With the development of new technologies, non-cash payments have become an almost integral part of business processes. Owners of companies and representatives of financial organizations have a large number of issues related to the organization of cash flows. Among them: what is an independent sales organization in the payment card industry, and what commission is charged for the service. Let’s try to figure them out together.
Table of Contents
What is an ISO?
Organization that provides its services to banks and financial companies that issue credit cards is called ISO. Its role is to process applications or make money transfers from the card, which are scheduled for a certain time.
In fact, the independent sales organization (ISO) is an intermediary between financial institutions and their customers. ISO is often confused with payment systems. What is the difference between them:
| ISO | Payment systems | |
| Description | Intermediaries between interested legal entities: companies and acquiring banks. | A set of tools for making payments for purchases, organizing money transfer in a non-cash way using bank cards and electronic payments. |
| Role | Assistance in creating trading accounts, provision of equipment rental services for accepting card payments, customer support and business intelligence (on request for an additional fee). | The role of the payment system is related to the transmission of information about the transaction. The tool also records whether the client has enough funds to carry out the operation. Thanks to him, funds are controlled from one account and credited to another. |
The Working Model of an ISO
ISO providers work in the digital space. Their services are also actively used by global market participants. Thanks to the successful integration of a wide range of services, companies can trade by accepting different payment methods and using solutions that are tailored to the specific needs of the business.
What kinds of services the independent sales organization payment processing provides:
- conducting transactions by bank cards;
- mobile payment support;
- integration of Internet acquiring.
In practice, ISO services are particularly in demand in those business sectors where participants face high risks. The tool is also indispensable in cases where the company needs flexible processing of payments made. The increase in the number of ISO points to wider opportunities in the financial sector. Due to the rapid development of modern technologies, the demand for data personalization and simplicity of solutions is increasing.
By interacting with enterprises, ISO helps to create accounts through which the cash flow of completed transactions will flow. Independent sales organization examples are: companies which accept both debit and credit card payments. The intermediary is also engaged in providing special technologies through which transactions will take place. The devices include card reader tools and payment gateways.
Renting out equipment, including card payment terminals and cash register systems, is also one of the services provided by ISO. Each client can receive qualified support upon request or in case of unforeseen situations related to the delay in the operation of the system.
ISO providers with a good reputation usually use commission sellers in order to attract new trading accounts. They are independent contractors working exclusively on a commission basis. They also have the right to receive monthly current residual payments for successfully attracting new trading accounts.
Advantages of Working with ISOs
What benefits will have a company that chooses partnerships with ISO:
- Simplify payment processing for sellers. Customer service is faster and more personalized compared to the services of large financial institutions.
- Flexibility of business process development and customized solutions for different needs. For example, ISO cooperates with companies doing business in high-risk industries. Banking structures may refuse to service them due to possible losses.
- Competitive pricing. Providers have the ability to set prices for services related to payment processing. As a result, the company will be able to reduce costs.
- Negotiating on behalf of sellers.
As in any business, choosing a partner requires prudence and a detailed study of information about it. Despite the advantages, it must be remembered that ISO systems charge higher fees for their services compared to banks. You also need to be aware of the presence of hidden fees that you may be asked to pay extra. These expenses can become unforeseen expenses for the business.
Becoming an ISO
The rapid development of the ISO market is explained by the demand for services and the growth of digital transactions. There are quite a lot of companies offering their services in this area to specific business sectors.
Who will be attracted to business in the ISO system:
- Those entrepreneurs who are ready to cooperate with other companies in order to help them solve problems related to electronic payments. The company will regularly pay a commission for this.
- The new working model can be considered as a source of regular income.
It can be difficult for traditional financial structures to adapt to new conditions, so there are still free places in the niche market. Not everyone can become an ISO member. It is important to meet several criteria and be able to complete the registration procedure. Here is a detail explanation of how to become an independent sales organization:
- Registration of a legal entity. You need to submit a certain list of documents to the institution that deals with these issues.
- Find a sponsor bank that supports relationships with leading credit card networks. The financial institution will act as a guarantor for transactions processed by ISO.
- Register in the credit card networks that the legal entity plans to work with. Usually, cooperation involves mandatory payment of a fee. ISO will be asked to demonstrate compliance with network standards in terms of financial reliability, and will also need to confirm intentions to comply with the requirements introduced.
- You will definitely need to get insurance. The amount of insurance is usually reported to the applicant. It should cover possible losses.
- It is necessary to confirm compliance with regulatory acts, including Security Standards for the use of credit cards.
- Creating a customer support service. It may be necessary to hire staff who will be responsible for concluding contracts with contractors.
Depending on the conditions under which the sponsor bank and the card networks agree to work. Starting an activity in the ISO system is not an easy decision, because an entrepreneur may face financial risks. For minimizing them, you need to understand the structure of the business and make a business plan.
The Future of ISOs in Payment Processing
The ISO system is becoming increasingly popular. This is due to the rapid development of e-commerce. Transactions in various business areas are carried out remotely. ISO providers allow you to simplify the payment acceptance process. The relevance of the development of this product is primarily due to the transformation of methods that are used all over the world for doing business.
Conclusion
Cooperation with ISO providers can be interesting for different business areas. It is particularly attractive for those businesses that process a large volume of credit or debit card transactions. Retail business representatives can become clients of service providers. If payment is made by cards, it does not matter what the seller sells: women’s dresses or hot dogs.
Any e–commerce companies are potential customers of the ISO provider’s services. They can also become service providers: consulting, product repair, home delivery, beauty salons. A special category includes enterprises with a high level of risk, with which traditional financial organizations may refuse to cooperate. Small and medium-sized businesses can benefit further from receiving a personalized approach. There are many sectors in the economy, among them there are currently unoccupied niches in which ISO services will be in demand.
ISO can be considered as a process for the development of a cashless service infrastructure using bank cards. Before you start trying to develop in it, it is worth assessing all the existing risks.
