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Where Do ISOs & MSPs Belong in Credit Card Processing?

May 3, 2022 • by shall

An independent sales organization (ISO) or member service provider (MSP) is a third-party organization utilized by a credit card member bank to process payments. These services allow organizations to accept credit and debit card payments in exchange for their products or services.

ISOs and MSPs are effectively the same. Independent sales organization” is a term used by Visa for approved providers, whereas “member service provider” is used by Mastercard. Both of these describe third-party payment processors that oversee merchant accounts for companies. 

Many modern business owners are familiar with credit card processing and how it works, but ISOs and MSPs differ from standard processing. Let’s look at these ISOs or MSPs and the role they can play in an organization’s merchant account agreement.

Credit Card Processing 101: What’s an ISO or MSP? 

ISOs and MSPs are credit card processing services that aren’t considered banks or credit unions. However, ISOs and MSPs do have an established card provision relationship with various member banks. Although an MSP or ISO is not a credit card association member, it is registered by a credit card corporation — such as Mastercard or VISA — and can provide numerous program services to other members. 

ISOs and MSPs are not considered banks and do not directly handle merchants’ funds and payments. Only the processing banks that ISOs or MSPs have contracted with can do this. If an ISO is going to be registered by a credit card association, only a processing bank that is also a Mastercard or VISA member can sponsor them. In most cases, these banks are association members and registered with Mastercard and VISA from the beginning. Additionally, multiple member banks can sponsor the ISO or MSP.

Here are a few characteristics of ISOs and MSPs and the role they play in credit card processing for businesses: 

Sponsorship by a Member Bank

If an ISO or MSP is sponsored by a member bank, they are allowed to market different merchant accounts. The member bank must ensure that a business is financially stable before carrying out any marketing on its behalf. To register with Mastercard or VISA, a business must comply with all relevant rules and stipulations regarding the marketing of the product. They are also required to pay a fee. 

ISO and MSP Compliance

Businesses and consumers can verify that an ISO or MSP follows compliance by reading their marketing materials or checking out their website or app. Organizations should have a disclosure agreement that states whether or not the company is a bank-registered, FDIC-insured ISO or MSP in the city and state in which they operate. These statements are required by both VISA and Mastercard.

If the disclosure is not visible, the ISO or MSP could face fines and charges up to $25,000. When you apply for a merchant account, make sure to read this disclosure and look over the terms carefully. 

Diving Into Merchant Services 

Credit card processing is a vital part of owning a business. Learn more about getting a merchant account with our e-book, “Merchant Services 101.” This guide answers common questions about payment processing and will guide you through the merchant account process.

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