What is an independent sales organization (ISO)?
An independent sales organization — commonly referred to as an ISO — is a third-party organization that sells products or services on behalf of another organization. In the payments world, an ISO will partner with a payments provider to sell their merchant services to businesses. These can include payment processing solutions, point-of-sale (POS) systems, and other financial or payment security services.
Today, ISOs are also increasingly engaging in partnerships with software companies — also known as integrated software vendors (ISVs) — who have integrated payments into their platforms. The selling power of the ISO combined with the value of an ISV’s complete offering becomes a strategic advantage for attracting merchant users and building long-term value (LTV) with the cross-selling of value-added services (VAS).
3 key takeaways about ISOs
- Software companies can partner directly with a payment processor for the advantages of Embedded Payments. They can also partner with an ISO to integrate payments through a referral partnership, but there may be limitations (see more in the FAQs).
- ISOs can partner with multiple payment processors to offer a broader set of financial solutions to their merchants.
- ISOs are not direct competitors of integrated software vendors (ISVs), however, there is some level of competition between the two in that both groups may be targeting the same merchant audience with payment processing solutions and other merchant services.
How ISOs sell Embedded Finance solutions
ISOs themselves do not have proprietary Embedded Finance capabilities, like payment processing, that they can sell. They must partner with a payments provider that offers those solutions, to then market them to businesses as a third-party seller. Through their partnerships, ISOs can offer a broad range of products including card-present solutions like POS systems, card-not-present solutions like eCommerce products, and other Embedded Finance solutions including embedded lending and “buy now, pay later” options.
Learn more about Embedded Finance.
ISO FAQ
How do ISOs earn revenue?
When an ISO sells merchant services to a business, the ISO’s earnings are typically commission-based, meaning that every time the business processes a transaction, the ISO will earn a percentage of the transaction fees. The higher the transaction volume of a business, the more residual earnings (or residuals) the ISO will receive. Many will also sell or lease products like payment terminals at a markup, or offer additional services like security solutions at a premium cost.
What’s the difference between an ISO and an ISV?
ISOs and ISVs can play very similar roles in the payments universe, by acting as the middlemen between businesses and payment processors, but they come from very different worlds. An ISO is purely a sales organization focused on acquiring merchants and selling only payments-related products or services. An ISV already has its own offering in the form of a business management software and is usually looking to add value to their platform by offering their users access to integrated payment processing and other Embedded Finance solutions.
Both ISOs and ISVs generate revenue through residual earnings and both can have a hand in customer support, depending on their preferred level of involvement and the partnership they have with their payment processor. They can also partner together to drive merchant engagement, with ISOs offering sales expertise and ISVs delivering the high-value capabilities of their platform.
As a software provider, how could I engage with an ISO?
Software companies that want to add Embedded Finance solutions like payment processing can engage in different partnership types with different partner options. The first step is making the decision between Embedded Payments and integrated payments. A software company that partners directly with a payments provider like Worldpay for Platforms to activate Embedded Payments will have the advantages of seamless integration and implementation, white-glove customer service, and flexibility to customize the user experience. Software companies may also choose to integrate payments through a referral partnership. This can be done directly with a payments provider or with an ISO, and while integrated payments can certainly offer the opportunity to earn residual revenue, there are usually limitations with curating the customer experience.
Learn more about the difference between Embedded Payments and integrated payments.
Terms related to ISOs
Learn more about ISOs
- Glossary: 117 software-led payments terms to know
- How to evaluate integrated payment solutions
- Integrated Payments vs Embedded Payments: What’s the difference?
- Software customer success story: Kangarootime