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ISO/MSP guide: what everyone ought to know
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ISO/MSP guide: what everyone ought to know

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The payment industry is replete with confusing terms, acronyms, and concepts. Keeping up with them can be challenging for aspiring merchants looking to set up card payment processing. If you’re the one who needs to know what role ISOs and MSPs play in the payment industry and how to become a registered ISO/MSP, this article is here for you. Let’s cut to the chase.

What is an ISO/MSP

Let’s clarify the ISO MSP definition. 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 ISOs (Independent Sales Organisations) — third-party companies or individuals that have partnerships with Card Association member banks and provide merchants with payment processing services on their behalf.

If ISO is what Visa calls its partners, Mastercard association members prefer to use the MSP (Merchant Service Provider) acronym to describe their partner organisations. In the payment industry, these two concepts are interchangeable. If the organisation resells both Visa and Mastercard services (the vast majority of them do), we can call it 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 brick-and-mortar stores. They’re also entitled to provide other value-added merchant services such as risk protection, fraud monitoring, payment dashboard, etc. Meanwhile, the ISO processor doesn’t interact directly with merchants’ money but simply resells acquirer’s/PSP’s services to them.

Thus, ISO/MSPs are kinds of distributors of payment services among small and large merchants. Basically, they help acquirers, payment processors and retailers find each other in such a huge e-commerce market and establish long-term partnerships.

Feeling interested? Then we’ll tell you how to become a registered ISO/MSP.

How to become a registered ISO/MSP

Getting started as a registered ISO/MSP is a rather laborious process. Organisations applying must provide the Card Association with comprehensive documentation, including financial statements, a detailed business plan, a complete roster of employees, sales materials, etc. Plus, they must pay a registration fee of $5,000 and $2,500 per association annually to stay certified. Thus, becoming a registered 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 payment ISO/MSP is audited annually to ensure it meets brand standards and other compliance rules.

The lifeblood of any ISO/MSP is residuals on each processed transaction. The card networks also set minimum amounts of processed transactions and/or fees. Still, there are additional revenue sources for ISO/MSPs from the sale of value-added merchant services, such as risk management, invoicing, fraud mitigation, and others. The more merchants an ISO/MSP has signed up with, the more money it gets.

Why merchants should partner with ISO/MSP

There are sound arguments why ISO/MSPs are a perfect entry path for merchants into online card payments. Here are some of them:

  • ISO/MSP partners with multiple acquirers and PSPs so they can choose the solution that best meets the merchants’ business needs.
  • Partnering with payment ISO/MSP is cost-effective for merchants who process a large number of transactions per month.
  • By working with ISO/MSP, merchants gain the reliability and security of large card networks.
  • ISO/MSPs are customer-focused, which means that merchants will receive timely support and quick solutions to any processing problems.

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.

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