Starting with an idea and turning it into a business is a mesmerizing and challenging ordeal. It comes with its perks, being self-employed given a feeling of freedom and control over one’s life. May it be a retail store or an international business. Setting your routine as per your needs is just amazing. But it’s not all fun and games. From managing expenses to maximize profits to improve the customers’ in-store experience, the everyday routine of a business owner can sometimes be exhausting.
Furthermore, there are countless requirements and necessities that a business needs to fulfill to function at all. As a result, business owners have to face the payment industry’s world. Business owners are faced with terms such as credit card association, independent sales office (ISO), and merchant account. Also, to improve the services they provide to the customers, merchants have to add things like credit cards and contactless payments at the point of sale. Unavoidably, a merchant has to contact payment processors to access newer and more efficient payment methods. In a broad generalization of the term, a merchant service provider is basically a third-party payment processor. But there is more to it than that. First, we will have to understand what a processor is before discussing the differences between merchant service providers and merchant services agents.
With advancements in the payment industry, accepting only cash as compensation for the goods and/or services that your business or store provides is very outdated. Newer and more efficient credit cards and e-wallets are gaining immense popularity. On top of that, the outbreak of the COVID-19 pandemic has boosted the popularity of contactless payment methods exponentially. But accepting credit cards as payment, or the alternatives for that matter, is not as simple as taking cash from a customer. A merchant needs a merchant account (separate from their business or personal account) and a merchant service provider to process those payments. Payment processors handle all the funding to come through credit cards and ultimately deposit them into your business account. But no matter what transaction you make, you cannot have it done without a processor. Processors are huge setups, accommodating hundreds, if not thousands, of businesses with their transactional needs.
Third-party payment processors have to go to processors to get their payments processed. Processors are the payment industry’s wholesalers; they give a processing rate to the merchant service providers (another name for ISOs), who then offer their services to merchants. Merchants can directly sign up with a processor, but it’s not assured that they will get better rates. Signing up directly with a processor may have drawbacks. You may not get a dedicated sales agent, and the customer service would be through their offshore call-center. Now that we know about processors, we can discuss independent sales offices.
Independent Sales Office
These are also known as member service providers (MSP). ISOs are payment processors registered with credit card associations (usually Visa and Mastercard). These companies represent one or more processors and indulge in merchant accounts and related services. Merchant Services ISO’s can be tiny offices dealing in numbered clients or large businesses, sometimes even more extensive than the processor. Becoming a registered independent service office is not an easy task. There are several steps. The proof of financial integrity and the availability of required skills and equipment is essential to register. These companies’ primary focus is to generate sales and buy-in clients to provide credit card processing services. This, at times, involves financial liability to the payment processor based on the accounts of the merchants they deal with.
The most significant benefit of a third-party payment processor is the personalized service they provide to the merchants. Larger processors cannot assign personnel directly to you or offer you dedicated customer service. But with a merchant service provider, you are likely to get a dedicated sales team that shall know your business in and out and help you with the troubles you face. Usually, with third-party payment processors, the customer support representative that you will be assigned will remain the same. This removes the problem of explaining your business to a customer support representative each time you need assistance.
These payment processors are dedicated to solving the clients they take on and usually help them grow. ISOs or MSPs have much greater leverage over accounts’ fees and structures. They provide multiple services, starting from credit card processing to aiding the business with tools. They charge their markup over the fees set by the processors.
Sales agents, or in other terms, merchant account resellers, are people who sign up with third-party payment processors and get clients to them. For their role of bringing a customer to the payment processor, they get a commission out of the fees the merchant will be charged. There are good and bad agents all around the market, and the good ones will have pricing that is not much different from the merchant service provider. They are in charge of getting you to the payment processor and are the go-to person for the merchant in case of any trouble.
A good merchant services agent can be a blessing for a business. They look out for your business and highlight your problems with the merchant services provider. It is good to have someone dedicated to your business’s betterment, even at a small cost, as they might save you a lot in the long run. The best tip to look for a good agent is to look for one that has been in the business for a long time. These representatives would have many companies working with them. You would be able to get the merchants’ reviews signed up with them.
So, the difference between an ISO and an agent is that an agent represents a merchant services provider who is just selling their services to you. The real job of processing your transactions is done at the end of the payment processor.