What is the Difference Between a Credit Card Processor and an ISO?

October 1, 2018

October 1, 2018

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A FeeFighters user recently asked this question: Sometimes I see entities refer to themselves as credit card processors and sometimes as ISOs. What is the difference between these two? Here is our answer: The Green Sheet defines credit card processors (also known as merchant account providers) as: Processor: A processor is any entity that is physically […]

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A FeeFighters user recently asked this question:

Sometimes I see entities refer to themselves as credit card processors and sometimes as ISOs. What is the difference between these two? Here is our answer: The Green Sheet defines credit card processors (also known as merchant account providers) as:
Processor: A processor is any entity that is physically processing a credit card transaction from swipe to settlement. In other words, a processor is a front-end network that enables a dial terminal, POS or gateway to connect to the Visa U.S.A. and MasterCard Worldwide systems for an authorization from an issuing bank.
Indeed, any back-end or settlement network that is receiving those authorizations and settling them to a sponsor bank is also a processor. Chase Paymentech Solutions LLC is a processor. Global Payments Inc. and First Data Corp. are processors. So, too, is Pay By Touch. Each of these companies has either a front end or back end, or both, and is involved in the physical authorization or settlement of a transaction.
Whereas an ISO is defined as:
ISO: This term is often used to indicate anyone selling bankcard services: Even Electronic Payments Inc. (EPI) calls its sales agents ISOs. [It stands for Independent Sales Organization]
So while a processor can be an ISO, an ISO cannot be a processor. Basically, a processor is in charge of the whole deal…just as it says, from swipe to settlement (learn more about the whole process here). ISOs have agents that resell this service…so for example, First Data is a processor and CoCard resells First Data’s services as an ISO. However, if you were directly to contact First Data, you could still get their services without going through an ISO. How does this affect your business? It doesn’t. There is no rule that mandates which provider of the categories is better, cheaper, or has superior customer service. This is just a glimpse of how complex the whole payment ecosystem is.

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