5 challenges to overcome when starting as an ISO/MSP

Entering the world of the payment industry can be overwhelming for aspiring merchants, as it is filled with confusing terminology, abbreviations, and intricate ideas. Staying informed about these aspects can be demanding, especially when establishing card payment processing. 

If you're seeking a comprehensive understanding of ISO and MSP and their importance in the payments industry, you've arrived at the perfect destination. 

Understanding ISO/MSP: defining the roles and functions

Meeting the unique requirements of merchants poses a significant challenge for card associations and banks, as their expertise lies primarily in finance rather than the intricacies of online business. To expand their reach and expedite client acquisition, acquiring banks rely on ISO/MSPs.

ISO (Independent Sales Organisation) and MSP (Merchant Services Provider) are third-party companies or individuals that have partnerships with card association member banks and provide merchants with payment processing services on their behalf.

While Visa commonly designates its partners as ISOs, associations affiliated with Mastercard use the term MSP to describe their partnering organisations. Nevertheless, in the payment industry, these terms are often used interchangeably. If an organisation resells services from both Visa and Mastercard (typically the case), it's commonly called an ISO/MSP.

Is it worth a shot?

For individuals with a solid sales background and a desire to expand their network, the ISO/MSP sector presents a lucrative opportunity. As an ISO/MSP, you typically earn a percentage of the transaction fees for each sale processed through your partnership. The more businesses you onboard, the greater your earning potential.Nevertheless, this industry is highly competitive, and distinguishing oneself in a saturated market can be challenging. 

Key challenges when starting as an ISO/MSP

1. Building a processing solution

ISO/MSPs are not just sellers. There are plenty of functions they can perform:

• Opening merchant accounts

• Processing chargebacks

• Fraud monitoring

• Selling or leasing POS terminals

• Authorising and processing transactions

• Collecting and analysing payment data.

A robust technological infrastructure is essential to provide value-added services to your merchants and stay competitive. However, developing payment processing software requires significant time and resources. Most commonly, this process takes at least three years. Besides, substantial costs are associated with assembling a development team and maintaining the necessary infrastructure.

2. Hiring and maintaining an IT team

If you are committed to developing and managing your own processing capabilities, engaging the expertise of a proficient development team becomes vital. They will be responsible for overseeing technical matters, addressing potential processing issues, and implementing system upgrades to meet the evolving needs of merchants.

However, sourcing, hiring, and onboarding skilled employees can take time and effort. Additionally, not all ISO/MSPs have the financial capability to effort such experts.

3. Registrations and audits

Each ISO/MSP must register with credit card associations (Visa, Mastercard) to handle payment processing duties. It is a time-consuming and painstaking procedure, including thoroughly examining all the applicant's documentation. Experts suggest allocating for no less than six months to become a legal ISO/MSP.

4. Managing financial flows and risks

Having a processing solution is not enough to ensure the sustainability of your ISO/MSP. As the number of merchants in your scope increases, the task of managing transaction flows and identifying payment risks becomes more challenging. Equally important is the ability to track vital business metrics, allowing you to assess your progress and determine if you are on the right path. Failure to possess adequate analytics and management tools can result in losing clients and eroding the reputation you have worked diligently to establish.

5. Signing contracts with new partners and clients

The highly-competitive ISO/MSP environment makes them fight for every client. It's incredibly challenging for newcomers to get their first clients on board, especially without an impressive base of partner banks. No one knows how much time and effort you will have to spend to build a client base and start making a profit.

How to succeed as ISO/MSP?

• Consider using a white-label model. This way, you can provide payment services based on ready-made infrastructure marketed under your brand.

• Rely on a professional team. Payment team as a service is an excellent option for newcomers in ISO/MSP business. It allows you to focus on business development without worrying about technical matters.

• Advanced analytics puts all the performance metrics before your eyes, keeping you aware of the health and performance of your business.

• Access to a global merchant network is key. White-label solution providers with a deep comprehension of ISO/MSP businesses' requirements grant their clients access to their network of merchants. This empowerment enables them to expand and diversify their portfolio of partners and clients effectively. 

To sum up

In today's fiercely competitive landscape, establishing oneself as an ISO/MSP is no easy feat. Whether you're determined to embark on your journey as an ISO/MSP or looking to expand your existing business, leveraging a white-label payment solution specifically tailored to elevate ISO/MSP performance is highly recommended.