As a business owner, accepting card-based payments requires working with a financial partner who can securely process incoming transactions – whether you sell in-person, online, via post, by phone or all the above.
Although there are banks and payment processors that specialize in merchant services, many businesses choose to work with independent sales organizations (ISOs), also known as merchant services agents or merchant services providers.
This article explains what independent sales organizations are and how partnering with one can help drive business growth.
What Is an Independent Sales Organization (ISO)?
If banks and conventional payment processors are the “wholesalers” of the payments industry, ISOs act more like retailers. While all three can sign up new businesses and offer payment processing solutions, independent sales organizations operate more on the front lines. Acting on behalf of payment processors and banks, ISOs recruit, train and service merchants — in exchange for a sales commission.
Because ISOs are third-party merchant services providers, they can work with many banks and payment processors — essentially serving as intermediaries within the larger payments industry.
What Is a Payment Processing Agent?
A payment processing agent does for ISOs what ISOs do for banks. They basically repackage and sell credit card processing solutions to merchants, which is why they often go by another name — “merchant services reseller”.
Just as with ISOs, the primary job of agents is to help connect businesses with the right payment processing solutions (in exchange for a commission). The main difference is size, with most payment processing agents working under the umbrella of one or several larger ISOs, banks or processors.
How Working With Agents & ISOs Can Drive Growth
If you’re looking to accept credit and debit cards in your business, you may be tempted to work directly with payment processors and banks. After all, they obviously have the security and IT infrastructure to process your customers’ cards. They’re ultimately the ones who will accept and reject incoming transactions — even those facilitated by ISOs and payment agents further down the chain.
So why go through an intermediary — especially when doing so involves paying a commission on top of the rates and fees you already have to pay to the card networks, processors and banks?
The answer is simple.
Larger financial actors might have the resources, but they normally don’t have the bandwidth to offer specialized services to growing businesses. By contrast, ISOs can provide far more personalized attention — complete with customizable options, negotiable pricing, faster response times and one-on-one support.
For many small business owners, this level of handholding and customer service is essential — for growing sales and for avoiding those inevitable hiccups that crop up when processing or refunding card-based transactions.
Things to Consider Before Working With an Agent or ISO
Although independent sales organizations are often better positioned to provide more personalized care, there are a few things to consider before establishing an ISO partnership:
1. How Specialized Is Your Business?
The more niche your industry, the more attention you’ll likely need. Working with a major bank is an option, but you may be pigeonholed into a one-size-fits-all solution that doesn’t offer the same flexibility that an ISO could offer.
2. How Risky Is Your Business?
Traditional banks and payment processors are often reluctant to underwrite merchants in certain industries (e.g., alcohol, gambling and firearms). ISOs enjoy a little more leeway when recruiting merchants. This is especially true since independent sales organizations can work with multiple banking and processing partners. This variety dramatically increases the chances of your merchant application being approved.
3. Where Will Your Customers Pay?
Another consideration is whether your customers will pay in-person via POS, online by payment gateway or remotely via virtual terminal. It’s important that whatever ISO or payment processor you partner with has the IT and hardware support you need to securely service your customers.
How to Choose an Agent or ISO
Because every business is unique, compiling a universal list of “must haves” is difficult. Each merchant will have slightly different needs and goals.
However, below are some of the most important things to look for as you begin researching ISO and agent partnership options for your growing business:
1. Industry Experience
It’s important to choose a payment processing agent or ISO with experience in your specific niche. They’ll be more familiar with the various payment challenges associated with your given field — whether you sell digital courses online or deliver pizzas door-to-door.
2. Payment Security
You want an ISO partner that understands the importance of payment security, including PCI compliance, tokenization and data encryption. A major component of long-term growth is the ability to reduce fraud and abuse within your payment environment.
3. Payment Integration
Depending on the ISO you choose, you may be able to integrate their payment solutions with the business tools you’re already using. Payment integration, for example, allows you to have all incoming sales automatically recorded in your favorite accounting platforms.
4. Settlement Times
The faster you receive your money, the more predictable your cash flow becomes. This is why many businesses look for ISOs that offer quick settlement times, with next-day funding being the most attractive.
5. Rates and Fees
Obviously, you want to pay the lowest “commission” possible. However, if you find an ISO that offers the level of customization, flexibility and security that your business needs, paying a premium may be worth it.
Remember, too, that because ISOs are eager to earn your business, their rates are often negotiable. Don’t be afraid to shop around and find the best deal for your given situation.
Keep Your Goals in Mind
Given how fragmented the payments landscape can be, it’s easy to feel overwhelmed by the sheer number of options. However, this variety is a blessing in disguise. With so many stakeholders to choose from, it’s possible to design a custom payment solution tailored to your unique needs and goals.
To learn more about CardConnect’s payment processing solutions, schedule a free consultation with our merchant services team today.