When considering where to obtain merchant services, there is no shortage of providers to choose from now a days that’s for sure! There is no doubt that processing has become a lucrative business. Over time, the service has been de-regulated, so merchant’s have much more choice as to who they want their provider to be. There are two major conglomerates to choose from. One can choose to have their Bank (member Bank – which means they are certified to process Visa and MC) process their transactions, or an ISO (Independent Sales Organization). Iso’s were developed after the de-regulation of merchant services.
There are some major differences between having an ISO process your transactions in comparison to the bank.
Direct Processing is a little bit faster from a bank hosted account, only because they have a direct link to the merchant’s banking info, where as with an ISO, the timing for deposits maybe anywhere from 24-48 hours after settlement. This difference exists because the branch would have a direct link to the deposit account, where the Iso’s deposit has to be cleared by Iso, then the member bank.
The Member Banks will also be more accepting of high risk merchant processing because of this link to the merchant’s account. Often times a merchant will have a business account with their bank, as well as other savings and credit accounts. Because of this “direct access” the branch has immediate security in the form of the entire merchant’s investments act to draw upon should there be any faulty transactions.
This high risk processing has advantages with Iso’s that the member banks cannot compete with at the same time….often times Iso’s are eager to obtain business, and, with the appropriated security in place, maybe more accepting of high risk accounts.
Service levels are another major difference. Banks are not as fast to provide comfortable “one stop” customer service in the same way that an Iso may be. Again Iso’s are more customer driven and as a result often provide better, faster more specific and personal customer service. As one may deduce, part of this improved service has allot to do with Hours of Service, Iso’s often have their own customer service and help desks working around the clock, where as a bank has very pre determined hours of operation, which are regulated and often not convenient for when a merchant may require additional services.
Pricing is a standard issue for any merchant seeking out services. This is where we see another major difference, in that, the Iso’s will compete and drive their prices down in order to obtain one’s business, the member banks are less competitive and often do not respond to competitive pricing quotes.
The best aspect of all of the differences mentioned here is that with the existence of both Bank’s and Iso’s being able to process merchant services, it offers a competitive edge to merchants. Just like any monopoly the more players on the board, the more fierce the competition which, in relation to merchant services, leads to the potential for better more competitive pricing and increase in the quality of service for merchants.
