I have dealt with hundreds of ISOs and acquirers in the payments industry and am often asked, "What are the keys to ISO success or to servicing ISO organizations?" You would think I would come up with some incredibly intelligent and profound answers, but in general I have two basic premises in developing an ISO or servicing our industry. Number one: there is no magic solution. ISOs have found success following many different models. You simply need to become a great marketer and focus on what you know best. Number two and more fundamentaly: you need to understand the inter-locking hierarchical nature of our industry and understand that different levels of the hierarchy have different needs. As an individual or organization grows in the payments business, their needs change, sometimes tremendously. Filling those specific needs requires a thorough understanding of our business because ISO/Acquirers at different levels of our business need very different tools, solutions, technologies, individuals and strategies. At the heart of knowing what an ISO/Acquirer needs is the knowledge of where they “fit”.
    I have broken down the acquiring business into five distinct rings. At the center of the structure is the merchant level salesperson (foot sales or telesales) who actually signs merchant accounts. Without them, nothing happens. From there, the industry builds all the way up to a rent-a-BIN ISO or primary acquirer. Interestingly, the rings are interdependent, with organizations on the outer rings often servicing players on the inner rings. Each ring plays a unique role in the payments ecosystem and has its own unique needs. Furthermore, as organizations evolve, their needs evolve as well.

  Merchant Level Salesperson

    The merchant level salesperson (MLS) is the workhorse of the industry. These motivated salespeople are often heavily, if not 100%, commission-driven and spend their days soliciting merchants via phone or on foot.

• Primary Needs
  A good upstream ISO/Acquiring partner that can service all of the MLS' needs; a full and integrated product set; an easy- to-use merchant application; a sales portal for submission and tracking; a sales support staff; leads if at all possible; and timely and correct commission payments.

  Un-Registered Sales Organization

    As a salesperson starts to learn the industry, he or she then tries to teach others how to solicit businesses in a similar manner. The salesperson forms a small company and markets under the name of a registered ISO or acquirer. This can also be an existing company starting to sell merchant services as an extension or value-add of their existing product line.

• Primary Needs
  A similar need set as the MLS, but a more aggressive pricing/ commission program to support paying other salespeople. In addition, a tool to help manage the sales force or distribution channels is beneficial.

  Registered No/Shared Liability ISO

    This organization is very similar to an un-registered sales organization. However, these companies pay the registration fees to Visa and MasterCard and start soliciting merchants under their own name, while still utilizing the upstream services of a registered ISO or acquirer.

• Primary Needs
  Same as the un-registered sales organization. Further improved pricing and promotional capabilities are preferred as well.

  Registered Full Liability ISO

    As the registered ISO builds its scale, the company has a need to take operational functions in-house to properly service merchants and growing distribution channels. In addition, there is a need to have portability rights (“ownership”) in the merchant contracts. The ISO then takes on underwriting, risk management and a handful of other operational functions. The move to this ring is quite complex, but gives the ISO the ability to control its own destiny and build a large and scalable organization.

• Primary Needs
  A one-stop-shop processor/acquirer partner that can provide tools to aid in risk management, credit adjudication and customer service; preferred contracts with value-added service providers (check company, leasing, deployment, merchant advance, etc); a CRM system that allows for single point-of-entry, merchant boarding, customer service, and sales force and commission management; a management team that can support the additional operational burden; funding to support the infrastructure built for this ring.

  Rent-A-BIN ISO/Primary Acquirer

    The rent-a-BIN ISO/Acquirer program allows an ISO to utilize a dedicated BIN and ICA of a primary Visa and MasterCard Member (financial institution). As the name states, the ISO is merely renting this BIN/ICA, as only a Member can truly own a BIN/ICA or a merchant agreement. That said, this is the most sophisticated of all ISO/acquirers and gives an organization the greatest autonomy and flexibility. In this ring, the organization will pick and choose vendors for each and every service, as opposed to going to one processor/acquirer for all their needs. The organization must then create an infrastructure to support this a la carte array of services and bring them together harmoniously. Because of the complexity and responsibilities of this level, very few ISOs actually qualify for this type of program. In fact, many of the most successful ISOs never reach this level.

• Primary Needs
  A sophisticated and highly experienced management team; systems to support all the operational and reporting requirements, as there will be little aid from processor partners; proper controls to avoid major mistakes in processing and operational processes.

    No ring of the hierarchy is any better or worse than another. Not to mention, the outer rings are often dependent upon players of the inner rings to drive business. The important thing to note when aspiring to or servicing a new ring of the hierarchy is that ring to ring needs vary significantly. Just like the servicing needs of national, mid-market and small merchants are very different, or the needs of verticals differ, the needs of different ISOs and acquirers differ too. It is critical to understand the varying needs of the different rings and find or develop solutions accordingly.

Greg Cohen is President of Moneris Solutions U.S., and manages all U.S. initiatives and operations for Moneris Solutions. Mr. Cohen can be contacted at 847-520-6559 or via email at greg.cohen@moneris.com.