What Is an ISO/MSP? What You Need to Know
An ISO (Independent Sales Organization) and MSP (Merchant Service Provider) provide payment processing services on behalf of a merchant.
They serve as middlemen between the merchant and their financial institution or bank, allowing the merchant to accept credit and debit cards for payments.
Amongst their several benefits, one stands out: providing access to payment processing services merchants may not have been able to get on their own.
But how exactly do ISOs and MSPs work? And how do they benefit the entire e-commerce ecosystem?
Table of Contents
Key Takeaways
- ISOs (Independent Sales Organizations) and MSPs (Merchant Service Providers) are third-party companies that provide payment processing services for merchants.
- ISOs primarily act as intermediaries between merchants and payment processors, while MSPs have a more direct relationship with payment processors as registered agents.
- ISOs and MSPs help set up merchant accounts, provide tailored payment solutions, and offer ongoing support and services to businesses.
- Key roles of ISOs and MSPs include sales and marketing, relationship management, customer support, risk management, value-added services, training and education, and industry advocacy.
- To verify a business’s registration as an ISO or MSP, check their website, marketing materials, and industry directories, and contact acquiring banks or regulatory agencies.
- Partnering with reputable ISOs and MSPs, can offer businesses numerous benefits, including competitive pricing, transparent billing, and exceptional customer service.
- It’s essential for businesses to work with registered, reliable ISOs and MSPs that adhere to strict industry standards to ensure secure and efficient payment processing.
First, let’s dive deeper into what an ISO/MVP actually is:
What are Independent Sales Organizations (ISOs)?
An Independent Sales Organization, or ISO, is a third-party company that partners with payment processors and banks to offer merchant services.
Precisely, they act as intermediaries between merchants and payment processors, helping businesses acquire merchant accounts and process credit card transactions.
Beyond providing merchant accounts and payment processing services, ISOs also bring value-added services, such as tailored payment solutions, support, and navigating the regulatory landscape.
What are Merchant Service Providers (MSPs)?
Merchant Services Providers (MSPs) offer businesses a wide range of payment processing services.
While the terms ISO and MSP are often used interchangeably, the primary distinction lies in their relationships with payment processors.
MSPs typically have a more direct relationship with payment processors, as they are registered agents of these companies. This means that they can process credit card transactions on behalf of merchants. In contrast, ISOs act as intermediaries between merchants and payment processors.
How ISOs and MSPs Work
ISOs and MSPs work in tandem to simplify payment processing so you don’t have to worry about technicalities, such as setting up a merchant account or understanding payment industry regulations.
Step 1: Establishing Relationships with Payment Processors
The first step is for the ISO/MSP to establish relationships with payment processors. This entails getting approval from the relevant authorities to become an authorized agent of the processor, enabling them to process credit card payments on behalf of merchants.
ISOs usually partner with multiple payment processors to offer various merchant services, while MSPs are registered agents of payment processors and have a more direct relationship with them.
This allows ISOs and MSPs to provide businesses with various options for processing credit card transactions.
Step 2: Connecting with Merchants
Once ISOs and MSPs have established relationships with payment processors, they reach out to merchants to offer their services.
This typically involves marketing their payment processing solutions and demonstrating how their services can help businesses accept credit card payments more efficiently and securely.
Step 3: Assessing Merchant Needs
When a merchant expresses interest in working with an ISO or MSP, the provider will assess their specific needs, including their industry, transaction volume, and unique requirements. This helps ISOs and MSPs tailor their services to meet the individual needs of each business.
Step 4: Setting Up Merchant Accounts
Once a provider clearly understands a merchant’s needs, they will assist the business in setting up a merchant account.
This account is necessary for processing credit card transactions and allows businesses to accept customer payments.
ISOs and MSPs facilitate the setup process as intermediaries between merchants and payment processors.
Step 5: Implementing Payment Solutions
With a merchant account, ISOs and MSPs will help businesses implement payment solutions tailored to their needs. This may include point-of-sale (POS) systems, online payment gateways, mobile payment options, or other payment processing tools.
These solutions enable merchants to accept credit card payments from customers and have the transactions processed through their merchant accounts.
Step 6: Providing Ongoing Support and Services
After implementing payment solutions, ISOs and MSPs continue to support merchants by offering ongoing services such as customer support, fraud prevention tools, and reporting features.
These services help businesses manage their payment processing more effectively and ensure that they have access to the resources needed to maintain a secure and efficient system.
Step 7: Monitoring and Optimizing Payment Processing
As businesses grow and evolve, their payment processing needs may change.
ISOs and MSPs will continually monitor and assess the performance of their payment solutions to ensure they meet the changing needs of merchants.
If necessary, they will make adjustments to optimize the system and ensure it operates at peak efficiency.
Difference Between ISOs and MSPs
While ISOs and MSPs provide value-added services to merchants, their roles and responsibilities differ. Here’s a quick summary of the key differences between ISOs and MSPs:
| Aspect | ISOs | MSPs |
| Focus & Function | Act as intermediaries between merchants, banks, and payment processors. | Provide a comprehensive suite of payment processing services, equipment, and software solutions. |
| Business Model | Earn revenue through fees charged to merchants for their services and from the sale or rental of equipment. | Generate revenue by offering payment processing services, equipment, software solutions, and value-added services. |
| Customer Support | Offer customer support and technical assistance to merchants for payment processing-related issues. | Provide customer support focused on the specific services and equipment they provide. |
| Security and Compliance | Help merchants connect with banks and payment processors; not directly responsible for security. | Play an active role in helping merchants maintain security and compliance, providing tools and services for data protection. |
| Services Offered | Primarily involved in acquiring and maintaining relationships with merchants and financial institutions. | Offer various services, such as POS systems, payment gateways, alternative payment methods, and analytics tools. |
| Value-Added Services | May offer some additional services to help merchants grow their businesses. | More likely to offer various value-added services like merchant cash advances, gift card programs, and loyalty programs. |
Role of ISOs and MSPs
ISOs and MSPs are key players in the payment processing industry, providing merchants with the services needed to accept credit card payments efficiently and securely.
Here’s how:
1. Sales and Marketing
This is the main engine of ISOs. They focus on generating leads, acquiring merchants, and providing the best deal to both parties.
You can call them a high-level sales team or affiliate, except they don’t sell the product but rather a service that helps merchants accept payments.
MSPs, on the other hand, focus more on offering end-to-end payment processing solutions.
They may have in-house sales and marketing teams that work directly with merchants, providing them with a comprehensive suite of services, including payment processing, point-of-sale systems, and other merchant-related tools.
2. Relationship Management
Both ISOs and MSPs prioritize relationship management to ensure the long-term success of their merchant clients.
ISOs work closely with payment processors and acquiring banks, managing the relationships between these entities and the merchants they serve. By fostering strong partnerships, ISOs can help streamline onboarding and negotiate favorable merchant terms.
MSPs, being more involved in the day-to-day operations of their clients, often have dedicated account managers who work directly with merchants to address any concerns or issues that may arise. They focus on cultivating lasting relationships and ensuring merchant satisfaction.
3. Customer Support
ISOs and MSPs provide customer support services to their merchant clients, ensuring that any issues or questions can be quickly addressed.
ISOs may offer technical assistance, troubleshooting, and guidance on using the payment processing platform. They also serve as a point of contact between merchants and their payment processors.
Given their more comprehensive service offerings, MSPs often provide a higher level of customer support. This can include 24/7 assistance, on-site equipment maintenance, and even dedicated support teams to help merchants resolve any issues with their payment processing systems.
4. Risk Management
Risk management is a shared responsibility between ISOs and MSPs. ISOs, as the initial point of contact for merchants, may be responsible for conducting preliminary risk assessments and ensuring merchants comply with industry regulations and security standards.
MSPs take a more hands-on approach to risk management, providing merchants with tools and resources to help prevent fraud, manage chargebacks, and maintain compliance with evolving regulatory requirements.
They work closely with acquiring banks and card networks to ensure the security and reliability of payment transactions.
Related article: What Are the Risks of Becoming Your Own Payment Facilitator?
5. Value-Added Services
Both ISOs and MSPs offer value-added services to differentiate themselves in the market and provide additional benefits to merchants.
ISOs may partner with multiple payment processors, allowing them to offer a range of specialized solutions to cater to the unique needs of their merchant clients.
MSPs often provide a broader range of services, such as integrated point-of-sale systems, e-commerce solutions, and mobile payment options. These services can help merchants improve operational efficiency and enhance customer experience.
6. Training and Education
ISOs and MSPs play critical roles in providing training and education to merchants. ISOs often conduct training sessions for new clients, ensuring they are well-versed in using the payment processing platform and aware of industry best practices.
MSPs may offer more comprehensive training and educational resources, including ongoing support, webinars, and workshops, to help merchants stay up-to-date with new technologies, industry trends, and regulatory changes.
7. Industry Advocacy
ISOs and MSPs engage in industry advocacy to promote the interests of their merchant clients and help shape the future of the payment processing landscape.
They actively participate in industry associations, conferences, and events, representing their clients’ voices and working with other stakeholders to address pressing issues and challenges.
ISOs may advocate for favorable policies and regulations that benefit their partner payment processors and merchants while promoting the adoption of new technologies and industry standards.
With their broader service offerings, MSPs may advocate for policies that support innovation, data security, and consumer protection. They work collaboratively with other industry players to foster a more competitive, transparent, and efficient payment processing environment for merchants and consumers.
How to Verify Registered ISOs and MSPs
Working with registered ISOs and MSPs is essential for businesses that want to ensure the security and efficiency of their credit card processing.
Registered providers have undergone rigorous vetting processes and adhere to strict industry standards, ensuring that they offer reliable, trustworthy services.
To determine if a business is registered as an Independent Sales Organization (ISO) or Merchant Services Provider (MSP), follow these steps:
- Check their website: Legitimate ISOs and MSPs typically provide information about their registration on their official website, usually in the “About Us” or “Legal” sections. This information may include the names of their partnering acquiring banks or payment processors and any registration numbers or certifications.
- Review marketing materials: ISOs and MSPs may also include registration information in their marketing materials, such as brochures, email signatures, or business cards. Look for any mention of their partnerships with acquiring banks or payment processors.
- Contact the acquiring banks or payment processors: If you have identified the acquiring banks or payment processors that the business claims to partner with, you can contact these entities to verify the ISO/MSP registration. Provide the name of the ISO/MSP and any registration numbers you have found in your inquiry.
- Search industry directories: Some organizations, like the Electronic Transactions Association (ETA), maintain directories of registered ISOs and MSPs. You can search these directories to verify if the business in question is listed.
- Check with regulatory agencies: In the United States, ISOs and MSPs are required to register with Visa and Mastercard, and they may also need to register with state or federal agencies. You can contact these agencies to inquire about the registration status of a particular ISO or MSP.
Remember that registration requirements may vary by jurisdiction, so it’s essential to familiarize yourself with the specific rules and regulations governing ISOs and MSPs where the business operates.
GETTRX is committed to providing businesses with reliable, secure, and compliant payment processing solutions. They work closely with top payment processors and adhere to strict industry standards, ensuring that their services meet the highest levels of security and efficiency.
FAQs: Common Questions About ISOs and MSPs
What is the difference between an ISO and an MSP?
The primary difference between an ISO (Independent Sales Organization) and an MSP (Merchant Service Provider) is their relationships with payment processors.
ISOs act as intermediaries between merchants and payment processors, while MSPs have a more direct relationship with payment processors as registered agents, allowing them to process credit card transactions on behalf of merchants.
Related article: Differences Between an ISO and a PayFac
How do ISOs and MSPs make money?
ISOs and MSPs generate revenue through various means, including transaction fees, monthly fees, and other service charges. They may also earn a percentage of the processing fees charged by payment processors. Sometimes, they may receive commissions, referral fees, or bonuses from their partner payment processors or acquiring banks.
Are ISOs and MSPs regulated?
Yes, ISOs and MSPs are regulated by various authorities, including Visa, Mastercard, and government agencies. They are required to adhere to strict industry standards and compliance requirements to ensure the security and reliability of their payment processing services.
How can I find the best ISO or MSP for my business?
To find the best ISO or MSP for your business, consider the following factors:
- Range of services offered: Look for providers that offer a comprehensive suite of services, including payment processing, POS systems, and other merchant-related tools.
- Pricing structure: Compare the pricing models of different providers to find the most cost-effective solution for your business.
- Reputation and experience: Look for providers with a solid track record and extensive experience in the payment processing industry.
- Customer support: Choose a provider that offers responsive, reliable customer support to ensure any issues or questions can be quickly addressed.
- Compliance and security: Make sure the provider adheres to strict industry standards and compliance requirements to safeguard your business and protect sensitive customer information.
Related articles:
- 7 Things to Consider Before Choosing a Payment Gateway for Your Business
- 18 Terms to Know Before Choosing a PayFac
Can I switch between ISOs and MSPs?
Yes, businesses can switch between ISOs and MSPs if they find a provider that better suits their needs or offers more competitive pricing. However, it’s essential to carefully review the terms of your current contract and consider any potential costs or complications associated with making the switch.
What is the role of the acquiring bank in the relationship between ISOs, MSPs, and merchants?
The acquiring bank plays a crucial role in the payment processing ecosystem. It is responsible for underwriting and approving merchant accounts.
Acquiring banks work closely with ISOs and MSPs, who act as intermediaries between the banks and merchants. ISOs and MSPs help facilitate the account setup process, provide ongoing support, and maintain relationships between the acquiring banks and merchants.
Conclusion
ISOs and MSPs play a vital role in the fintech industry, helping businesses navigate the complex world of credit card processing and providing tailored solutions that cater to their unique needs.
By understanding the roles and functions of these key players, merchants can make informed decisions when choosing the right partners to support their payment processing needs.
GETTRX, while not an ISO or MSP, offers businesses numerous benefits, including competitive pricing, transparent billing, and exceptional customer service. GETTRX Zero and the company’s Flat Rate package provide merchants with affordable and reliable payment solutions, ensuring they can process credit card transactions efficiently and securely.
As the fintech industry continues to evolve, it’s more important than ever for businesses to work with registered, reliable ISOs and MSPs that adhere to strict industry standards.
By doing so, merchants can safeguard their businesses, protect sensitive customer information, and enjoy the benefits of a secure, efficient payment processing system.
