Independent sales organization (ISO): What is it and is it right for your business?
As a business owner, you know that accepting credit and debit card payments is essential — whether you’re running an e-commerce store or a brick-and-mortar shop. But when setting up and managing payment processing, you’re faced with a sea of options, including independent sales organizations (ISOs).
So, what exactly is an ISO, and do you need one for your business? Understanding the role of ISOs in the payments industry can help you decide whether this type of provider is right for you.
In this article, you’ll learn what an ISO does, how it differs from other payment service providers, and what advantages (and drawbacks) working with an ISO can offer. If you’re unsure whether an ISO fits your business’s needs, read on to find out how they operate — and whether an all-in-one solution like MONEI might be a better option.
Table of contents
- What is an independent sales organization?
- How do ISOs help businesses and what are the advantages?
- What are the drawbacks of working with an ISO?
- Do I need an ISO for my business?
What is an independent sales organization?
An independent sales organization (ISO) is a third-party company authorized to sell and manage merchant or virtual POS accounts (specialized business bank accounts) on behalf of payment processors. ISOs focus on the relationship side (managing accounts, support, and compliance) rather than the technical side of processing and act as intermediaries in the payments industry.
They help businesses accept credit and debit card payments by connecting them with payment processors and banks. ISOs are registered with major card networks, such as Visa and Mastercard, which ensures they meet industry standards and regulations. Working with an ISO allows you to access payment processing services, support, and additional resources that facilitate smooth, compliant business transactions.
ISO vs. payment processor
ISOs and payment processors both work behind the scenes to enable smooth and secure electronic transactions, but they serve distinct roles with different responsibilities and relationships to businesses and financial institutions.
Here’s a breakdown of their differences:
ISOs are intermediaries authorized to sell or lease payment services. They connect businesses with payment processors and acquiring banks, and handle account setup, support, and compliance. ISOs often provide additional services, such as business analytics and sometimes point-of-sale equipment for accepting physical card payments. Their primary role is to help you access the payment solutions you need for your business.
Payment processors handle the technical backend and financial aspects of transaction processing. When a customer makes a payment with a credit or debit card, the payment processor communicates with the issuing bank (the customer’s bank) and the acquiring bank (the merchant’s bank) to complete the payment. They are responsible for securely transmitting transaction data, verifying funds or credit, and ensuring that money is correctly debited from the customer and credited to the business.
📚Further reading:
ISO vs. payfac
A payfac or payment facilitator’s responsibilities and structure differ from an ISO. It allows multiple sub-merchants (individual businesses) to operate under a single master merchant account. This structure simplifies the onboarding process for online sellers like you, as you don’t need individual accounts with an acquiring bank or payment processor. The payfac is the primary merchant of record and manages payment processing, settlement, and compliance for its sub-merchants.
An ISO typically sets up separate virtual POS accounts for each business client and does not operate under a shared account structure. They work more like consultants, guiding you through setting up and managing your virtual POS with an acquiring bank.
Payfacs are ideal if you’re looking for simplified onboarding, whereas ISOs can help you set up a direct connection to a merchant bank and could be a better option if you have higher transaction volumes.
ISO vs. MSP
While MSPs include any service provider offering electronic payment solutions, ISOs are specifically authorized entities that set up merchant or virtual POS accounts and assist with customer support, equipment, and compliance. All ISOs are MSPs, but not all MSPs are ISOs.
Some companies, like MONEI, combine ISO, MSP, and payment processing roles for an all-in-one solution, providing a streamlined approach to payment processing, and enhancing customer experiences while potentially reducing costs.
How do ISOs help businesses and what are the advantages?
- Merchant account setup and payment processing integration. ISOs manage merchant or virtual POS account setup and connect with payment processors, allowing you to securely accept online and in-store card payments.
- Support. ISOs provide hands-on customer support, helping you with payment setup, troubleshooting issues, and maintaining compliance with industry regulations. Some also offer training on using POS equipment and managing transactions.
- Additional services. Many ISOs offer extra services such as fraud protection, chargeback management, and reporting tools to help you manage business payments effectively and securely.
- Flexible solutions. ISOs tailor their services, providing flexible payment solutions and features that align with your specific operational requirements.
What are the drawbacks of working with an ISO?
- Fees and markups. While ISOs often offer competitive pricing by partnering with multiple providers, they may add extra markups on top of base rates, increasing your overall costs.
- Lack of control. Since ISOs act as intermediaries between your business and service providers, you may not have direct control over certain aspects of payment processing and may rely heavily on the ISO for support.
- Limited technical expertise. Some ISOs may not have the same technical expertise as payment service providers, limiting their ability to address complex issues or offer highly specialized support.
- Contract commitments: ISOs may require long-term contracts, limiting flexibility if you want to switch providers or adjust services.
Do I need an ISO for my business?
Finding the right payment service provider for your business can feel overwhelming, making working with an ISO appealing, but it’s not worth the extra fees, lack of control, and contract commitments. Instead, choose an all-in-one payment platform that provides direct services without acting as an intermediary.
MONEI combines payment gateway services, payment method aggregation, virtual POS, and physical payment capabilities, giving you everything you need to start transacting — all in one place. Sign up with MONEI today for a streamlined, transparent, and efficient payment experience.
Find more definitions in our payment industry glossary.
Alexis Damen
Alexis Damen is a former Shopify merchant turned content marketer. Here, she breaks down complex topics about payments, e-commerce, and retail to help you succeed (with MONEI as your payments partner, of course).
