is a crash course in what it takes to become an ISO startup, what you’ll need to consider before getting started, and how to maximize success once you’re up and running. 

 

Decide if You Want to be a Registered or Unregistered ISO

One big decision you’ll need to make right off the bat is whether to operate as a registered or unregistered ISO. As an unregistered ISO, your path to getting started is much easier. However, you’ll also be subject to some significant restrictions. For instance, you won’t be able to use your own branding and, most importantly, you’ll be limited to operating as a single independent agent, unable to hire any employees to work below you. The good news is that to become an unregistered ISO, all you’ll need to do is find a registered ISO willing to hire you on as an agent. You can then begin recruiting merchants and generating residuals essentially immediately, and you’ll own your share of those residuals for the lifetime of the merchant’s processing, just like a registered ISO. 

If your goal is just to get into the industry and start building a residuals portfolio for yourself as quickly as possible, the unregistered ISO route is the way to go. However, if your goal is to build a larger business that you can one day step away from, you’ll need to register. The process of registering with the major card companies is not a simple or easy one, and you’ll need to be prepared to spend a lot of time waiting and a lot of money on fees. It’s also worth noting that going from zero to registered is exceptionally difficult, and most successful registration applicants have a history in the industry. 

In any case, once you’re ready to go with the registration process, you’ll need to go through the following steps, at a minimum, to get set up with the processing services you’ll be reselling and get the all-important OK from the major card companies as an ISO startup. 

Get Your Business History and Personal Financials in Order

The hardest and most time-consuming part of the registration process is due diligence. As an ISO startup, your business represents a potential risk to every other party involved in payment processing, and as a result, both your processing partners and the major card issuers are going to spend a lot of time ensuring you’re someone they really want to be doing business with. To ensure they come to the right conclusion, you’ll need to have as much information available as possible. At a minimum, you’ll need all of your legal business documentation, your personal financial history, any existing business history, and a solid business plan. Don’t approach processors until you’ve got your documentation in order, otherwise you’ll slow the process down unnecessarily. 

Find a Sponsoring Payment Processor for your ISO Startup

As an ISO, your primary job is to resell payment processing services, so one of the most important parts of registration is finding a payment processor or sponsoring bank to take you on as their representative. Ideally, you’ll eventually have a number of processing partners, as the more services you can offer to merchants, the better. However, to start, you’ll only need a single sponsor. It may be tempting as a startup just to find anyone willing to take you, but that would be a mistake. Your processing partner is going to have a big impact on the success of your ISO startup, especially early on. So, it’s important to find a sponsor with a wide range of payment processing services, as many value-added services as possible, competitive rates, and a rock-solid reputation. That may make the process more difficult, but when it comes to applying with the card companies, you’ll be glad to have a reputable processor behind you as you grow your ISO startup. 

Apply with the Major Card Companies

Once you have a sponsoring processor backing you, you can get started with the registration process itself. The good news is that your sponsor will initiate the process on your behalf and may offer you assistance or guidance if you need it. The bad news is that the process is still going to take a while and is likely to be frustrating.

Once the registration process has been initiated, you’ll have to submit all the documentation you have for your ISO startup to both Visa and Mastercard at a minimum. You could theoretically go with only one or the other, but that would severely limit your options upon commencing operations, making it impractical. 

With your documentation in, each company will begin an extensive background check, performing the necessary due diligence to verify that you’re a trustworthy, reputable person or group of people likely to make them enough money to take on the risk of a new partner. It’ll likely take a few months at least before a decision is made and even longer if either company has to request more documentation or there are any problems with the application. In any case, the registration process is a waiting game, and the best thing you can do to minimize it is to work with your sponsor to ensure your application is air-tight. 

Pay Your ISO Startup Fees

Prior to receiving your official registration, you’ll need to pay your fees. As a newly registered ISO, you’ll be on the hook for $10,000 to each card company you’re applying with. So, with Visa and Mastercard as the practical minimums, you’ll be looking at a $20,000 outlay upfront just to get started. From then on, each company will require you to pay $5,000 per year to maintain your registered status. While registration isn’t cheap, and will eat up a big chunk of your profitability for the first year or two, it’s important to remember that what you’re paying for is the ability to grow your revenues far faster than any unregistered ISO can, and within a few years, you likely won’t think twice about the fees. 

 

Get Your Technology in Order

Once you’ve paid your fees and your registration is finally approved, you’ll be ready to go to work growing your ISO startup. Unfortunately, you’ll be entering an extremely competitive industry, and while the opportunity to build a large residuals portfolio exists, it’s going to take some serious work. Your early success will depend largely on finding ways to generate a competitive advantage over more established players as quickly as possible, and the best way to do that is to leverage technology better than they do. That’s equally true for brand new unregistered ISOs, who will need to find a way to stand out among the crowd of other independent agents. 

Unquestionably the best technology available to any ISO startup is customer resource management (CRM) software. CRM platforms specifically designed for the payments industry offer a variety of tools to make recruiting, managing, and serving new merchants easier. IRIS CRM, the industry’s top payments CRM, includes advanced lead management tools, an automated onboarding tool called TurboApp, automatic residuals calculations, advanced reporting, a complete communications suite including a built-in power dialer, and much more. 

Keep your eye on the IRIS CRM blog for part 2 of our ISO Startup Guide where we will share tips for growing your ISO after inception with a focus on ISO CRMs and how technology can supercharge your business development and growth. 

To find out more about how IRIS CRM can help your new ISO establish an immediate competitive advantage and maximize the growth of your residuals right out of the gate, schedule a free guided demonstration of the platform today.