iso in merchant services

What is an ISO in Merchant Services?

Are you considering starting a business? Then chances are, you are already doing research on how to make informed decisions about payment processing solutions. You may already use a payment provider and are thinking of switching to one with a wider range of options. Regardless of your business scenario, you are in the right place. 

There’s no denying that the payment world is confusing. Understanding the different payment players and the flow between them is important, because when you understand the different business models that you will be partnering with, you put yourself in a better position to negotiate. It will also help improve your ability to distinguish reliable partners from unreliable ones. 

What is ISO?

ISO stands for Independent Sales Organizations, or organizations that are not official members of esteemed payment processing associations such as Mastercard or Visa. However, ISOs have developed partnerships with relevant acquiring member banks to provide access to merchant accounts or other merchant services to their respective members. 

ISOs can be thought of as businesses with a dedicated set of technologies and sales agents. Some ISOs operate independently while setting their own processing rates, but they all serve as one-stop destinations for all types of merchant services. ISOs make money by leasing and selling software or hardware, in addition to taking a set percentage of transaction revenue. 

The way that they are able to offer everything a merchant requires is by ensuring reliable partnerships for all aspects of accepting credit cards. Most importantly, this is achieved by having direct relationships with acquiring banks. 

An acquiring bank is one with the ability and authority to offer merchant accounts. Merchant accounts are defined as the official accounts wherein business revenues get deposited prior to being sent out to the selected business accounts. It is not possible to accept credit card payments without a merchant account, giving them an important role in merchant positions. 

Types of ISO Merchant Services

  • Online gateways
  • Credit card processing
  • Software or POS systems
  • Hardware including terminals
  • Mobile apps and readers
  • Analytics programs

Importance of ISOs in the Payment Ecosystem

If the payment ecosystem was a pyramid, ISOs would sit in the middle of that pyramid. You can also think of ISOs as official service providers on behalf of cardmember associations and acquiring banks. 

Role of ISOs in Merchant Services

In the merchant services realm, ISO or Independent Sales Organization can be regarded as the third-party payment processing organization responsible for handling merchant accounts for a payment processor, bank, or any large-scale financial institution. ISOs are known to serve as the conduit between individual merchants and larger institutions, handling the details of the payment processing needs of different merchants. 

An ISO offers a wide range of useful services to merchants. These include:

  • Arranging access to the payment processing account. This allows the merchants to accept debit card and credit card payments.
  • Providing access to payment processing equipment -ranging from computer-based payment gateways to credit card terminals.
  • Providing ongoing support for the payment processing business of the merchants.

For most merchants, working with an ISO is preferable, especially when merchants have to deal directly with large-scale banking institutions for payment processing. An ISO is typically able to provide customized services, flexible pricing plans, and personal support that a large institution may not be able to provide – especially to smaller businesses.

Are Merchant Service Providers and ISOs Same?

It would ultimately depend on the definition. The manner in which MasterCard speaks about MSPs (Merchant Service Providers) is the same in which VISA speaks about ISOs. All you should know is that both the terms depict companies selling a suite of merchant services while having relevant relationships with the acquiring banks.

Things to Consider While Evaluating ISOs and MSPs

  • Ensure the Availability of the Right Hardware: Some ISOs lease the hardware components of the companies. On the other hand, there are some that create their own hardware. The ISO you choose should offer the best-available hardware as per your business requires. It could imply mobile terminals and others. Ensure that the hardware components have ample capacities.
    Flexible Online Gateways and Invoices: When you partner with an ISO having restrictive gateways, it will be damaging for your business. Observe what they have to offer. Understand your specific needs and keep looking for a service provider to make the overall workflow seamless.
    Understand the Fees and Processing Volume in Negotiations: You should have a relevant idea about the average processing volume in terms of location. You should also check the number against what you have paid in total fees. Therefore, you will know exactly how much you will save by switching. If a firm offers to check the numbers on your behalf, it is even better. Allow the firm to walk you through relevant numbers. Double check the same by yourself. Then, consider the reduced fees.
    Look Into Loyalty Programs; Gift cards and loyalty programs are important ways to keep growing your business. Observe the options that service providers have to offer. Ensure that the ISO links the available information right into the respective payment reports.
    Look into Contract Lengths and Hidden Fees: Some ISOs might come up with higher cancellation fees. They might even charge you for over or under transacting.


You should seek services from a reliable ISO that combines the flexibility and reliability of a large-scale organization with personalized solutions for your small business. Make use of all the payment processing services your business requires with affordable and consistent pricing assurance.

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