Glossary

An independent sales organization (ISO) is a third party that provides merchant services on behalf of acquiring banks. The ISO handles the acquisition of merchants and provides support in return for commission. The acquiring bank provides merchants with the ability to process credit card payments and receive funds in their merchant account. An ISO may work with more than one acquiring bank and needs to be registered with the card schemes. Before it can begin operating, an ISO needs to be vetted to ensure it adheres to the bank and card scheme’s standards.

ISOs are responsible for acquiring merchants, but do not directly provide the financial services needed to process and receive card payments. Services provided by ISOs can include:

• Merchant acquisition and onboarding, including setting up a merchant account so the merchant can receive card payments
• Technology services, such as selling or leasing physical card readers or integrating online payment gateways
• Customer support, helping merchants deal with any payment-related issues they may experience
• Value added services such as analytics or security and fraud prevention

ISOs are dedicated to providing services directly to merchants. As a result, the level of service they provide may surpass that provided directly by the bank, especially to smaller merchants. Banks may be also wary of entering into a relationship with less well-established businesses or merchants in higher risk industries (adult entertainment, gambling etc.). ISOs can help these merchants open and manage an account. The rise of ISOs reflects a broader trend in the financial services industry towards decentralization, with technology driving and facilitating more individualized services.

An ISO must meet a number of criteria and go through a registration process before it can begin operating. The ISO requires a sponsoring bank, on whose behalf it operates. The ISO must meet the bank’s requirements, as the bank is responsible for the risks associated with any transactions processed by the ISO. If the ISO meets the bank’s requirements, it also needs to be registered with the card schemes and meet their financial standards and comply with applicable regulations. These include PCI DSS (Payment Card Industry Data Security Standard) as well as local legislation such as anti-money laundering requirements.