Credit Card Processing Blog

Independent Sales Organization (ISO) is a term that is often used in the payment card industry, however not always accurately. In this article we will look at exactly how the Credit Card Associations of Visa and MasterCard define what an ISO is, how ISOs relate to the Associations and their member banks, how they are registered and what functions they performs.

What is an ISO? The payment card industry defines an ISO as an organization or individual that is not an Association (Visa or MasterCard) member, but that has a bank card relationship with an Association member that involves acquiring or issuing functions such as the ISO soliciting merchant accounts, arranging for terminal purchases or leases, providing customer service, and soliciting cardholders.

What is an MSP? An ISO is sometimes referred to as a Member Service Provider (MSP), although their definitions are not always synonymous. MasterCard refers to its ISOs as MSPs, defining a Member Service Provider as “a non-member that is registered by the Corporation [MasterCard] as an MSP to provide Program Services to a member, or any member that is required to register, in the Corporation’s sole discretion, and has been registered as an MSP to provide Third Party Processor Program Services to another member.” The acquirer must register all ISO / MSPs with the applicable Association.

What are the ISO’s / MSP’s relations with member banks? It is important to understand that ISOs and MSPs are not banks and the actual handling of the merchants’ money is done by the processing bank that has contracted with the ISO. Each ISO / MSP must be sponsored by such a processing bank, member of Visa and / or MasterCard, in order to be registered by either Credit Card Association. Typically, processing banks are members of both Associations and the registration process for each Association is done simultaneously. An ISO / MSP can be sponsored by multiple member banks. Processing banks can also perform the job of their ISOs / MSPs, but they rarely do so and prefer to concentrate on issuing credit cards and acquiring payment transactions instead.

ISOs / MSPs must display the name of their sponsor bank on their website and marketing materials. Most disclosures are located in the footer of the ISO / MSP website. Our disclosure notice reads:

“UniBul Merchant Services LLC is a registered ISO / MSP of Wells Fargo Bank, N.A., Walnut Creek, CA”

How are ISOs / MSPs registered with Visa and MasterCard? The ISO / MSP registration process is fairly rigorous. It begins with the applicant finding a member bank to be its sponsor during the registration process. Prospective ISOs / MSPs then have to prove that they are financially able to perform their duties. The documents applicants must submit with their application include:

• Two years business financial statements or personal tax returns (last 2 tax years) for all principals.
• Personal financial statement for each principal.
• Executed Articles of Incorporation / Partnership documents.
• Detailed business plan.
• Copy of sales materials / solicitations.
• Complete list of current ISO employees / agents.

In addition, all principals have their credit history checked and evaluated to ensure that they are responsible with credit.

What are the ISO / MSP registration fees? Upon approval, the applicants must pay registration fees of $5,000 for each Credit Card Association. Every year thereafter, ISOs / MSPs have their registration reviewed and additional fees of $2,500 per Association are due upon approval.

What are agents? ISOs / MSPs can sign up sales agents to help them sign new merchants. MasterCard defines an agent as “an entity that provides Program Services to a member and is not registered by the Corporation [MasterCard] as an MSP.” Sales agents can only introduce themselves as representatives of their ISO / MSP and cannot advertise their own business name as a service provider.

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