ISO Vs. ISV: Key Differences & Roles In Payment Processing

As the payment processing industry evolves, understanding the roles and differences between independent sales organizations (ISOs) and independent software vendors (ISVs) is becoming increasingly important. Both organization types contribute to the growth and development of the payments landscape, but they do so in unique ways. In this blog post, we will explore the roles of ISOs and ISVs in payment processing, their differences and their convergence within the industry.

Role of an ISO

An ISO for merchant services is a third-party organization that partners with payment processors to sell and manage merchant accounts. ISOs act as intermediaries between merchants and processors, helping businesses set up and maintain the necessary infrastructure for accepting credit and debit card payments. They typically have a network of sales agents responsible for signing up new merchants and providing ongoing support.

ISOs play a crucial role in the payment processing ecosystem, as they help merchants navigate the complex world of payment processing and ensure secure, reliable transactions. By participating in an ISO agent program, agents can leverage the technology and services of payment processors to offer merchants cost-effective and efficient payment solutions.

Role of an ISV

An independent software vendor is a company that develops and sells software solutions to businesses. In the context of payment processing, ISVs create applications and platforms that integrate payment processing functionality into existing solutions, such as point-of-sale (POS) systems, e-commerce platforms or customer relationship management (CRM) tools. By providing seamless payment integration, ISVs enable merchants to accept payments within their existing software infrastructure, improving the overall customer experience.

ISVs often partner with payment processors or ISOs to offer a complete payment processing solution to merchants, ensuring compatibility with a wide range of payment methods and maintaining security and compliance standards.

Differences Between an ISO and ISV

Below are two of the main differences between how ISOs and ISVs operate in the payments industry.

Revenue Model

ISOs typically earn revenue through commissions on merchant account sales, residuals from processing fees and other merchant-related services. ISVs, on the other hand, generate income from the sale or licensing of their software products, which can include one-time fees, subscription fees or usage-based pricing models.

Provided Services

While both ISOs and ISVs contribute to payment processing, they offer different services:

• ISOs focus on selling and managing merchant accounts, providing support and ensuring a smooth payment processing experience for merchants.
• ISVs develop and sell software solutions that integrate payment processing capabilities into existing systems, allowing merchants to accept payments seamlessly within their current business processes.

Convergence of ISOs and ISVs in Payment Processing

As the payments industry evolves, the lines between ISOs and ISVs are blurring. Growing demand for integrated payment solutions is driving a convergence of their roles, with ISOs and ISVs increasingly collaborating to offer comprehensive payment processing services to merchants.

This convergence is evident in several ways:

Strategic partnerships: ISOs and ISVs are forming strategic partnerships to provide end-to-end payment processing solutions, combining the sales and support expertise of ISOs with the software development capabilities of ISVs.

Cross-selling opportunities: ISOs are increasingly offering ISV-developed software solutions to their merchant clients, while ISVs are partnering with ISOs to expand their reach in the market and provide complete payment processing packages.

Value-added services: Both ISOs and ISVs are focusing on providing value-added services, such as data analytics, fraud prevention and customer support, to differentiate themselves in the competitive payments landscape and meet the evolving needs of merchants.

Technological innovation: As the payment processing industry becomes more technology-driven, ISOs and ISVs are working together to develop and implement cutting-edge solutions that cater to the changing needs of merchants and consumers.

Consolidation: The payments industry is witnessing a consolidation trend, with ISOs and ISVs merging or acquiring one another to expand their service offerings, improve their competitive positioning and capitalize on synergies.

Summing Up

As the payment processing industry continues to evolve, traditional ISV versus ISO roles are converging, creating a dynamic landscape where collaboration and innovation are essential for success. By understanding the distinct roles of ISOs and ISVs and embracing their convergence, businesses can better navigate the complex world of payment processing, leverage the strengths of both entities and ultimately deliver a more seamless and more secure payment experience for their customers.

By acknowledging the ISO versus ISV payments dynamic and adapting to the changing landscape, both can capitalize on new opportunities and thrive in the rapidly evolving payments industry.

To learn more about ISO and ISV opportunities with CardConnect, schedule a free consultationwith us today.