Do I need an ISO or MSP to Accept Credit Cards?

Business owners know they need to accept credit cards to run a viable business. They may even understand they need a merchant account to accept credit card payments. Many business owners don't concern themselves with the names of the providers, or the various terms thrown around by members of the payment processing industry. 

We use terms like merchant instead of business owner. We refer to members of the industry with terms like ISO, MSP, aggregator, PayFac, and so on. But why is it good for merchants to understand these terms?

These terms refer to the different types of institutions that bring credit card processing services to business owners. Understanding terminology helps merchants to differentiate between the options they have for solutions to accept credit card payments. And, of course, this will help them choose the solution that best fits their needs.

Today, we’re going to explain what ISO and MSP stand for, and what role they play in the credit card processing circle.

What are ISOs and MSPs?  

ISO stands for Independent Sales Organizations and MSP stands for Merchant Service Provider. Both are organizations that partner with the card associations (Visa, MasterCard) and acquiring banks to bring credit card processing services to merchants. 

Visa refers to these partners as ISOs or Independent Sales Organizations. MasterCard refers to these independent sales organizations as MSPs or Member Service Providers. But to confuse things more, many industry insiders also use the term Merchant Service Provider - also abbreviated MSP. But it doesn't really matter, since all three terms are used interchangeably by people working in the industry. 

Member/Merchant Service Provider is the most fitting because this is exactly what they are. They provide member services to all merchants who want to accept credit cards. 

What do ISOs/MSPs do?

ISOs work closely with the Credit Card Association members to bring services to merchants that enable them to accept card payments. Credit Card Associations grant ISOs/MSPs permission to offer payment solutions to merchants and to communicate with card holders. This way, ISO/MSPs can connect merchants with their own merchant account directly with an Acquiring bank. 

In the simplest explanation, ISOs/MSPs can be considered middlemen. They provide the bridge between merchants and the Acquiring banks that facilitate credit card transaction payments. But they’re also a bridge between acquiring banks and their potential new merchant clients.

MSPs do most, if not all, of the heavy lifting of bringing new merchant clients to the acquiring banks. And they handle much of the preliminary underwriting and onboarding of new clients.

Think of it this way. When you want to access the internet you need to work with an Internet Service Provider. The ISP acts as the technology bridge and service provider that grants you access to the internet. MSP/ISOs work in the same way by bridging merchants with the card brand networks capable of routing the transaction. They provide the technology and customer service to securely process payments.

Merchant Service Providers do more than bring clients to the acquiring banks. They work for the merchants and do exactly what their name implies - provide services for their merchants. This service means providing more than just access to payment solutions. They’re also responsible for providing merchants with all the supporting solutions needed when to accept credit cards for payment. 

This includes hardware and software that meets data security standards set by the Payment Card Industry (PCI). It also includes comprehensive fraud detection as well as chargeback mitigation programs, even data analytics and reporting. And, they’re the ones who provide the merchant with customer service and support throughout the life of the account.

Acquiring banks only have to communicate with their registered ISO/MSPs or can be contracted to provide service centers for the ISO or MSP. 

 A majority of the risk falls on the shoulders of ISOs and MSPs.   

ISO/MSPs assume increased costs, liability, and responsibility for merchant accounts.

First, they must register with each card association member in order to provide services to merchants. This registration costs them $5000 for each association the first year. Then they must pay $2500 each year thereafter to re-register. 

They also go through a rigorous review process before being granted registration. Acquiring banks and card brands expect ISOs and MSPs to adhere to strict rules for participation in the credit card processing network. During the review process all financials, marketing materials, security protocols, and even employees are fully vetted. 

How do ISO/MSPs differ from payment aggregators?

Square and PayPal are two of the largest and most well-recognized payment aggregators. It's easy to think that everyone that allows you to accept credit cards does it the same way. But that’s actually not the case. Working with a Merchant Service Provider is very different from how merchant aggregators work.

Of course, merchant aggregators also provide merchants with the ability to accept card payments. They just do it much differently.

Merchant aggregators hold one merchant account under their own name that acts as a parent merchant account. They lump all the merchants they sign up together and allow them to process payments under their parent merchant account. So instead of each merchant having their own merchant account, they all process through one single account. 

In addition, in many cases, each merchant pays the exact same fee for processing. Business history and risk level do not come into play. If you’re a low-risk merchant with a clean business history, you’ll pay the same rate as a brand new business who brings a greater level of risk to the aggregator. It is up to the aggregator to manage the total risk of the parent merchant account.

These types of accounts can often be less secure for the merchants. If something goes wrong with the main account, it will affect every merchant who’s processing under it. At any time, the bank can freeze or close the merchant account.

Often, the processor will terminate the aggregate merchant account with very little notice. This can happen due to something any one of the merchants in the account does, OR, if the risk level of the combined merchants in the account is too high. Therefore, you can fall victim simply because of something any one of the other merchants did that has nothing to do with you.

For this reason, aggregators don't like to serve any business model that they consider higher risk. If they onboard a high-risk business, it could result in getting the whole merchant account being shut down. If a business is initially approved, then later found to be too high-risk, the aggregator will quickly terminate the account to protect the parent merchant account.

If you’re a high-risk business, it’s especially important to find an experienced merchant service provider who can supply you with the best solution for your needs.

What are the benefits of working with an ISO/MSP?

As we’ve shown, ISOs and MSPs provide each merchant with their own merchant account. This means that they individually underwrite each merchant before they approve their merchant account. 

Merchants have the ability to negotiate the best rates and terms based on their own merits. They’re not just subject to paying the same rate as everyone else like you do with aggregators. This means merchants can often realize significant savings compared to rates from an aggregator. It also means they’re less likely to have their merchant account closed unexpectedly since they’ve already vetted the business model.

At the same time, acquiring banks can impose large processing minimums on their registered ISOs. If for some reason the ISOs accounts do not meet those minimums, they must make up for it by giving up their profits.

This is true of small stand alone shops as well as your local bank. Yes, your local bank may be an ISOs or MSPs or they use an ISO/MSP to provide service. Really the only thing to look out for here are high pressure sales tactics. Established ISOs will have supportive and consultative representatives without the need to struggle and meet these minimums.

Merchant accounts are not “one size fits all”- merchants need payment gateway options.

Your business is not the same as the one down the street. Likewise your business today is not the same business it was a decade or even a year ago. You need to make sure that you work with an ISO, MSP, or Acquirer who has the power and tools to adapt to the changes your business will go through.

Having access to multiple payment gateways or having a fully customizable payment gateway that will meet or exceed the needs of your business.  

MonerePay chooses merchant services as its highest priority.

At MonerePay, we don't work for the acquiring banks; we work for our clients. 

Throughout our decades of working in the credit card processing industry, we’ve cultivated several trusted banking relationships. This led us to a highly unique opportunity to partner with Chase Bank. 

We have the ability to harness the power of the largest financial institution in the world and combine it with our boutique service and features. Instead of a one size fits all approach, we’re able to custom tailor our credit card processing services to our client’s needs. Furthermore we are able to do it with Chase's exclusive savings program.

Once we identify your business' unique needs you will be assigned a dedicated merchant account. Your advisor will work through the reporting, installation, and ongoing service needs of your business for optimal merchant account management.

The MonerePay payment gateway can be custom tailored to your reporting needs while using Level 2 and 3 data, when applicable, to optimize the cost of each transaction in Interchange. That combined with savings on every Chase card used at your business provides unparalleled competitive pricing.

Compared to working with your bank MonerePay maintains a much lower overhead and has no investor's margins to meet. This combined with our ability to offer discounts the competition does not have access to enables us to be more competitive. Simultaneously, our Fintech approach provides the cutting edge tools and service your business needs to succeed, now and in the future. 

We pride ourselves on bringing transparent, reliable, and fair merchant account solutions to our merchants. And we top it all off with personalized customer service.  Regardless of the size of your business we provide dedicated representatives, nimble and fast integrations, and outstanding rates.

Our clients are our cherished, loyal customers. They are not just another name in our portfolio. Just like the regulars that patronize your business, again and again, our clients are our regulars. We know your name, we know your business, and we work hard to fill your needs. That's how we earn the loyalty of our merchants. 

Wondering if you have the right solution for your business’s needs? Give one of our ETA Certified Payments Professionals a call today. We’d be happy to audit your account and see how we can help you. And if your solution is perfect and your rates are great, we’re not afraid to admit it. That's Integrity.