Credit Card Processing

What Is an ISO? Independent Sales Organization Explained

An accountant goes over ISO options with a client

With the ratio of US consumers preferring cash as a payment method down to less than 20%, it’s clear businesses must accept credit and debit cards to keep customers happy.[1]Reserve Bank of San Francisco. “2022 Findings from the Diary of Consumer Payment Choice“. Accessed on August 14, 2023. While independent sales organizations (ISOs) can play an integral role in helping businesses accept credit and debit cards, some merchants don’t understand the role ISOs play in the payment process. This guide explores ISOs, as well as how they relate to merchant accounts, payment processors, card associations, merchant service providers (MSPs), and other payment stakeholders.

What Is an Independent Sales Organization (ISO)?

Business partners discuss ISO options

An independent sales organization, also known as an independent sales office, is an approved third-party organization connecting merchants with payment processing services. Many member banks allow third parties to source customers and provide a range of ancillary services, including onboarding, hardware provision, software integration, and customer support. By allowing ISOs to handle much of the customer-facing services, member banks can focus on issuing credit cards and other operational tasks.

ISOs undergo strict vetting processes to gain approval from card associations and member banks. Company principals must undergo financial checks and various other suitability tests to open up an ISO. Additionally, ISOs never handle merchant funds—payment processors, member banks, and other payment stakeholders are the parties handling cash on behalf of merchants.

For their services, ISOs typically take a commission on the merchant account fees charged. While this commission can increase your overall processing fees, the benefits are often worthwhile. As ISOs provide dedicated customer support, custom features, and other advantages, the fee often pays for itself.

What is an ISO sales agent?

An ISO sales agent is an individual approved to work for an ISO. An agent doesn’t have to undergo the same extensive vetting process as the principals of the ISO, but they must be directly affiliated with an ISO. An ISO sales agent has no direct relationship with a member bank or card association; they can only identify themselves as an associate of their affiliated ISO.

How Does an ISO Fit Into the Payment Process?

With so many stakeholders in the payment process, it can be challenging to understand where an ISO fits into the payments landscape. To contextualize their role, it’s useful to understand how this type of organization interacts with other payment stakeholders. Let’s explore in more detail below:

Card Associations

Card associations, also known as card networks or card brands, set interchange fees, provide infrastructure for issuing cards, and communicate with acquiring banks. (Visa, Mastercard, Discover, and American Express are examples of major card associations.) ISOs must gain approval from card associations before they can offer payment processing services to merchants.

Member Banks

Acquiring banks, or member banks, are banks with card association “memberships”—essentially, banks that are approved for processing credit card payments from particular card associations. These banks include some of the largest financial institutions in the world, including JP Morgan Chase, Wells Fargo, and Bank of America. An ISO has a relationship with a member bank, and this relationship enables it to gain approval from card networks to sell payment services for the member bank.

Payment Processor

Payment processors handle the backend components of the transaction process. When merchants seek payment processing, they do so through an ISO, as many banks don’t directly issue merchant accounts to business owners.

Basically, ISOs leverage their relationships with banks, processors, and card brands to offer merchants a convenient onboarding process to their payment solution.

What’s the Difference between an ISO and a Merchant Service Provider (MSP)?

An ISO merchant account provider discusses finances with a client

If you’re deep into researching payment solutions for your business, you may come across the term MSP (Merchant Services Provider). Many business owners make the mistake of thinking ISOs and MPSs are entirely different. In truth, every MSP is technically an ISO, but every ISO is not an MSP.

Like an ISO, an MSP operates independently, yet in collaboration with other parties involved in payment processing. As large-scale organizations, however, MSPs offer numerous relationships and resources that can help hard-to-place businesses obtain payment processing. And because MSPs often time have more extensive solutions, ISOs can enter partnerships with MSPs in order to better support their clientele.

What to Consider When Researching Potential ISOs

While exact year-to-year numbers vary, previous research suggests around 80% of merchant accounts are registered by ISOs.[2] “Independent Sales Organization“. Accessed on August 14, 2023. The prevalence of ISOs in the US marketplace’s payment infrastructure means there are plenty of providers from which to choose. So, what should your business consider when comparing potential ISOs to partner with? Let’s find out:

1. Supported Payment Methods

Modern consumers expect payment flexibility, so ensure your ISO has a full list of supported payment methods. Confirm your potential ISO partner accepts all of today’s most popular payment methods, including credit and debit cards, as well as online, in-person, digital wallet, and QR code payments. After all, with more than 60% of surveyed American consumers stating they’re more likely to shop with businesses offering their preferred payment method, you can’t ignore the importance of payment variety.[3]CIO. “Consumers Want More Payment Flexibility in Their Shopping Experience“. Accessed on August 14, 2023.

2. Hardware and Software Integrations

ISOs are often responsible for offering hardware and software to their merchants. Whether this is setting up a new merchant with a card reader or installing their payment gateway, ISOs help businesses utilize modern payment tools. As such, you should always assess an ISO’s hardware and software options before agreeing to a payment partnership. For example, if your business already has tablets for payment processing, it’s best to avoid ISOs requiring in-house tablets. Similarly, if you prefer a specific payment gateway provider, consider choosing an ISO compatible with its software.

3. Pricing, Fees, and Hidden Costs

There’s no doubt pricing plays a major role in the ISO decision process. And while processing costs may seem small in isolation, they add up quickly, especially for high-volume businesses. This is one reason merchant accounts are popular, as they often offer cheaper processing fees than other payment solutions.

It’s also important to research if there are other fees, such as chargeback fees, international payment fees, setup fees, and more. There’s nothing worse than hidden costs impacting your bottom line.

4. Additional Services

Some ISOs offer additional features outside of traditional payment processing solutions. For example, an ISO may act as a facilitator between merchants and lenders. This increased access to business funding can be especially beneficial to newer businesses without an extensive credit history and high-risk businesses to which funding is usually harder to access. Other additional services may include onboarding, software integration services, and point-of-sale (POS) services.

Why Work With an Independent Sales Organization?

In reality, many member banks don’t work directly with merchants; they prefer to focus on the non-sales aspects of processing credit cards. As a result, obtaining a merchant account via an ISO or MSP is often much easier. Additionally, there are also several benefits associated with using an ISO to process payments:

A hand accepting a purchase.

Gain access to merchant accounts

Using a merchant account instead of a payment service provider (PSP) yields various benefits. Firstly, merchant accounts offer more dependable access to payment services, as they are not subject to the same arbitrary, blanket user agreements found with many PSPs. Additionally, your merchant account is specific to your business, meaning you won’t need to worry about slow payout timeframes and other issues.

It’s also worth noting that high-risk businesses are often denied access to traditional merchant accounts. And because PSPs rely on traditional merchant accounts to facilitate payment processing, they don’t offer services to high-risk businesses. However, these businesses can partner with an MSP to obtain payment services with a high-risk merchant account.

A blue phone with an orange 24 next to it

Benefit from dedicated customer support

Although ISOs don’t handle payment processing directly, they do offer customer support to their merchants. ISOs allow merchants to benefit from dedicated customer support, ensuring expertise is available when payment issues arise. This support can be especially helpful when a business first sets up its payment infrastructure, as an ISO provides technical assistance during onboarding.

A small white checkmark in a light blue circle.

Receive industry-specific hardware and integrations

While acquiring banks and merchant account providers will handle the backend of your business’s payments, hardware and integrations play a critical role in your payment infrastructure. Whether it’s a mobile card reader for a food truck business or an online payment gateway for an eCommerce store, ISOs provide access to industry-specific hardware and/or software to improve payment convenience.

Final Thoughts on ISOs

Many banks offering merchant services have strict requirements and service options, making it hard to access custom solutions. On the other hand, many ISOs and MSPs offer tailor-made payment options to their clients. If you need specific hardware, software, features, or payment structures, an ISO or MSP can assemble a comprehensive payment processing package for your individual needs. Reach out to PaymentCloud today to get a payment solution customized to address your unique business needs.

Choose a dependable merchant services provider that can get you the best rate!

I want my free quote
a woman watering money growing on a tree from ISO

Article Sources

  1. Reserve Bank of San Francisco. “2022 Findings from the Diary of Consumer Payment Choice“. Accessed on August 14, 2023.
  2. “Independent Sales Organization“. Accessed on August 14, 2023.
  3. CIO. “Consumers Want More Payment Flexibility in Their Shopping Experience“. Accessed on August 14, 2023.

close icon
card terminal icon

Ask Us About Zero Cost Processing


By submitting this form, you consent to our terms

VeriSign Secured

Your information will not be distributed

close icon


By submitting this form, you consent to our terms

VeriSign Secured

Your information will not be distributed