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What is an ISO and Why Should You Use One For Your Card Processing?

Stephen Hart

Stephen Hart

Founder - Cardswitcher

Former - Chief Financial Officer @ Worldpay

Danny’s new trainer business is booming.

Sales are through the roof and traffic on his new website is rising exponentially.

It has come to the point where Danny can longer just accept bank transfers to his debit card as the sole method of payment.

Danny is currently in the process of turning his website into an eCommerce business where he’ll be able to authorise and accept payment through a payment gateway.

In order to become an accredited online business, Danny is required to set up a merchant account. Merchant accounts are a special type of bank account that allow businesses to accept card payments directly from debit and credit cards.

They are authorised by merchant acquiring banks in collaboration with merchant services to ensure businesses facilitate secure online payments.

When Danny consulted an online payment processing expert, he thought his head was going to explode trying to absorb all the financial jargon.

In his meeting, Danny was advised to seek out an Independent Sales Organisation (ISO) to manage and handle the new merchant account for his expanding business.

In this article, we’ll explain exactly what an ISO and ISO credit card processing are, how they operate and lay out some of the benefits they reap for a wide range of businesses.


What is an ISO?

ISO’s - also known as Independent Sales Organisations or Member Service Providers/ Merchant Service Providers (MSP’s) - are third-party companies that act as the middlemen between merchants and the acquiring banks (who ultimately take in the payments for credit card transactions).

ISO’s are contracted by acquiring member banks to seek out new merchant clients like Danny to deal with all of their credit card processing needs in exchange for a small percentage of their sales.

New merchants who are looking to open up a credit card processing account for their growing business will usually be pointed in the direction of an ISO.

There are two different types of ISOs:


  • Registered ISOs - An independent company that is authorised to use their own logos on merchant agreements. They are required to identify their member bank on their independent website.
  • Super ISOs - In direct agreement with their member bank. They tend to operate through a network of ISO and sub-ISOs.



The Role of an ISO

It used to be the role of the acquiring bank to recruit new merchants. However, the last decade has seen ISOs dealing directly with business owners for all their payment processing needs.

This change has transpired as a result of a couple of factors:


  1. Card companies don’t have the resources to deal with the large volume of merchants themselves.
  2. Credit card processing is deemed too high-risk for acquiring banks so they prefer to distance themselves from any potential slip-ups.


While setting up the merchant account, the role of the ISO involves going over the terms and transaction rates of the account.

If the merchant is happy to move proceedings along, the ISO is responsible for submitting the application to a bank acquirer for underwriting.

Once the merchant’s application has been given the green light, another company referred to as a “third-party processor” is tasked with processing the merchant’s following card payment transactions.


What will an ISO provide my business with?

It’s important to understand that ISO’s don’t generally run any of their own online payment systems. They tend to focus solely on recruiting new merchant clients, processing credit card transactions for small businesses, and providing customer support to merchants whenever they need it.

On top of being a merchant’s personal payment processor, ISO’s also act as a convenience store for all things a merchant may need. To make some extra money, ISO’s also sell/lease hardware and software to business owners including card readers, virtual terminals and payment gateways.

Unlike major card companies like Mastercard and Visa, ISOs aren’t part of the esteemed card members association. Instead, through their partnership with acquiring member banks, they are provided with everything they need to satisfy their merchant’s credit card processing demands.

different ways to pay on a card reader


Benefits of an ISO

We’ve outlined some of the best benefits of an ISO from a business owner’s perspective.


Despite charging customers a small sum for transaction fees, ISOs are generally much cheaper than most third-party processors like PayPal, Square and SumUp.

With an ISO, each merchant account is underwritten individually, meaning merchants have some bargaining power when it comes to negotiating. Third-party processors, however, pool all their merchants under the same bracket regardless of your reputation or risk factor.


More Flexibility, Same Security

Since they’re a lot smaller, ISOs are able to provide more personalised and flexible service for merchants without losing the level of protection offered by the acquiring banks.

Merchants can expect to receive a much more responsive and hands-on approach from ISOs because it’s in their best interest to keep merchants around for as long as possible in order to build their client portfolio. PCI Compliance is guaranteed. Rates are negotiable. Customer service is personalised. Win. Win. Win.


Banks are Highly Selective

We mentioned above that credit card processing services have a high-risk factor attached to them. This subsequently means that the ISOs the banks employ are going to be reliable and experienced.


Additional Features

Another benefit in teaming up with an ISO to handle your merchant account is that some ISOs offer premium access to some of the most sought after services and tools in the payments industry. IRIS CRM, to name one, is a leading customer resource management tool that offers businesses a platform to manage their transactions and other finances.



If you want to keep your options open, don’t let your search stop here. Our round-up article of the cheapest merchant services for small businesses is another great insight for business owners who are looking to save a few bob on their merchant account.

If you’re ready to save up to 40% on your credit card processing fees, be sure to try out our card processing fee comparison tool.

Compare over 20 of the best card processors

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Written by:
Stephen Hart

Stephen Hart

Founder - Cardswitcher

Former - Chief Financial Officer @ Worldpay

Stephen brings a wealth of experience honed through years in the financial sector, particularly in the card processing payments industry. His illustrious career spans key roles at PwC, Natwest, and the role of CFO at WorldPay, before going on to found card processing comparison site, CardSwitcher. He is passionate about helping growing businesses to understand the card processing landscape so they can make savvy financial decisions.