Navigating the payment industry can be daunting for aspiring merchants, as it’s rife with bewildering jargon, acronyms, and complex concepts. Keeping up with them can be a challenge, particularly when it comes to setting up card payment processing. If you’re the one who needs to know more about what ISO and MSP are and their significance in the payments industry, you've come to the right place. Let’s cut to the chase.
What does ISO/MSP stand for?
The ISO/MSP definition is as follows:
ISO (Independent Sales Organisation) and MSP (Merchant Services Provider) are third-party companies or individuals that have partnerships with Card Association member banks and provide merchants with payment processing services on their behalf.
Understanding the business needs of each merchant is a near-impossible task for card associations and banks since they specialise in finance, not an online business. To reach more clients and find an approach to them faster, acquiring banks rely on ISO/MSPs.
Visa refers to its partners as ISOs, while Mastercard association members prefer to use the acronym MSP to describe their partner organisations. However, these terms are often used interchangeably in the payment industry. If an organisation resells both Visa and Mastercard services (which is typically the case), it can be referred to as an ISO/MSP.
ISO/MSP functions and services
ISO/MSPs aren’t financial companies. They act as legal intermediaries between acquiring banks or payment service providers and merchants, helping the latter launch ISO card processing and accept payments from customers. Having partnerships with Credit Card Association member banks (but not being members themselves), ISO/MSPs can find and onboard merchants, open MIDs for them, and set up POS terminals in physical stores. They’re also entitled to provide other value-added merchant services such as risk protection, fraud monitoring, management tools, etc. Meanwhile, ISO/MSPs don’t interact directly with merchants’ money but simply resell acquirers’/PSPs’ services to them.
Thus, ISO/MSPs function as intermediaries in the distribution of payment services to both small and large e-commerce merchants. Essentially, they facilitate connections between acquirers, payment processors, and retailers within the expansive e-commerce market, creating enduring partnerships.
Is there any difference between ISO/MSP and PSP?
ISO/MSP and PSP are links in the same chain. However, if ISO/MSPs are focused on the sales process, payment service providers are directly involved in developing and integrating payment services and technologies. As the fast-growing payments industry has created strong competition between acquirers and PSPs, there is a high demand for professional sales teams to help them find and onboard merchants. This is where ISO/MSPs come into play and take over the entire sales process, allowing the PSP to focus on technical challenges and product improvement.
Any company that is now a PSP might have started as an ISO/MSP but has grown to provide more services by developing its own payment solutions like payment gateway, fraud prevention tools, API integrations, etc. Each ISO/MSP may become a PSP in the future.
Interested in becoming an ISO/MSP?💸
Let us help you carve out a thriving career in this dynamic and rewarding industry.
Getting started as an ISO/MSP: 5 main challenges
If all budding ISO/MSPs knew the challenges they might face along the way, they could make far fewer mistakes, saving time, money, and nerves. Of course, there’s no magic wand to eliminate all these issues, but a competent approach and a couple of tools can make things much easier.
Get to know the major payment challenges for ISO/MSP and the solutions we can offer.
Challenge 1: Building a processing solution
ISO/MSPs are not just sellers. There are plenty of functions they can perform:
- Opening merchant accounts
- Processing chargebacks
- Fraud monitoring
- Selling or leasing POS terminals
- Authorising and processing transactions
- Collecting and analysing payment data.
You'll need robust technological infrastructure to provide value-added services to your merchants and stay competitive. But have you wondered how much time and resources it will take to build payment processing software? Seasoned industry players know that it will take no less than three years. Add to this the huge costs for the development team and infrastructure maintenance.
If you want to access the building blocks of a payment infrastructure without significant investment and software development, you can rely on a white label model. Using this solution, you have the opportunity to provide payment services to merchants under your brand based on the ready-made infrastructure of another payment company.
Challenge 2: Hiring and maintaining an IT team
If you’re determined to develop and maintain your own processing anyway, you’ll have to enlist the support of a skilled development team. The people you hire will drive your ISO/MSP, covering technical issues, dealing with possible processing accidents, and upgrading the system to meet rapidly changing merchant needs.
And it's about time again: finding, hiring, and onboarding employees is not quick. Plus, knowledgeable fintech specialists should be paid well for their work. Not every ISO/MSP can afford such expenses.
Payment team as a service may be a great option for ISO/MSP business. You can focus on your business development by leaving all the technical matters to our dedicated specialists. Our white label solution with professional support and technical maintenance will cost you one developer's monthly salary. Upgrades and updates are also on us.
Challenge 3: Registrations and audits
Each ISO/MSP must register with credit card associations (Visa, Mastercard) to handle payment processing duties. This is a time-consuming and painstaking procedure, which includes a thorough examination of all the applicant’s documentation. Experts suggest allocating for no less than six months to become a legal ISO/MSP.
Although there’s a great deal of work to be done yourself (like a business plan, registering a trademark, brand assets, etc.), submitting to a white label solution requires a minimum of paperwork and time from your side. Plus, you save yourself from the risk of costly mistakes by enlisting the support of our Account Managers, who will be there at any time to answer all your questions.
Challenge 4: Managing financial flows and risks
A processing solution alone is insufficient for your ISO/MSP to stay afloat. The more merchants you have on board, the more difficult it is to manage transaction flows and identify payment risks. It’s equally important to track the critical metrics of your business to understand where you are moving and whether you’re on the right track. Thus, lacking analytics and management tools here may cost you clients and your carefully-crafted reputation.
Our Analytics solution puts all the performance metrics before your eyes, keeping you aware of the health and performance of your business. You can track transaction statuses, merchant account balances, storefront conversion rates, and many other valuable metrics with auto-generated reports at your fingertips.
Challenge 5: Signing contracts with new partners and clients
The highly-competitive ISO/MSP environment makes them literally fight for every client. It’s extremely challenging for newcomers to get their first clients on board, especially without an impressive base of partner banks. No one knows how much time and effort you will have to spend to build a client base and start making a profit.
Understanding the needs of ISO/MSP businesses, we provide our clients access to our global merchants network, empowering them to diversify and grow their portfolio of partners and clients. More than 300+ integrations are already done for you so that you can provide processing services right from the start.
You’ve seen how rocky the ISO/MSP path can be. But the good news is that Corefy’s white label solution for ISO/MSP helps to easily overcome all the challenges and enhance your business efficiency.
Realising how cumbersome it is to develop the processing software independently, we provide a white label solution for ISO/MSP businesses. It’s a ready-made scalable platform that doesn’t require any development effort from your side. By launching your own-branded ISO/MSP on a white label model, you can start providing your clients with a huge range of processing services in a month or even less. It’s faster, cheaper, and cost-efficient.
Corefy CEO & Co-founder
How much does it cost to become an official ISO/MSP
The cost of becoming an official ISO or MSP can vary depending on several factors, such as the size of your business and the services you plan to offer. Organisations applying must pay a registration fee of $5,000 for each association and $2,500 per association annually to stay certified. Thus, becoming an official ISO/MSP will cost a minimum of $10,000 (to apply for both Visa and Mastercard). However, by gaining official reseller status, ISO/MSP will quickly recoup those costs thanks to the large flow of merchants who only want to partner with approved organisations sponsored by large card networks.
Visa and Mastercard have quite strict guidelines for their affiliated ISO/MSPs, which can be easily attributed to their role as brand representatives. Card networks require all registered members to list the name and location of their sponsor bank on their website and marketing materials. If this disclosure is missing, a fine of up to $25,000 may be imposed. Each ISO/MSP is audited annually to ensure it meets brand standards and other compliance rules.
Additionally, you may need to invest in technology and equipment, such as payment terminals, to facilitate payment processing for your clients. You may also need to allocate resources for training, compliance, and marketing.
Is it worth a shot?
ISO/MSP can be a lucrative opportunity for those with strong sales background and a drive to build their client network and cultivate relationships. As you'll typically earn a percentage of the transaction fees for each sale processed through your partnership, the more businesses you bring in, the more money you make.
However, the competition in the ISO/MSP space can be fierce, and it may be difficult to stand out in a crowded market. That’s why opting for a white label solution may be your trump card.
With Corefy’s white label platform for ISO/MSP, you’ll be able to:
- Focus on business development and customer relationships rather than technical issues.
- Outperform competitors by offering advanced payment processing.
- Accelerate your time-to-market with fast and easy payment provider integrations.
- Increase conversion and minimise risks with payment routing and cascading, which allows you to choose the most profitable path for each transaction and reduce processing fees.
- Scale your business by easily connecting with new clients and payment partners from our extensive network.
Becoming an ISO/MSP is not easy in today’s highly competitive environment, but given the huge demand for payment expertise, the benefits definitely outweigh the costs. If you’re determined to start your journey as an ISO/MSP or are looking to expand your existing business, try Corefy’s white label payment solution specially designed to boost ISO/MSPs performance.