All You Need To Know About Merchant Services ISO

Once upon a time, cash was king, but in today’s digital world, electronic transactions have usurped the throne. Merchants have long understood how important it is to accept credit card payments, both online and in-store, in order to maximize revenues. Many of them go into their banks to open merchant accounts, only to be turned away for failing to meet qualifying criteria.

What is ISO credit card processing?

In the middle of those two extremes are independent sales organizations, representing arguably the easiest and most accessible way for business to establish new merchant accounts – especially their first merchant accounts. In this article, we’ll look at the basics of independent sales organizations, including what they are, how they operate, and why going with one is the best choice for a wide range of businesses.

What is an Independent Sales Organization?

An independent sales organization (ISO) is a company that acts as an intermediary between merchants and the acquiring banks that ultimately take in the payments from credit card transactions. The merchant services ISO serves a number of functions, including finding new merchant clients on behalf of the acquiring banks and major payment processors, processing the transactions put through by small businesses and, in many cases, providing support and customer service to merchants for the lifetime of their relationship with the merchant services ISO.

The advantages of engaging a Merchant Services ISO

  • From a cost perspective, while merchant services ISOs do charge a small mark-up on transaction fees, those fees are normally still much lower than the fees charged by third-party processors like PayPal and Square.
  • Because third-party processors pool all of their customers under a single master merchant account, everyone pays the same rates, regardless of business history or risk.
  • That means reputable and reliable businesses are left holding the bag for high-risk merchants and paying higher fees for no reason.
  • With a merchant service ISO, each merchant’s account is underwritten individually, ensuring each merchant can negotiate fees based on the merits of their business, often resulting in significant savings.

How does a Merchant Services ISO make money?

When a merchant signs up with an ISO through an agreement, the merchant sees the merchant services ISO take a very tiny percentage of each transaction processed as their payment. Those fees are essentially small mark-ups on the fees charged by the acquirers, and, while individually they often only represent pennies, when aggregated over hundreds or thousands of transactions across an ISO’s entire roster of merchants, they add up quickly.


Registered merchant services ISO – the kind that goes through the long, arduous, and costly process of partnering with an acquiring bank. It is certified by the major card companies – also have the option of recruiting freelance ISOs, or agents, to work with them. In that case, the residual payments are split between the registered ISO and the agent. This brought in the new merchant business, and, like the ISO, the agent often owns those residuals for the life of the merchant-ISO relationship.