What is an Unregistered ISO?

What is an Unregistered ISO?

Registered and Unregistered ISOs fill a very important need in the payment processing industry – the need to connect millions of merchants around the globe with a relatively small number of payment processors. 

ISOs resell merchant services on behalf of the payment processors so the processors can focus on handling the millions upon millions of transactions that go through their systems each day. ISOs do the legwork involved with merchant recruiting, including marketing and sales. They also often provide ongoing service and support to the merchants they’ve recruited. By acting as the middleman, ISOs make it possible for payment processors to work with far more merchants than they could ever handle on their own. 

In exchange for playing their vital role, ISOs receive a small slice of the fees on each transaction their merchants generate, known in the industry as a residual. Residuals on any given sale are tiny — sometimes a fraction of a penny. But ISOs own their residuals for life, and with hundreds or potentially even thousands of merchants generating transactions, those tiny residuals can quickly add up. 

Key Points:

  • Independent sales organizations act as middlemen, bridging the gap between merchants and payment processors. 
  • In exchange for performing sales, marketing, and support activities, ISOs are paid a percentage of the fees on each transaction, called residuals. 
  • There are two types of ISO: registered and unregistered. 
  • Unregistered ISOs act as independent agents, working for a registered ISO or payment processor. 
  • Unregistered ISOs must sell services under the name of their larger partner. 
  • Unregistered ISOs can’t subcontract work, limiting them in their capacity for growth. 
  • To thrive in a highly competitive industry, ISOs can utilize advanced sales technology, like custom resource management software, to improve their processes and make recruiting more efficient.


What Differentiates an Unregistered ISO from a Registered ISO?

So, with an understanding of what registered and unregistered ISOs offer to the wider payments industry, what’s the difference between the two? The distinction boils down to two things: what each type of ISO can do, and what they have to go through to earn certain privileges. 

The biggest operational difference between the two is that unregistered ISOs can’t hire out work to subcontractors. Most large, registered ISOs employ teams of independent agents who handle the sales and recruiting process in exchange for their own small slice of the residuals pie. Unregistered ISOs can’t do that, meaning, in essence, an unregistered ISO is an independent agent that can work on its own or for a larger registered partner but can’t farm the work out to anyone else. 

That limitation has some major implications for unregistered ISOs. Growing a residuals portfolio is all about adding more and more merchants, and without the ability to hire sub-agents, unregistered ISOs are limited to the merchant recruiting they can perform on their own. That puts a practical cap on growth and long-term earnings. As a result, many unregistered ISOs will eventually choose to undertake the registration process — a move that comes with significant financial upside, but is arduous, drawn-out, and costs tens of thousands of dollars at a minimum. 


Becoming an Unregistered ISO

The good news for prospective unregistered ISOs is that getting started is relatively simple, especially compared to the complex and expensive process of becoming a registered ISO. In essence, all that’s required to become an unregistered ISO/agent is to find a registered ISO or payment processor to work for. That’s it! Once hired by a partner, an unregistered ISO can get to work selling merchant services, but there are some rules attached. For instance, the unregistered ISO can’t do business under any name it wants or build up its own brand. Unregistered ISOs must sell merchant services under the name of the larger partner they’re working for.

Each merchant a new unregistered ISO signs up for processing services becomes a part of that agent’s portfolio, and residuals will be generated on each and every transaction processed for the life of the merchant. Those residuals are calculated and added up once each month, and the unregistered agent’s share — known as their split — is paid out. Because payment on residuals is only made once per month, and new unregistered ISOs will have relatively small portfolios for the first few months (or longer), it’s extremely important for new agents to have a strong financial safety net in place to keep the bills paid and food on the table in between residuals checks, especially if business is slower than expected at the beginning. 


Competing as an Unregistered ISO

Competition for merchants is fierce, and unregistered ISOs are competing against all other ISOs and agents — including other agents working for the same processing partners. Maximizing residuals is all about standing out above the competition and finding more efficient ways to find and close new merchants — a hard task in an industry as saturated as payment processing. 

One of the best things a new unregistered ISO can do to gain an immediate competitive advantage is to adopt a payments-specific customer resource management platform. A good payments CRM will enable even the newest unregistered ISOs to leverage technology in order to improve every aspect of their merchant recruiting process — from lead acquisition and management to the sales process, to ongoing service and support, and even administration. 

IRIS CRM is the payments industry’s top customer resource management platform, offering ISOs a full suite of features designed specifically to make recruiting and supporting merchants faster, easier, and more profitable. Just some of the features packed into IRIS CRM include:

  • An advanced lead management system
  • Automatic lead account creation
  • A built-in power dialer
  • Advanced reporting and analytics
  • Automatic residual calculations
  • Automated merchant onboarding with TurboApp
  • A white-label merchant support portal
  • Website visitor tracking
  • Integrations with many of the industry’s top payment processors

…and much more. To find out more about how IRIS CRM can help your independent sales organization streamline your merchant recruiting process and close more deals in less time, schedule a free guided demonstration of the software today.

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