ISOs/MSPs: What’s Their Role In Credit Card Processing?

ISOs/MSPs: What’s Their Role In Credit Card Processing?
By alphacardprocess April 7, 2023

The payment industry features a plethora of confusing terms, concepts, and acronyms. It can be a challenging job to keep up with such terms and ideas -especially when you are an aspiring merchant looking forward to setting up credit card processing. If you wish to understand the role of ISOs and MSPs in the payment industry, it is critical to initially understand them individually.

What is ISO/MSP?

Understanding the unique needs of every merchant out there is quite a difficult task for most banks and card associations as they tend to specialize in finance -not any online business. To reach an increasing number of clients while finding a better approach to interact with them, acquiring banks tend to depend on ISOs or Independent Sales Organizations. These are available as third-party individuals or organizations that maintain partnerships with member banks of the Card Association while providing merchants with reliable payment processing services on their behalf.

Visa refers to ISO as its partner. At the same time, association members of Mastercard prefer using the concept of MSP or Merchant Service Provider for describing the partner organizations. In the modern payment industry, these terms tend to be interchangeable. If the organization goes ahead with reselling both Mastercard and Visa services, it is referred to as ISO/MSP.

What are the Services and Functions of ISO/MSP?

ISO/MSPs should not be confused with financial companies. They serve the role of legal intermediaries between merchants and payment service providers or acquiring banks. In turn, ISO/MSPs perform the function of assisting merchants in launching ISO card processing and accepting payments from customers.

When a merchant partners with member banks of the Credit Card Association (not serving as members), ISOs or MSPs can go ahead with finding and onboarding merchants, opening MIDs for themselves, and setting up POS terminals in brick-and-mortar stores. They are also given the responsibility of providing additional value-added merchant services -including fraud monitoring, risk protection, payment dashboard, and so more. At the same time, an ISO processor will not interact directly with merchants’ money but will simply resell services of PSPs or acquirers to the merchants.

In this manner, ISO/MSPs can be regarded as a type of distributor of a wide range of payment services amongst both large as well as small-scale merchants. Typically, they assist payment processors, acquirers, and retailers who come across each other in a massive e-commerce market while establishing long-term partnerships.

Ways to Become a Registered ISO/MSP

If you wish to get started with serving as the registered ISO/MSP, it could appear to be a complex process. Organizations that apply for the same are expected to provide the Credit Card Association with in-depth documentation -including a comprehensive business plan, financial statements, sales materials, a complete overview of employees, and so more. At the same time, organizations are also expected to pay $5000 in the form of a registration fee and $2,500 for every association yearly to be certified with the Card Association.

As such, becoming a registered ISO/MSP will cost around $10k -when you apply for both Mastercard and Visa. However, as you gain the status of an official reseller, ISO/MSP will effectively recoup the existing costs. It is because of the large number of merchants who wish to partner with approved organizations that are sponsored by large-scale card networks.

Both Mastercard and Visa impose strict guidelines for the affiliation of ISO/MSPs. This can be effectively attributed to the role of these card networks as representatives. Card networks typically require all registered members to list the location as well as the name of the sponsor bank on the website as well as promotional resources. If the disclosure tends to be missing, a fine of around $25k will be imposed. Every payment ISO/MSP is audited yearly to make sure that it is capable of meeting brand standards along with additional compliance rules.

The lifeline of any ISO/MSP is the residual or remaining amount on every transaction that has been processed. The card networks also go ahead with setting a minimum amount of processed transactions or fees. Still, you can come across multiple revenue sources for the respective ISO/MSPs out of the sale of value-added merchant-specific services -including fraud mitigation, invoicing, risk management, and so more. The more merchants a typical ISO/MSP will sign up for, the more money it will earn.

Why Should Merchants Partner with ISO/MSPs?

There are several reasons why ISO/MSPs are ideal as the entry path for merchants into the domain of online card-based payments. Some of the reasons are:

  • ISO/MSPs tend to partner with PSPs and multiple acquirers. This allows them to choose the best solution that will effectively meet the unique business needs of merchants.
  • Partnering with ISO/MSPs serves to be a cost-effective solution for merchants who are capable of processing vast volumes of transactions on a monthly basis.
  • When you work with an ISO/MSP, you will gain access to the security and reliability of large-sized card networks.
  • ISO/MSPs tend to be customer-centric. This implies that merchants can look forward to receiving timely support as well as quick solutions to all types of processing problems.

ISOs and MSPs offer significant value to the respective payment processing partners. However, there are several more benefits that they provide to the merchants. This makes ISO/MSPs the right solution for a majority of merchants out there. Some additional benefits of partnering with ISO/MSPs are:

  • Offering a Wide Variety of Products & Rates: As merchants work with an ISO, it tends to open up an enormous scope of products and services than they would have access to while working directly with a payment processor.

As ISOs usually feature a number of payment processing partners, they are effectively able to pair up the merchants with a particular processor whose services are capable of meeting the unique needs of the merchants. The delivery of more options implies improved access to the lowest price possible. It is because ISOs usually have access to varying rates from multiple processors.

  • ISOs Offering Personalized Services: Payment processors having a direct relationship with large-scale merchants are expected to prioritize services for large accounts. An average merchant might find themselves lost in the respective results. Working with the ISO, particularly a small-scale one, offers merchants access to a dedicated payment partner that will go ahead with providing them with highly attentive ongoing services. Additionally, fast and highly personalized support is also provided in case any issue arises.

Another lucrative way in which ISO/MSPs are capable of providing improved service and value-added services to merchants is with the help of a dedicated payment CRM. A reliable customer resource management platform helps in offering advanced merchant analytics and reporting, allowing ISO/MSPs to ensure a higher level of awareness over the respective operations, failures, and successes. Specific platforms, like CRM, the leading payments CRM of the industry, also offer private-label merchant-specific support dashboards that make it easier and quicker for merchants to ask for as well as receive help. By understanding how every merchant is doing, as well as eliminating friction from the respective support process, an advanced CRM is aimed at making the job of the ISO easier. It also ensures merchants that they will enjoy proper sales along with uninterrupted service.

ISO and MSP Compliance

Consumers and businesses can consider verifying that the particular ISO or MSP follows the respective compliance rules by going through the marketing material or checking out the app or website. Organizations are expected to feature a disclosure agreement stating whether or not the company has been registered by the bank, the MSP in a state or city within the scope of operation, and ISO that is FDIC-insured. These statements are needed by both Mastercard and Visa.

In case the disclosure is not available, the ISO or MSP might have to face specific fines or charges of around $25k. As you are applying for the merchant account, ensure that you go through the disclosure while looking over the terms & conditions carefully.


It is not an easy job to become an ISO/MSP -especially in the ongoing highly competitive era. However, due to the increasing demand for payment expertise, the overall benefits tend to outweigh the respective costs. If you are adamant about starting the journey in the form of an ISO/MSP or wish to expand your existing business, you should try out reliable, white-label payment solutions that are specially designed to boost the overall ISO/MSP performance.