ISO Attorneys: Understanding ISO Payment Processing

Electronic payments litigation is sometimes necessary for a business to pursue. An ISO attorney is one who is skilled in all areas of Independent Sales Organizations (otherwise known as an ISO), also known as Member Service Providers (MSPs). These are third-party companies contracted by a credit card member bank to procure new merchant relationships. The ISOs also process online credit card processing transactions for independent small businesses, typically in exchange for a flat fee or percentage of sales. 

Merchants who want to open a credit card processing account for their businesses often seek out ISOs for help, who will in turn sign them up and explain the rates and terms of the credit card merchant account. After the merchant has filled out the application, the ISO will submit this paperwork to an acquirer to start the underwriting process, or it will underwrite the account internally. Once the merchant has been approved, another company (called a processor) will then process the merchant’s card payment transactions.

An ISO attorney deals with all aspects and challenges of the electronic payments industry, including disputes with owners, vendors, processors, banks, ancillary service providers, residual report reviews and fee analyses, overcharges, downgrade surcharges, discount services, mislabeled fees, and wrongfully charged companies. ISO attorneys are also skilled in the right to termination and termination fees, minimum fee requirements, reserve account withholdings, and internal disputes. 

If you are a merchant facing ISO legal issues, your case should be handled by an ISO attorney, who by association, must also be skilled in the ins and outs of the electronic payment industry. The intersection of finance and technology has completely changed the game when it comes to the payment processing industry, resulting in the fast growth of innovative services such as peer-to peer-lending, crowdsourcing, e-banking, and e-credit card payments.

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A Look at the Electronic Payments Industry

The payments industry is a fast-paced and ever-changing scene that’s constantly in a state of flux due to new methods of payment, mergers & acquisitions, and of course new technology. As technology takes a step forward, payment technology companies are playing a bigger role in the payments industry, with some even merging with traditional financial institutions such as banks to cater to evolving merchant preferences. 

It used to be that payment processing was just about transferring funds, but now the newest players in the payment processing industry are redefining the customer experience while allowing business owners to manage their companies much more easily.

Understanding ISOs

In short, an ISO or MSP is the middleman among merchants, acquiring banks, and card-issuing banks. Banks legally authorize ISOs to establish and cultivate relationships with merchants. 

An ISO provides, for a flat fee or percentage of the transactions, the equipment necessary for merchants to accept payments. If you have a brick-and-mortar location, this will include credit card terminals to facilitate credit card processing. For online businesses, they provide digital payment gateways. 

ISOs might also provide additional products and services according to the specific business’s needs. This typically includes items such as customer relationship management software. 

An ISO offers ongoing customer support as long as the merchant remains partnered with it, providing customized solutions and flexible pricing packages. 

The Difference Between ISOs and MSPs

You’ll hear the terms ISO and MSP used interchangeably, and while they play the same role, the difference depends on which credit card company the provider is associated with. Many, like Visa, use the term ISO. MasterCard, on the other hand, uses its own term: MSP. 

You might also hear the term PSP, or payment solutions provider. It is the same as an ISO or MSP. The difference is that it is not connected to one card or bank. Therefore, anyone in the ISO payment processing industry can use it. 

How ISO Credit Card Processing Works

‌ISO payment processing is fast, but it can be complicated because of the number of parties involved. Each transaction includes the customer, merchant, card-issuing bank, acquiring bank, and ISO.

‌Customer 

‌Credit card processing begins when your customer swipes their credit card. This credit card comes from their card-issuing bank, which partners with one of the major credit card providers.

Merchant 

The vendor or merchant offers the option to pay with a credit card. When the customer swipes the card, the merchant’s system sends the credit card information to the bank to get authorization to receive the payment.

Card-Issuing Bank

The card-issuing bank is the customer’s bank, which has provided the customer’s credit card. When the card gets swiped, the card-issuing bank either approves or denies the transaction, according to the customer’s account balance. 

If approved, the bank then bills the customer for that amount. Upon payment, the money gets dispersed to the acquiring bank.

Acquiring Bank

‌The acquiring bank is the merchant’s bank, which holds the merchant’s money and receives payments on behalf of the merchant. When transactions are cleared and paid, the money goes into the merchant’s account at the acquiring bank. 

ISO

The ‌ISO’s role is to make everything work together. An ISO transfers the requests and information between the parties involved in ISO payment processing, moving the payment through the process.

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Merchant’s Choice: ISO or Other Payment Processors?

‌ISOs allow merchants to accept credit card payments from their customers. But there are several third-party payment methods to choose from, in addition to ISOs for payment processing. Merchants considering ISOs should consider a few possible advantages, from fees to security to support.

Fees

‌While ISOs do charge fees, they are typically much lower than other payment processors. ISOs base their fees on individual accounts according to business history and potential risk. Other payment processors like Square and PayPal charge every business the same fee.

Security

Acquiring banks and credit card issuers only work with secure ISOs. If you work with a registered ISO, you can trust that the process is as secure as it would be through a bank. 

Support

‌One big advantage of ISOs is the level of support a merchant receives. Banks have a lot of volume to deal with on a regular basis, making it challenging to give all merchants the support they need.

ISOs, on the other hand, are smaller and have fewer merchant partners. Therefore, they can provide a much greater level of personalized support than banks can. This support is one of the biggest reasons merchants use an ISO instead of going directly through a bank.

If you choose to work with an ISO, you can gain several benefits. However, you must be vigilant when choosing between ISO options. At Global Legal Law Firm, we can help guide you through vetting potential ISOs and ensuring the contracts protect you. 

Challenges of ISO Credit Card Processing

‌While ISOs or MSPs can provide great benefits, they come with one serious challenge: understanding and following the legal technicalities attached to them. 

The payment processing industry as a whole is full of regulations by which each party must abide. If a merchant does not understand these regulations, it can face legal issues. 

A merchant might also be taken advantage of by a party in the payment process due to a lack of knowledge. An ISO attorney from Global Legal Law Firm can help prevent both scenarios.

Why Do I Need an ISO Lawyer?

There’s little doubt that technology continues to drive commerce and innovative payment methods. Payment regulations and laws are just as complex and ever-changing. ISO attorneys and electronic payment lawyers bring the knowledge and experience to walk you through the complicated regulatory landscape while advising you on critical contractual relationships.

Here at Global Legal Law Firm, we have many years of experience with legal issues surrounding credit and debit card processing, money transmission, merchant acquiring, prepaid access, virtual wallets, mobile payments, ACH, payment facilitation, and MATCH list removal for merchants.

Here’s a more in-depth look at what we do:

  • Electronic Payments Law
  • Mergers & Acquisitions, Contract Review, & Purchases
  • Collections & Loss Mitigation
  • Regulatory Defense
  • Corporate Planning & Compliance
  • Opinion Letters
  • Merchant Disputes
  • MATCH or TMF List Issues

We have vast experience in regards to MATCH or TMF List issues in particular. MATCH stands for Member Alert to Control High-Risk Merchants and it’s also known as Terminated Merchant File (TMF). This list keeps track of businesses with a credit card processing account that’s been terminated by an acquiring bank. When a bank considers whether or not to accept you for a merchant account, it will reference MATCH to see if you are listed. If you show up on the list, you will most likely be denied – sort of like a blacklist for the banking industry.

Showing up on this list can be a real problem for merchants who accept electronic payments, so you want to start the steps for removal right away.

Contact Global Legal Law Firm 

For more information on how we can serve you with our Electronic Payments & Financial Services, contact us!  Our ISO lawyers are ready to represent you in the complex payments space.

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