Independent sales organizations are companies that partner with payment processors or more rarely banks to resell payment services directly to merchants. The primary revenue driver for most ISOs is merchant accounts – special bank accounts that enable businesses to accept credit card payments directly. When an ISO’s merchant makes a card sale through their merchant account, the ISO earns a small percentage of the transaction known as a residual. The more merchant services an ISO has access to, the more options they’ll have to resell to their customers. ISOs generally partner with multiple payment processors to maximize access to products, and to ensure a merchant rejection from one processor doesn’t necessarily mean the end of the road. Other sources of revenue on top of ISO payments include software sales, like online payment gateways and other ecommerce solutions, and hardware sales, like in-store payment terminals and POS systems. 

How ISOs Add Value to the Payments Industry

As resellers, ISOs act as middlemen between merchants and the payment processors that handle the actual logistics of transaction processing. Some merchants question the value of working with an ISO at all, wondering why they shouldn’t instead just partner directly with a processor or bank. While that is sometimes possible, it isn’t necessarily easy, and partnering with an ISO represents a much simpler and more frictionless route for merchants looking for electronic payment processing. 

While banks and payment processors could potentially make slightly more money by working directly with merchants, the sheer volume of merchants compared to the relatively small number of acquiring banks issuing credit cards makes it impractical. Direct merchant relationships would overwhelm their resources, which is precisely why ISOs are such a valuable part of the payments ecosystem. A large number of ISOs handle the recruiting and service duties, funneling merchants to a smaller number of payment processors, and from there to an even smaller number of banks. The dynamic allows each player in the system to focus on what it does best, ensuring the smoothest operations and best possible service for the end merchant. 

Registered vs. Unregistered ISOs

Within the ISO vertical, there are two different categories of company: registered and unregistered. Both serve essentially the same function within the industry, but there are different rules for how each operates. Unregistered ISOs are essentially independent agents. They can recruit merchants looking to sign up for ISO payments and earn residuals on merchants’ transactions, but they’re limited to operating as lone wolves and can’t subcontract any of the work. Registered ISOs go through a difficult vetting process with both their payment processing partners and the card companies. In exchange, they’re allowed to subcontract their own independent agents, significantly expanding their revenue and growth opportunities. As a result of the rules around registration, all large ISOs are registered and most unregistered ISOs work directly for a registered counterpart in order to maximize their potential earnings. 

ISO Selection Criteria

Merchants looking for new services have an enormous amount of choice when selecting an ISO. ISO services are not homogeneous, however, and everything from transaction fees to hardware costs to service availability can vary wildly depending on the ISO. To ensure the best possible experience, merchants looking for new ISO payments services should consider:

  • Transaction Fees and Pricing Models: Merchants should always shop around because the pricing models offered by the processors an ISO works with directly impact the end cost to the merchant. Merchants looking to minimize the fees on their ISO payments should ask about interchange-plus pricing – the most transparent and affordable model in the industry – and get quotes from a variety of competing ISOs. 
  • Size: Large ISOs will almost always have access to a wide variety of processing partners and may be able to offer the best rates as a result. However, there are benefits to working with a smaller company such as more personalized, one-on-one attention.
  • Niche Service: Some ISOs specialize in working with merchants in certain industries. Merchants with highly unique needs should consider working with a specialized ISO to ensure the best possible service, even if that means paying slightly more in fees. 
  • Value-Added Options: The fewer partners a merchant has to deal with, the simpler their operations will be so it’s important to look for an ISO that offers a variety of value-added services. Obvious things to look out for include web payment gateways and modern, tap-enabled payment hardware, but the greatest value often comes from included services like advanced fraud protection and access to next-day funding. 
  • Technology: Some ISOs use advanced technology, like customer resource management systems, to ensure the highest-quality service and to lower costs and pass savings on to merchants. In some cases, merchants even get access to the reporting areas of those CRM tools – a major benefit that can enable better decision making and long-term growth. 


IRIS CRM is the top customer resource management system in the payments industry, offering sales, reporting, and productivity tools designed specifically for the unique needs of independent sales organizations and their merchants. 

To find out more about IRIS CRM and everything it can do for ISOs and merchants alike, click here now to schedule a free guided demonstration.