A sales organization that is the third party and that works by signing up merchants to accepts credit cards. Also known as a Merchant Services Provider, the merchant will accept the cards on behalf of one or many acquiring banks.
The payment card industry definition of an ISO is an individual or organization that is not an association member to either Master Card or Visa but instead has a banking card relationship with an association member. This relationship involves the issuing and acquiring of functions, providing customer service, arranging leases or terminal purchases, soliciting card holders, and issuing functions.
New business and existing small business are frequently customers of an ISO. When these new and small businesses want a credit card processing account the ISO will explain all the terms, rates and fees for the processing account and will sign the merchant up. They will then provide the merchant with the necessary application paperwork and submit the application to an acquiring bank for underwriting. Assuming the merchant is approved for the account, they will then be turned over to a processor, who will actually process the subsequent credit card transactions.
In most, but not all, cases the ISO is also responsible for ongoing customer service support to the merchants they sign up. This is simply for the accounts, the actual hardware and software used to process credit card payments receives support from the manufacturer, the processor, or the payment gateway.
ISO’s will typically use commission based sales people to solicit new merchant accounts. These salespeople are independent contractors, working solely on a commission basis and for the right to receive the monthly ongoing residual payments for acquiring new merchant accounts. These salespeople are another cost for merchants as they must continue paying them their residual on a monthly basis if they wish to keep their crucial merchant services account.