Merchant Service provider ISO: Frequently Asked Questions

When a business opens a merchant account, it often has questions about the role of the account issuer. Despite its ongoing service to a business, the role of an account provider can seem obscured by its “middle man” status, a status that most businesses wish to have clarified before they open an account. Also known as an ISO (independent service organization), a service provider plays a crucial role in the merchant service industry. Below, we answer frequently asked questions regarding ISOs to clarify their role.

What parties are officially involved in the merchant account process?

A merchant account usually involves three parties: the business that applies for the account, the ISO that evaluates its initial and ongoing qualifications as an account applicant/holder, and a bank that handles the account transactions. Although underwriting is often performed by an ISO, the process may also include an underwriter.

What is an ISO’s definitive role in the merchant account industry?

An ISO helps a bank evaluate whether a business qualifies for a merchant account, evaluating its business potential and any risks associated with its situation. In addition to evaluating a business’s qualifications, ISOs also monitor the company’s compliance with its merchant account agreement. ISOs shut down merchant accounts that violate their account agreement.

What percentage of account applicants does an ISO deny?

The qualifications for a merchant account are not designed to be exclusive. At most top merchant services, the acceptance rate is above 90%, and often near 100%. However, the 1%-2% of applicants a merchant service provider ISO often denies could translate into a significant number of applicants.

Is there a difference between an ISO and an MSP?

In most instances, an ISO and an MSP (member service provider) are the same things. More often than not, the distinction between an ISO and an MSP is mere which term is preferred by a particular credit card company. For example, MasterCard prefers the term MSP.

Can ISOs handle account transactions in the role of a bank?

No, only banks handle account transactions. However, ISOs have “bankcard relationships” with banks that process merchant transactions. A processing bank sponsors an ISO for registration by a credit card association.

What are the requirements for an ISO to register with a processing bank?

The registration requirements for an ISO are rigorous. In order to qualify for registration, an ISO must present the following documents with its application: principals’ business financial statements or tax returns for the last two years, a personal financial statement for each principal, articles of incorporation (i.e. partnership documents), a copy of all sales materials and solicitations, an in depth business plan, and a list of all current employees.

How can you tell if an ISO is registered with a processing bank?

A merchant service provider ISO is required to list its sponsor bank and the bank’s location on its website and marketing materials. An ISO’s sponsor bank listing usually appears at the bottom of its website.

At AVP Solutions, we understand that important questions exist about the role of ISOs in the merchant account process. That’s why, unlike some ISOs, we clearly advertise our services and fees. If you need an account, don’t become involved with an ISO that hides its fees and sidesteps questions. At AVP Solutions, transparency about the account process is part of our customer care philosophy.