ISO stands for independent sales organization – a type of company that plays an extremely important role in the payment processing ecosystem. In essence, ISOs are liaisons between merchants and payment processors who resell services on behalf of one or more partners in exchange for a small piece of the revenue from processed transactions. 

ISOs come in a number of forms relating to how they operate and sell, and different companies can have vastly different product and service offerings. Understandably, a lot of merchants and even some payment professionals don’t have a great understanding of what ISOs are or how they add value to payment processing. With that in mind, the following is a 101-level introduction to independent sales organizations, their operations, and their role in payments. 


What is an ISO?

An ISO is a company that resells merchant services on behalf of its payment processing partners. While an ISO technically only needs one processing partner to operate, generally speaking, ISOs work with half a dozen or more processors in order to maximize the options they can provide to merchants. 

ISOs are important because they represent the bridge between a relatively small number of payment processors around the world and the millions and millions of merchants that need payment services. If a processor had to recruit, manage, and support all of their own merchants, they’d be totally swamped by those tasks and would be unable to perform their primary job – providing payments infrastructure. To solve the imbalance, ISOs operate in the middle, between the two extremes. Each payment processor can work with a handful of ISOs and delegate most of the customer-facing tasks to them.  

The most important tasks an ISO handles on behalf of its processors are merchant recruitment, onboarding, and ongoing support. Recruitment involves the sales process itself – marketing, advertising, making connections, and ultimately closing potential new merchants. Onboarding involves uploading a merchant’s application and information to the processor for approval (and potentially some underwriting depending on the ISO.) Ongoing support involves ensuring merchants are happy, operating efficiently, and, most importantly, processing transactions to generate residuals. 

Residuals are the compensation ISOs get in exchange for the value they provide to the payments ecosystem. Every time a card payment is made, the payment processor charges a small transaction fee – generally under 3% of the transaction value plus a small fixed fee of a dime or two. ISOs earn an even smaller slice of the transaction fee – normally well under 1% – known as a residual. But, with hundreds or potentially thousands of merchants each processing thousands of transactions, even the smallest residuals add up fast, making operating an ISO a potentially lucrative opportunity. 


Type of ISOs

While all ISOs perform the same duties on a high level, there are some very important distinctions between various types of ISO, namely registered and unregistered ISOs, and wholesale and retail ISOs. Each operates in a slightly different way and serves a specific niche within the payments industry. 

Registered ISOs vs. Unregistered ISOs

Registered and unregistered ISOs work together to serve the payments space, but there are some key differences in what they do and the barriers to entry to operation. Registered ISOs go through a long, complex, expensive registration process with the credit card companies. The due diligence, risk assessment, and fees a potential registered ISO is subject to through that process earn them a few important rights, including the right to operate under their own branding and to hire a team to work under them – an important detail for ISOs looking to maximize the size of their portfolio. 

An unregistered ISO is actually another name for an independent agent – an individual person that does not go through the same registration process, and, while avoiding the costs and headache, can only work on their own as a contractor. Most independent agents work on behalf of a registered ISO performing sales, recruiting, and support duties in exchange for their own share of the residuals. While unregistered ISOs can’t hire employees to work for them and thus are limited in the scope of their portfolios, their residuals portfolios can still build up significantly over time. 

Retail vs. Wholesale ISOs

Among registered ISOs, companies can operate either as retail resellers, or wholesale resellers. Both sell the same services and provide ongoing support, but wholesale ISOs take on the extra duty of helping with underwriting – the process of assessing the risk a new merchant represents and whether they’re worth doing business with. By taking on underwriting duties, wholesale ISOs also take on some additional risk and liability. In turn, they receive larger residuals than their retail counterparts. 


End-to-End Merchant Services

Merchant services ISOs can be as varied as the payment processors they work with, but there are some specific products and services that merchants can generally expect to have access to, and many ISOs are continuously looking for new ways to grow their offerings. The wider a set of products and services an ISO offers, the more of the payments process their merchants can access through a single vendor, making life easier for the merchant and the relationship more lucrative for the ISO. 

Payment Processing

Payment processing is the core service offered by all ISOs. With ISO credit card processing, the actual product being sold is the special merchant account that businesses need to accept card payments. An ISO will help a new merchant compile their application and act as the liaison between the merchant and the bank or payment processor, doing what they can to ensure the merchant can be accepted and begin processing transactions. 

Payment Hardware

Brick-and-mortar merchants need payment terminals and, in some cases, point-of-sale systems to do business. Many ISOs will offer a variety of hardware to their merchants, in some cases for free through the processor and in some cases as paid add-ons.

Payment Gateway Software

Payment gateways are the systems at the heart of ecommerce transactions, taking in a customer’s credit card data, encrypting it, and acting as the hub through which communication with the issuing and acquiring banks take place. Some ISOs partner with third-party gateway companies to resell this important software, with compensation working in a similar way to their payment processing residuals. 

Value-Added Services

Some merchant services providers offer a variety of value-added services that merchants can select in exchange for slightly higher fees, either on a monthly or transaction-by-transaction basis. Common services include advanced fraud protection, third-party data security, automated recurring billing, shorter payout time frames, and more. 


Sales organizations of all types and all service offerings are an incredibly important cog in the payments machine. Without them it would be much more difficult for merchants to find payment processing services, and processors would grind to a halt under the weight of tasks outside their areas of expertise. However, not all are created equal, and merchants looking for new payment processing services should evaluate their ISO carefully on a number of factors, including pricing, services offered, quality of support, and more. 

Another important evaluation factor is what kind of technology an ISO can offer. Many top ISOs use payments customer resource management systems – software tools designed specifically to improve and streamline all areas of sales and customer relationships. Some CRMs offer the ability to pass access to certain tools onto their merchants. For instance, IRIS CRM – the payments industry’s top customer resource management system – allows ISOs to provide their merchants with a private labeled support portal, advanced reporting tools, and more. 


To find out more about how a top payments CRM can help your ISO gain a competitive advantage and provide your merchants with the support, tools, and data they need to succeed, schedule a free guided demonstration of IRIS CRM today.