What Does ISO Mean? An Overview of Where an Independent Sales Organization Fit in Credit Card Processing

ISO Residual Calculations

If you’re new to the payment processing industry, one term you’ve likely seen over and over again with no real explanation is “ISO.” ISO stands for independent sales organizations – a term for businesses that resell payment processing services on behalf of the larger players like major banks, VISA, and Mastercard. Essentially, when a new merchant begins accepting credit cards, they don’t actually engage with VISA, Mastercard, or any of the other big card companies. It would simply be impossible for those giants to deal with every single merchant accepting payments through their platforms. Instead, merchants deal with ISOs – middlemen approved by the card companies. In this article, we’ll look at some of the details of how those ISOs work, what types exist, and how they impact merchant success. 


The Different Types of ISOs

Generally speaking, there are two primary types of independent sales organizations – registered and unregistered. Registered ISOs work on behalf of payment processing companies like Fiserv, TSYS, and others, who themselves offer payment processing services on behalf of the card companies. Registered ISOs go through a long, arduous process in order to become approved resellers, with a high level of scrutiny applied by the card companies. In turn, registered organizations can hire independent agents to work beneath them. Those agents represent the second level of independent sales organizations – unregistered ones. Unregistered ISOs work under registered ISOs to bring in business in exchange for a share of the commissions – called residuals – earned on each merchant sale. Unlike registered ISOs, unregistered ISOs can’t hire or contract out work to anyone below them. 


How do they Work?

ISOs partner payment processors and, upon acceptance and registration, are approved to resell those processors’ services. When a merchant is ready to begin accepting electronic payments, they can approach a sales organization, who will then find the right payment processing solution available through their network of processors and submit an application on behalf of the merchant. Once the merchant is approved, their business relationship continues to be with the ISO, who, depending on their agreement with the processor, is responsible for ongoing customer service. In exchange for bringing in the merchant and providing that ongoing service, an ISO is entitled to receive residuals from the processor for as long as the merchant continues to process payments with them. 


The Importance of Choosing Right

Because the ISO acts as the primary contact between the merchant and the payment processor, and because the merchant’s business relationship is effectively entirely with the Sales Organization, it’s extremely important that new applicants carefully consider which sales organization to partner with. The most obvious factor to consider is the fee structure offered on the payment processing services, but there are a wide variety of less obvious factors to consider as well. One is service quality – payment processing might seem like an impersonal type of business, and in some ways it is, but since a merchant-ISO partnership represents a long-term relationship, it’s very important that merchants choose an organization that has a strong reputation for good customer service.

Another key area to consider is what tools an ISO offers to merchants to enhance their payment processing services and maximize success. There are a number of tools currently on the market designed to augment the payment processing process and to improve the operations and profitability of both merchants and ISOs alike. One such tool is IRIS CRM, the payment industry’s leading customer resource management tool. Certain payment processors, like BAMS, offer their ISOs and merchants access to IRIS CRM completely free, representing enormous added value. For more information on IRIS CRM and the suite of tools, it provides to ISOs and merchants, talk to us today

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