Independent Sales Organizations (ISOs) vs. Sales Agents vs. MSPs

In the payments industry, independent sales organizations (ISOs), member service providers (MSPs) and sales agents are often used interchangeably. In many cases, they provide similar services, but there are key differences in how they operate. Before becoming (or working with) an ISO, MSP or sales agent, it is important you understand these distinctions.

This article explores these differences, including:

• What is an ISO in payment processing?
• What is an MSP and how do they work?
• What role do sales agents play in the industry?

What Is an ISO in Merchant Services?

Traditional payment processors are responsible for facilitating the capture, encryption, transmission and approval of card-based transactions. In effect, they are the wholesalers of the larger payments industry. As such, they don’t necessarily provide dedicated and personal support to the merchants they represent.

By contrast, ISOs act more like retailers in the payments industry (especially when working with the Visa card network). On behalf of their sponsoring processor(s), ISOs provide a range of payments-related services, including customer support, sales training, merchant solicitation and equipment rentals. Because of their specialized nature, ISOs are also able to offer more flexible pricing and a wider[WU1] range of perks and benefits to the merchants that sign up.

What Is an MSP in Merchant Services?

“Member service provider” is simply an alternative to ISOs (e.g., MasterCard vs. Visa). MSPs also provide program services to the members they represent — including training, support and various perks. Quite simply, there isn’t much difference between how an ISO vs. an MSP operates. In most cases, these terms can be used interchangeably.

What Is a Sales Agent in Merchant Services?

If ISOs and MSPs are the retailers of the industry, sales agents act as third-party brokers who help connect merchants with ISOs, MSPs or payment processors. In fact, most sales agents lack the ability to sell payments-related services directly to merchants. Instead, they must work under the umbrella of a sponsoring ISO or MSP — and receive smaller commissions for the privilege.

That’s the downside.

The upside, however, is that sales agents aren’t subject to as many rules[WU1] or fees as their larger counterparts. This allows them to diversify their client base considerably. Many sales agents are also able to provide a higher level[WU2] of service than traditional ISOs and MSPs.

The Key Differences Between ISO vs. MSP vs. Sales Agent Organizations

As discussed, ISOs and MSPs are largely interchangeable, with the main distinction being whether they work with Visa or MasterCard respectively. Either way, these organizations work under the aegis of one or several payment processors — helping onboard new merchants looking to accept card-based sales.

They are the retailers of the payments world.

The main difference between an ISO and agent organizations is scale. ISOs (and MSPs) are often larger and provide more generic merchant services to their customers on behalf of the payment processors they represent. Sales agents tend to be smaller, which allows them to offer even more specialized and personal support. Although they lack the autonomy to provide payment processing directly, sales agents act as third-party brokers who help bring merchants into the network.

Moreover, ISOs and MSPs typically keep 100% of the markup they charge (above the payment processors’ base rates). This often involves having to pay higher fees and adhere to more regulatory guidelines. By contrast, sales agents receive closer to 50% of their markups. Whereas they must legally register with the card networks, sales agents aren’t normally subject to the same high fees and regulations as their ISO and MSP counterparts.

The Role of Banks in the Payments Industry

Banks play a pivotal role in the payments industry — acting as either the initial funding source and/or final deposit account for most card-based transactions. Card-issuing banks are also responsible for ultimately deciding whether a sale should go through. If a customer lacks sufficient funds or if a transaction looks suspicious, that user’s card-issuing bank will decline the sale and send notification through the network.

Although banks sometimes act as processors or ISOs, it’s often cheaper for them to outsource these merchant services rather than handle them in-house. This allows banks to focus on their core financial services while third-party actors — such as ISOs, MSPs and sales agents — work on bringing in new customers and card-based transactions.

Still Have Questions?

You now have a broad overview of how payment processing for ISOs & agents work. If you have additional questions about the pros and cons of each, our merchant services team is here to help.

To get started, schedule a free consultation with us today.