On the surface, the independent sales organization business model is simple: ISOs go out and find merchants on behalf of payment processors, then recruit and serve those merchants in exchange for a small slice of the transaction fees generated on each sale. The reality is that not all ISOs are alike, and the differences between different types of ISOs and how they work aren’t always easy to understand. The difference between retail and wholesale ISOs is one example of a slightly confusing distinction within the industry, especially for new entrants. So, what is the difference between retail and wholesale ISOs, and what makes going wholesale such an important goal for so many ISOs? The following is a quick crash course on the differences – and similarities – between the two types of ISOs, and the costs, risks, and rewards involved with each. 



On the retail side, ISOs have the option to register or operate unregistered. Unregistered ISOs are essentially independent agents working for a larger, registered ISO. The unregistered ISO model is attractive for many people in the industry because it minimizes the barriers to entry when starting and simplifies business. Unfortunately, unregistered agents must work independently and can’t hire anyone to work under them. 

No single person can operate as a wholesale ISO because, even if they had the transaction volume necessary to support it, they would never be able to handle the workload. The requirement for a significant team and the relationships wholesale ISOs need to have with processors and card issuers mean that all wholesale ISOs must be registered. There are significant startup costs – as high as $10,000 for registration with each card company – and an enormous amount of scrutiny and due diligence during the application process. 



The standards applied to wholesale and retail by the card companies are identical. But the standards set by an ISO’s processing partners can be very different, and, generally speaking, going wholesale involves a significant increase in complexity. Retail ISOs, whether registered or unregistered, focus purely on recruiting merchants for their acquiring partner and servicing the transactions of those merchants. While large retail ISOs can have enormous teams depending on their volume, the breadth of expertise required and the oversight by their processing partners are narrower due to their simpler business model. 

Wholesale ISOs, on the other hand, take on a number of responsibilities outside of simply finding, signing, and servicing merchants. Key among them are additional responsibility for the tech stacks involved in processing and settlement, and responsibility for at least part of the underwriting process – two areas retail ISOs never touch. These additional responsibilities necessitate entire additional departments of expert staff that retail ISOs don’t have to worry about. 



On the technical side, wholesale ISOs often opt to run their own front-end boarding systems that enable them to handle merchant onboarding themselves rather than simply passing application data to their processing partners. They also often have their own settlement systems on the backend of transactions. In both cases, the costs to develop and maintain those systems can be massive.

Staffing is another major cost, thanks to the expertise wholesale ISOs need to build into their organizations. The all-important underwriting process forces wholesale ISOs to add entire teams of risk and compliance professionals and managers. Even the smallest wholesale ISOs still need significant underwriting and risk management experience, and the associated salaries can have a huge impact on the bottom line, especially for ISOs operating otherwise small, lean teams. 

Finally, wholesale ISOs may also opt to pay additional fees to their processing partners in order to utilize certain parts of their infrastructure, like their bank identification number. While going wholesale offers some major long-term benefits to ISOs, the significant increase in costs, especially those associated with technology development and staffing-up, can easily catch unprepared ISOs off guard. 



The biggest risk ISOs face when going wholesale is greater exposure to losses due to their involvement in the underwriting process. Retail ISOs bear effectively no responsibility for the behavior of the merchants they acquire. They simply pass those customers on to a processor, and the processor alone makes a go-or-no-go decision based on the merchant’s risk profile. Wholesale ISOs insert themselves into that due diligence and decision-making process, so they are at least partially on the hook for losses caused by the merchants they sign. This has the potential to prove extremely costly, not only from a financial sense, but also in the damage that can be done to reputation and relationships with processors and acquiring banks. 

The second major risk wholesale ISOs face is the financial risk that emerges from business complexity. Wholesale means managing more complex services, more complex technology, and larger, more complex teams, so the potential for unforeseen problems and, in turn, unforeseen costs, rises significantly. For instance, a transaction data breach has the potential to result in high system upgrade costs and potentially enormous penalties, two disastrous surprise costs that retail ISOs don’t have to worry about the same way wholesale ISOs do. 



Despite the costs and risks involved, the rewards can be great enough that going wholesale is a long-term goal for many retail ISOs. While those rewards are myriad in nature, in the end, it’s all about the money. Wholesale ISOs don’t take on additional risk for free. In exchange for that service, they have the ability to unlock better splits with their payment processing partners. The difference may be as little as a fraction of a percent on each transaction, but spread across a portfolio with thousands of merchants each performing potentially thousands of transactions, and the small premium wholesale ISOs earn in exchange for their additional duties really adds up. 

Other benefits of going wholesale include additional control over the recruitment and boarding process, greater flexibility with processing partners when it comes to things like branding, and, arguably most importantly, higher company valuations. 



Many, if not most retail ISOs dream of one day going wholesale to unlock the higher fees and boosted valuations that wholesale ISOs enjoy. But that jump is no small task, and making it too early could be potentially disastrous. While there are no hard and fast rules for when a retail ISO is ready to transition to wholesale, there are some factors you can focus on to help ensure the decision isn’t made in haste. 

Revenue is by far the most important consideration since the rewards of going wholesale are delayed, but the costs are upfront and immediate.ISOs need to ensure they have the necessary cash reserves to meet any unexpected expenses that arise during the transition or the early stages of their wholesale operations. If existing revenues don’t allow for large, conservative reserves, making the jump to wholesale is probably best delayed. 

Volume is another major consideration. Generally speaking, retail ISOs looking to go wholesale should have a merchant roster in the multiple thousands at a minimum. Having thousands of merchants on the roster reduces volatility (since losing any given merchant is less impactful), and that stability ensures long-term revenue will remain high enough to make the risks associated with wholesale operations worth taking. 


Regardless of which end of the retail-wholesale spectrum your business falls on, having the right technology is key to maximizing your monthly residuals. IRIS CRM, the payments industry’s leading customer resource management platform, is the ultimate sales and productivity tool. From advanced lead management, to lightning-fast merchant boarding, to deep portfolio insights, to automated residuals calculations, to communications and administration tools, and beyond, IRIS CRM does it all. 

If you’re ready to see how IRIS CRM can save your ISO time while cutting costs and boosting revenues, schedule a free guided demonstration of the platform today!