Infrastructure
ISO (Independent Sales Organization)
Definition
ISO (Independent Sales Organization) a third-party company authorized to resell payment processing services on behalf of acquirers. ISOs find merchants, handle sales, and often provide support, while the acquirer provides the actual merchant account. Unlike PayFacs, ISOs don't aggregate merchants - each merchant gets their own MID. ISOs earn residual income on processing volume and may specialize in specific verticals or risk profiles.
Related Terms
Acquirer
A bank or financial institution licensed by card networks to process card transactions on behalf of merchants. Also called acquiring bank or merchant acquirer. The acquirer provides the merchant account, assumes liability for merchant behavior, manages settlements, and handles chargebacks. Major acquirers include Worldpay, First Data (Fiserv), Chase Paymentech, and Elavon. Different acquirers have different risk appetites for merchant verticals.
Payment Facilitator (PayFac)
A payment model where a master merchant (the PayFac) aggregates sub-merchants under its own merchant account. PayFacs like Stripe, Square, and PayPal perform underwriting, onboarding, and risk management on behalf of their acquirers. This enables fast merchant onboarding but means sub-merchants don't have their own MIDs. PayFac model works well for smaller merchants but creates single-point-of-failure risk.
Merchant Account
A bank account that enables a business to accept card payments. The merchant account holds funds from card transactions before settlement to the merchant's business bank account. Obtaining a merchant account requires underwriting by an acquirer. High-risk merchants face more scrutiny and may require specialized acquirers. Terms include processing limits, reserve requirements, and fee structures.
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