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What is an Independent Sales Organization?

An Independent Sales Organization, also called a Member Service Provider, is a third-party organization representing a bank or other financial institution that sells and promotes its services, one of which is merchant accounts. Being a third-party organization, an Independent Sales Organization sets up partnerships with various banks to find, open and manage merchant accounts on behalf of the financial institutions it represents. The ISO, as it is also known, reaches an agreement with acquiring banks, third-party processors or other financial entities that are properly licensed. This agreement allows them to act as a representative of any financial institutions with which they have agreements.

The primary role of an independent sales organization is to administer merchant services of the bank or payment processor. Payment processing constitutes a major part of the role of an ISO, with one of its primary roles being to match the merchant services of the bank or payment processor with businesses. Independent Sales Organizations can also offer their own merchant account services, and thus are able to underwrite these deals. In doing so, they are legally obligated to accept any risk or liability associated with their own merchant services. The larger the Independent Sales Organization is, the bigger the risks and liabilities that are associated with them. One common practice within the industry is to have larger Independent Sales Organizations resell their payment processing services to smaller Independent Sales Organizations. When this is done, the larger ISO usually charges a rate for its service.

In order to participate in these dealings, an Independent Sales Organization, big or small, must be sponsored by a processing bank. Also, it must be a member of a MasterCard or VISA association. In doing so, they must be registered by these associations in order to participate in any dealings. With e-commerce today dealing mostly in credit card purchases, the role of ISO’s is becoming more important than ever. According to industry statistics, 80% of merchant accounts are opened by Independent Sales Organizations, with banks themselves opening only 20% of accounts. As e-commerce becomes more global in the years ahead, it’s very possible that ISO’s will only continue to grow more important in opening up these accounts to more and more businesses. No matter what type of business one has, or the size of it, using an Independent Sales Organization when looking into merchant services makes entering into an agreement easier than ever.

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