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What Is an Independent Sales Organization?

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When you want to give your customers the option to pay with debit or credit cards, an independent sales organization could set up your business to accept card payments.

Independent sales organizations, or ISOs, are third-party companies that sell card processing services on behalf of credit card companies or banks. Businesses cannot set up payment services directly with companies like Visa and Mastercard but instead, must find another company to facilitate card transactions. Working with an ISO could be compared with purchasing insurance through an independent agent rather than directly through the insurance provider, said Tara Wilson, director of marketing and communications for National Payment Corporation, an Ohio-based merchant services provider.

“Generally, ISOs have relationships in the back end with the bigger names,” Wilson said.

Credit card processing comes with a fee, and you may be able to get lower rates through an ISO, Wilson said. But not all ISOs may have your best interests in mind. We’ll help you better understand what ISOs do and how to choose a reputable organization.

The role of an independent sales organization

A sales agent working on their own could be an ISO, as could a large service provider like National Payment Corporation. ISOs could also be referred to as member service providers. An ISO would provide the equipment needed to accept credit card payments and integrate software with your business’s point-of-sale (POS) system, Wilson said. Some companies might provide the POS system as well. Payment processors such as Square also offer merchant services like an ISO. These companies would facilitate credit card transactions, provide hardware to accept cards and integrate software like ISOs would.

As a business owner, you would owe interchange fees to the card networks for the ability to accept debit or credit payments from your customers. Card companies such as Discover, Visa and Mastercard charge varying rates for these transactions. The card companies can set their own interchange rates but ISOs can adjust the fees that they charge business owners. Some ISOs may offer competitive rates, but others could charge high fees, Wilson said. Or, they could start low and incrementally raise your rates, which could be a sign of a disreputable ISO, she said. We’ll discuss more red flags in a later section.

ISOs can also facilitate financing on behalf of lenders or finance companies. ISOs sell a variety of products, though merchant cash advances are common because of the proximity to other merchant service providers.

What is a registered agent?

 A sales agent is typically an individual selling merchant services as a contractor for other organizations. ISOs have the option to register with large card companies, usually through the Visa and Mastercard associations, but not all sales agents do so.

If a sales agent is unregistered, they must be associated with a credit card processing company or a registered ISO. The agent has to market their services under the name of either the company or ISO rather than their own name. Unregistered sales agents also cannot contract sub-agents to sell merchant services on their behalf.

The registration process can be lengthy and may cost thousands of dollars in fees, but the agent would be able to market services in their own name and hire sub-agents. Agents and ISOs typically disclose registration status in the footnotes of their website.

Some registered agents may administer services on behalf of several credit card processors or credit card companies, Wilson said. They would get a payout from each company they represent, which could motivate them to charge higher rates.

“There’s a lot of money to be made in this industry,” Wilson said.

Red flags to watch for when choosing an ISO

Because of the lucrative nature of credit card processing, some ISOs may prioritize personal gains, Wilson said. And fraudulent agents can tarnish the reputation of the industry.

For example, the Federal Trade Commission alleged in 2017 that an Arizona-based ISO processed millions of dollars in credit card charges through fictitious companies. That same year, the FTC sued a number of ISOs for alleged fraudulent telemarketing practices.

To avoid disreputable ISOs, here are a few red flags to look for when choosing who to work with.

  • Contract terms: If an ISO wants to lock you into a contract, they’ll likely try to make as much money off you as possible during the contract term. The ISO would probably expect you to leave at the end of the term and could charge you excessive rates in the meantime.
  • Incremental increases: An ISO may charge you a particularly low rate when you first partner with the organization, only to increase the rate over time. ISOs should stick to a base rate and be straightforward in explaining how that rate is calculated.
  • Unwilling to share information: In addition to explaining rate calculations, an ISO should be willing to share data about the company, especially if you’ve already partnered with the organization. If the ISO is unwilling to give you information you’ve requested, you may want to rethink the relationship.

Finding the right ISO for your business

Keeping an eye out for red flags should help you circumvent untrustworthy ISOs, but you should also take proactive steps to find reputable organizations.

Many ISOs turn to their local chamber of commerce to find business leads, Wilson said. You could do the same to verify an ISO that you’re considering working with. You could ask your chamber of commerce if they’ve interacted with a certain ISO and collect feedback about the organization, she said.

“If the ISO is good, if they’re reputable, they’re definitely in touch with the local chamber of commerce,” Wilson said.

Other businesses in your area or industry could also provide similar information, Wilson said. You could ask business owners which merchant service provider they use and whether they would recommend the company to you.

Gathering as much information as possible could save you a headache down the road. And even though there are bad seeds within in the industry, being diligent in your search could ensure a positive experience with an ISO, Wilson said.

“I would definitely suggest doing your research,” she said. “You can find the ISOs out there that are a little more reputable.”


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