A business owner who wants to expand his or her business operations list their products on an e-commerce website. However, the majority of transactions on an e-commerce website involves receiving payment through credit cards. In order to obtain the capability of accepting such payments, the business owner has to apply for a merchant account with a bank, a specialized merchant service provider or independent service organizations.
Banks are selective regarding the businesses with which they will provide merchant accounts. Instead, many business owners have availed the services of independent sales organizations for providing credit card processing services. Independent sales organizations are the middlemen between the acquiring bank and business owner. They provide services of finding, opening, and managing merchant accounts on behalf of the business in return of a fee or percentage of commission based on a business’ sales. Independent sales organizations are also called merchant service providers by MasterCard or when they provide other financial transaction processing services.
Since ISOs do not have to adhere to the strict laws and regulations like banks do, they are able to offer their credit card processing services to owners with a low credit rating in exchange for a higher fee. While giving preference to the independent sales organization over any other financial institution, merchants can benefit from the following:
– Ability to buy or lease credit card processing equipment
– Establishing both a merchant account as well as an Internet merchant account
– Accepting a wide range of credit and debit cards
– Offering other services such as telephone, mail, and mobile services
– Handling the burden of PCI DSS compliance and other technical requirements
ISOs and MSPs should not be regarded as banks. They are only sponsored by the processing bank, a member of VISA and MasterCard or by any other approved credit card association. The actual handling of the money is done by the processing bank that has a contractual relationship with the ISO. Therefore, it is possible that an ISO can be sponsored by multiple banks that are also members of the credit card association. While selecting any ISO or MSP, the business owner should check the website and marketing materials to know the name of the bank sponsor, learn about them, and understand the services better.