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Shaw Merchant Group
Friday, January 13 2023
Difference Between a Merchant Services ISO and a Sales Agent

In this industry, you will often hear the words “merchant sales agents,” “Member Service Providers,” and “Independent Sales Organizations” used in a similar context, as if all three of these things are the same. The truth is that these terms actually refer to distinct roles in the credit card processing business. If this seems confusing to you, don't worry; all of these terms will be explained in this article, as well as their relationships to the credit card associations. We will also go over how you might go about becoming a merchant services ISO or an MSP.

After we've sorted all of that out, we'll go over what the advantages and disadvantages are of working in the industry as each of these roles. Getting an idea ahead of time of what each of these entails will hopefully save you from making a lot of mistakes early on in your business ventures.

What Every Term Means - First of all, let's get everything perfectly clear by defining the terms that we've mentioned so far:

ISO (Independent Sales Organization) – This is basically the credit card processor, the company that serves as the middle man between the credit card companies and the merchant. It will often provide terminals to the merchants, as well as tech support, training, and customer service. Another common term for this is “merchant service company.”

MSP (Member Service Provider) – ISO is a term often used by Visa, and so MSP is basically MasterCard's version of this. They both mean roughly the same thing. However, to make things a little more obscure, MasterCard also uses the term ISO, but it means something different. Basically, in their case, an ISO offers services that are not processing and transaction services, like customer service and lead generation. For our purposes, though, don't worry too much about these subtle distinctions. They are basically the same thing. For the sake of simplicity, let's just assume that we're including MSPs when we use the term “ISO” from now on.

Sales Agent – This role is completely different from the above mentioned roles. A merchant services agent is a third party that sells the services of merchant services ISOs and MSPs. Since merchant services companies often like to concentrate on processing credit cards and offering POS solutions, they will contract sales agents to find merchants to work with. A sales agent doesn't have to pay the high association fees like an merchant services ISO does, but he can't do business in his own name and have a merchant services ISO program with an ISO or MSP company.

What is the Relationship Between an ISO / MSP / Sales Agent and the Processing Banks? - You probably realize that merchant services ISOs are not banks, and that these organizations need banks to ultimately perform the transactions. Every merchant services ISO will need a sponsoring bank, one who is a member of Visa and MasterCard's respective associations. In practice, these banks will usually not take on small merchant service companies, and actually most merchant services ISOs use larger ISOs as intermediaries between them and the banks.

A merchant services ISO program can also have several sponsor banks. Though this can be extra costly, it also gives merchant services ISOs the advantage of being able to take on different kinds of merchants. For example, some banks might be averse to what they see as “high-risk” businesses, while others are not (though these usually charge higher fees).

By the way, these sponsoring banks don't really need merchant services ISOs at the end of the day. They could cut out the middle men and sell directly to merchants if they wished, but most of these companies prefer to focus their energies on processing transactions and don't want to bother with customer service and other issues.

If you're curious about what acquiring bank a given ISO uses, simply check out their website. They are actually required to make this information public, and it will usually be apparent in the footer of the page.

Now, how about sales agents? Well, agents are indeed registered with the credit card associations, but of course it is much less complex and expensive than it is for ISOs. Sales agents are basically contractors and the ISOs that they work with usually take care of the heavy lifting when it comes to paperwork.

How Do ISOs Go About Registering With Visa and MasterCard? - If you're an ISO, you'll have to swim through a rough sea of bureaucracy before your business can start processing credit cards. First, you need to find a bank that is a member of the credit card associations—usually both, but sometimes one—and you need to show the bank that you know what you're doing.

The banks will have to put you through a vetting process before the Associations are comfortable taking you on. You will usually have to submit all kinds of information on your business, and what type of business you are running, whether it is a “high risk” business, and what sort of services you provide to customers can all be a factor.

Usually, the bank and credit card companies will want to see:

  • Your financial history
  • Your business plan
  • Incorporation documents
  • Who your agents are
  • Promotional material that you use to sell

After all of that is squared, you'd be required to pay $5,000 for each of the credit card associations. This is a yearly fee, by the way, and your application gets reevaluated every year as well. By contrast, an agent pays a bit of pocket change—maybe $50 once a year—to stay in business.

Should You Be an ISO or a Sales Agent? Which is Better? - Now, you might be curious about what path to take when it comes to your merchant services business. Should you become an ISO for merchant services, or take the safer and cheaper route and become a merchant services agent? Really, it comes down to your revenue. Do you have the sufficient merchant volume to be able to afford all of the crazy fees that ISOs have to pay? Then maybe it would be worth the trouble for you. If not, you should probably stick to the path of a sales agent, at least until you have more capital.

Becoming an ISO might seem really expensive and complicated to you right now, so you might be wondering why you would even want to become one. Well, basically you have the potential to make way more money. As a merchant services ISO, you are working directly with the processing banks (or at least with a larger ISO that is working with the banks), so you get a very low price in terms of transaction costs because there are less middle men between you and the bank. Your profit margins are higher than that of a merchant services sales agent. Merchant services sales agents get less of a share and they also have higher fees to deal with. It's like the difference between wholesale and retail, to give a somewhat awkward analogy.

However, not everything is rainbows and sunshine when it comes to being a merchant services ISO. There is a lot of responsibility and a lot of bank fees to dodge, things that sales agents don't really worry about. For example, you would need to watch out for so-called minimum processing fees. Basically, these are fees that the bank will charge you if you don't make a certain amount of transaction fees. Even worse, some banks will increase these fees year after year, and you will lose your residuals if you can't keep up. In fact, you might even have to pay a penalty out of your own pocket!

In order to avoid these minimum fees, you need to have a substantial portfolio of merchants. The minimum threshold that you are required to meet may be thousands of dollars, and since you're making pennies per transaction, you're going to need a huge volume of transactions. This is why it's not very wise to become an ISO if you have no experience in the business and no clients yet. It is just too risky.

As mentioned, the bank can also decide to increase the minimum every year, so that you're constantly trying to catch-up. This can be bad news for you because you can lose everything that you worked for. It's hard to escape having minimum fees of some kind, but steer clear from the kind of agreement that increases it every year if you can.

There are also some companies that will require you to sign up a certain minimum amount of new merchants per month, or you could lose all of your residuals. Don't sign up for such a deal, either, or you could see all of your income disappear quickly through no real fault of your own.

What We Have Learned - What's the best way to get started, then? Well, like anything else, that really depends on you and where you are with your business. If you're starting from square one, it's advisable to avoid the risks of becoming an ISO, and to simply stick to being a sales agent until you have decent enough income. There's something to be said about gaining experience and learning the business as well. No matter what you do, make sure to read every single contract before you sign anything so that you can avoid being taken for a ride. Don't jump into anything until you are ready. If you're not confident enough to negotiate with sponsor banks, then don't become an ISO just yet and spend some time as a sales agent building up your portfolio. Take things slow and you will avoid costly mistakes.

Posted by: Scott Shaw AT 10:21 am   |  Permalink   |  Email

Want to Become a Registered ISO?

To become a registered ISO (Independent Sales Organization), individuals or companies must first establish a strong understanding of the payment processing industry, as well as the rules and regulations set forth by major credit card associations such as Visa and Mastercard. The process typically involves applying for registration with a payment processing company or acquiring a sponsorship from an existing ISO. Additionally, applicants must pass a thorough background check, demonstrate financial stability, and have a proven track record of success in sales or marketing. Once registered, ISOs are authorized to sign up merchants for credit card processing services, handle merchant account setups, and provide ongoing customer support.

Registered ISOs play a crucial role in the payment processing ecosystem by acting as intermediaries between merchants and payment processing companies. They are responsible for acquiring new merchant accounts, managing payment gateway services, and ensuring compliance with industry regulations. ISOs also have the ability to set their pricing and fees for merchant services, allowing them to generate revenue through markups or residual income from processing volumes. By becoming a registered ISO, individuals or businesses gain the opportunity to build a lucrative business in the payment processing industry, expand their client base, and establish themselves as trusted partners for merchants seeking reliable payment solutions.

Becoming a credit card processing agent can be a lucrative and rewarding career choice for individuals looking to enter the world of sales and financial services. By partnering with a reputable ISO (Independent Sales Organization) and offering point of sale solutions to businesses, you can earn a substantial income while helping merchants streamline their payment processing operations. In this comprehensive guide, we will cover the steps to becoming a credit card processing agent, explore the best ISO agent programs for selling point of sale solutions, and provide insights into the earning potential in the merchant services industry.

How to Become a Credit Card Processing Agent

1. Understand the Industry: Before embarking on a career as a credit card processing agent, it is essential to familiarize yourself with the payment processing industry. Learn about different types of merchant accounts, payment gateways, and processing fees to better serve your clients.

2. Obtain the Necessary Licenses: In order to legally sell merchant services, you may need to obtain a business license or register as a sales agent with a reputable ISO. Check with your local government agencies to ensure that you are compliant with all regulations.

3. Choose a Reputable ISO Partner: Partnering with a reputable ISO is crucial to your success as a credit card processing agent. Look for companies that offer competitive rates, top-notch customer service, and a comprehensive training program for their agents.

4. Complete Training and Certification: Many ISOs provide training programs for new agents to learn about the company's products and services, as well as sales techniques and industry best practices. Take advantage of these resources to build your knowledge and skills.

5. Build a Sales Strategy: Develop a sales strategy that targets businesses in need of point of sale solutions. Identify your target market, create a compelling pitch, and leverage your network to generate leads and close deals.

6. Provide Excellent Customer Service: Building long-term relationships with your clients is key to your success as a credit card processing agent. Be responsive to their needs, address any issues promptly, and go above and beyond to deliver exceptional service.

7. Stay Updated on Industry Trends: The payment processing industry is constantly evolving, with new technologies and regulations impacting the landscape. Stay informed about industry trends and innovations to better serve your clients and stay ahead of the competition.

Best ISO Agent Programs for Selling Point of Sale Solutions

1. First Data: First Data is a leading provider of payment processing solutions, offering a comprehensive suite of point of sale solutions for businesses of all sizes. Their ISO agent program provides competitive rates, dedicated support, and cutting-edge technology to help you succeed in the merchant services industry.

2. North American Bancard: North American Bancard is another trusted name in the payment processing industry, offering a range of point of sale solutions for businesses. Their ISO agent program provides generous commissions, ongoing training, and marketing support to help you grow your sales.

3. TSYS: TSYS is a global payment solutions provider known for its innovative technology and industry expertise. Their ISO agent program offers a competitive commission structure, access to cutting-edge payment solutions, and personalized support to help you succeed as a credit card processing agent.

4. Worldpay: Worldpay is a leading provider of payment processing solutions, offering a variety of point of sale solutions for businesses in various industries. Their ISO agent program provides competitive rates, marketing support, and resources to help you build a successful merchant services business.

5. Square: Square is a popular payment processing platform that offers point of sale solutions for small businesses. Their ISO agent program provides a simple and straightforward commission structure, as well as access to Square's suite of payment processing tools and services.

Earning Potential in the Merchant Services Industry

1. Commissions: As a credit card processing agent, you can earn commissions on every sale you make, typically ranging from 0.25% to 1% of the transaction volume. Some ISOs may offer additional bonuses or incentives for meeting sales targets or acquiring new clients.

2. Residual Income: In addition to upfront commissions, many ISO agent programs also offer residual income, which is a percentage of the ongoing transaction volume generated by your clients. This can provide a steady stream of passive income over time as you build your client portfolio.

3. Additional Revenue Streams: In addition to commissions and residual income, credit card processing agents may also earn revenue from ancillary services such as equipment leases, payment gateway fees, and value-added services. These additional revenue streams can further boost your earning potential in the merchant services industry.

4. Growth Opportunities: The merchant services industry is growing rapidly, with businesses of all sizes looking for innovative payment processing solutions. By building a strong client base and providing excellent service, you can expand your business and increase your earning potential over time.

5. Financial Freedom: With the right skills, dedication, and strategic planning, credit card processing agents have the potential to earn a substantial income and achieve financial freedom. By leveraging the resources and support provided by reputable ISOs, you can build a successful merchant services business and enjoy a rewarding career in the payment processing industry.

In conclusion, becoming a credit card processing agent can be a rewarding and lucrative career choice for individuals looking to enter the world of sales and financial services. By partnering with a reputable ISO, offering point of sale solutions to businesses, and providing excellent customer service, you can build a successful merchant services business and achieve financial freedom in the payment processing industry. With the right training, support, and determination, you can unlock your earning potential and thrive in this dynamic and growing industry.

With the rapid growth of e-commerce and online transactions, the demand for payment processing services has increased substantially. White label payment processing is a business model where a company offers payment processing services to merchants under their own brand name.

What is White Label Payment Processing?

White label payment processing is a service where a company provides payment processing services to merchants under their own branding. This means that the merchant will see the payment processor's branding, but the processing service is actually provided by a third-party company.

The white label payment processing provider takes care of all the technical aspects of payment processing, including payment gateways, security, and compliance, while the merchant focuses on growing their business.

Advantages of White Label Payment Processing:

1. Flexibility: White label payment processing allows merchants to customize the payment process to meet their specific requirements.

2. Branding: Merchants can ensure that the payment process aligns with their brand image, enhancing customer trust and loyalty.

3. Cost-effective: White label payment processing eliminates the need for merchants to invest in developing their payment processing system, saving them time and money.

4. Technical support: White label payment processing providers offer technical support to merchants, ensuring a smooth payment process.

How to Start Your Own Payment Processing Company

1. Research the Market: Before starting your payment processing company, it's crucial to research the market to understand the demand, competition, and potential opportunities.

2. Develop a Business Plan: Create a detailed business plan outlining your target market, revenue model, marketing strategy, and financial projections.

3. Obtain the Necessary Licenses: To operate a payment processing company, you will need to obtain licenses from regulatory authorities. Ensure you comply with all legal requirements.

4. Choose a White Label Payment Processing Provider: Select a white label payment processing provider that meets your requirements in terms of features, pricing, and customer support.

5. Customize Your Branding: Customize the payment processing service with your branding and integrate it seamlessly with your website or platform.

6. Market Your Services: Promote your payment processing services to merchants through marketing campaigns, partnerships, and networking events.

7. Provide Excellent Customer Support: Offer excellent customer support to merchants to build long-term relationships and grow your business.

How Much Does It Cost to Become a Registered ISO for Merchant Services?

To become a Registered ISO (Independent Sales Organization) for merchant services, there are several costs involved, including:

1. Registration Fees: The registration fee to become an ISO can range from $500 to $5,000, depending on the payment processor and the services offered.

2. Compliance Costs: ISOs are required to comply with industry regulations, which may involve additional costs for training, audits, and certifications.

3. Technology Costs: ISOs need to invest in technology infrastructure, including payment gateways, security systems, and software development.

4. Sales and Marketing Costs: ISOs need to allocate budget for sales and marketing activities to promote their merchant services and attract new clients.

5. Miscellaneous Costs: Other costs may include insurance, legal fees, and operational expenses.

In conclusion, white label payment processing is a valuable business opportunity for entrepreneurs looking to enter the payment processing industry. By partnering with a white label payment processing provider, you can offer payment processing services under your brand name, providing a seamless experience for merchants. Starting your payment processing company requires thorough research, planning, and investment, but with the right strategy and dedication, you can build a successful business in this growing industry.

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    Shaw Merchant Group is a registered DBA of EPX, a registered ISO of BMO Harris Bank N.A., Chicago, IL, Fresno First Bank, Fresno, CA, and Citizens Bank N.A., Providence, RI.

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