Reviewing the Two Types of Credit Card Merchant Service Providers in the Market

Online payment systems haven't been as simple as they are today. With a credit card and a click of a button, a purchase can be created. Card merchant services provide businesses with the ability to accept payments through credit and debit cards, the preferred method of payment around the world today.

In the early 2000s, merchants had to make an application for special accounts with banks. Once the accounts had been created, banks accepted the transactions from the consumers on behalf of the organization, transferring the cash from the bank that issued the credit card into the bank from the company.

Critiquing Merchant Services: The Two Types

Today, the selection is no longer that limited. There are now two kinds of these services: processors and resellers.

Processors, also called acquirers, are banks that receive transaction details from the merchant, communicate with financial institutions in approving the transaction, and deposit funds into the merchant's banking account whenever a purchase has been completed.

Resellers, also called Independent Sales Organizations (ISOs), are third-party organizations that resell the offered products and services of 1 or even more processors for a higher fee, as these institutions aren't restricted to the rules and regulations that most banks have. Regarded as middlemen because they do not perform the actual services sold, these entities have an agreement to sell the services of the bank or the bank/processor alliance.

Merchants stick with their existing banks directly for credit card processing since:


banks will waive service fees for letting them pick the provider
they tend to be more convenient
they cut out middleman costs
they possess a feeling of loyalty to the bank

The main disadvantage of choosing a processor is the fact that because this industry is not their priority, banks may have a far more limited knowledge of credit card processing. Because of this, customer support will be compromised, processing equipment costs higher or ISOs might be hired anyway.

ISOs offer all the products that processors have because these organizations can resell for multiple processors and could contract along with other providers for support. Some studies have shown that ISOs are the more commonly chosen providers, handling roughly 80% of all merchant services, with less than 200 from the 700 to several thousand organizations providing legitimate operations. This reason to be concerned was reported because a lot of companies filed complaints against ISOs that advertised reduced rates but charged excessive fees for processing and equipment once the contracts had been signed.

Ultimately, processors will be the safer bet for startup companies that continue to be getting a feel of the industry. Businesses with a little more experience can venture into researching for the best ISO in the market to meet all the needs of the business, the fees, rates and conditions of all the major companies, the specializations the company provides and the new trends in the payment processing industry. This could take a great deal of time and energy on the part of the company but ultimately might be a better option over time.