Starting in a new industry can feel both exciting and challenging. Those new to being Independent Sales Organizations (ISOs) and agents feel this same mix of emotions. Navigating variable pricing models, a seemingly endless number of processing platforms, and a steep learning curve makes it easy to make early mistakes.
If you’re new to this world, understanding how it works and impacts your long-term income is crucial.
Reading this post lets you understand what new ISOs and agents should know, including:
- What ISOs and agents do
- Choosing the right processor
- How to spot potential hidden costs and fees
- Best practices for structuring card processing deals
Understanding What ISOs and Agents Do
Before selling merchant accounts, let’s clarify what you’re doing. An ISO or agent works with merchants and payment processors. This work involves seeking out and speaking with merchants about payment processing services to get this business to sign up with the payment processor you work with.
After a merchant agrees to use these services, ISOs and agents:
- Help merchants set up their accounts
- Integrate new payment solutions with existing systems
- Provide ongoing support and troubleshooting
In return for setting up a business to accept credit and debit cards from customers, an agent or ISO receives a portion of the revenue obtained when a merchant’s customer purchases products or services.
Think of ISOs and agents as crucial middlemen who bridge the daunting gap between processors and business owners. The better you understand a merchant’s pain points, the more valuable you’ll be. Whether walking a business owner through EMV compliance or helping them transition from tiered to interchange-plus pricing, your support goes far beyond onboarding.
Choosing the Right Processor
New ISOs and agents should know that they’ll spend lots of time working with processors. There are hundreds of card processing companies out there. As a new agent or ISO, some processors hope you’ll fall for a flashy marketing pitch or signup bonuses without doing your due diligence and getting stuck in a bad deal.
Thoughtful questions to ask include:
- Will I receive residuals for the life of the merchant account?
- Can I sell my future residuals?
- How often are residuals paid?
A great processor is the foundation for success as an ISO or agent. Don’t be afraid to take the time needed to choose a processor that perfectly suits your business needs.
Strong processor relationships support your business with stellar onboarding assistance, reporting tools, and transparent communication. Weak processors may treat you like a disposable lead generation machine.
New ISOs and agents should know to check for transparency around service agreements, revenue splits, and what happens when you reach certain volume thresholds. If you have questions, always ask for clarification.
Watching Out for Potential Hidden Costs and Fees
Unfortunately, hidden expenses are sometimes hard to avoid. New ISOs and agents should know how to spot and avoid hidden fees. Learning this crucial skill benefits agents, ISOs, and the merchants they serve.
For agents and ISOs, hidden costs can appear in the form of:
- Extensive setup fees (sometimes called desk fees) for joining a program
- Annual compliance or admin fees that eat into your residuals
- Clawbacks on bonuses when certain conditions happen, such as a merchant canceling early
Potential hidden costs and fees for merchants to watch out for include:
- Non-qualified transaction surcharges
- Early termination fees
- PCI non-compliance penalties
- Monthly minimum processing fees
New ISOs and agents should know they’ll explain fees to merchants. So, understanding fee structures thoroughly is vital. If not, you can wind up with confused and sometimes angry merchants. Consider creating a simple one-page guide or whitepaper explaining standard processor fees and what they mean. This simple document can help you close deals while reducing future support-related issues.
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Structuring Card Processing Deals
New ISOs and agents should know deals like the back of their hands. That’s how they earn business. Initially, undercutting your competitors by offering rock-bottom rates might seem ideal. However, that’s not always the best move. Basis points are essential. However, most merchants value reliability, excellent customer service, and long-term costs over saving a few dollars in the beginning.
Take a consultative approach instead of pushing a client to close a deal. That means being ready to explain pricing models, billing, and integrated tools, and being prepared for questions. This extra preparation might seem like overkill, but it is often an effective way to close card processing deals.
Earning Residual Income
Perhaps the most important factor for ISOs and agents is residual income. It’s the lifeblood of an agent’s or ISO’s career success. Residual income is what you earn when customers buy products or services from merchants.
New ISOs and agents should know that this income will not be significant at first. However, with enough time and effort, your merchant accounts could soon grow into a six- or seven-figure portfolio.
A significant aspect of success here involves structuring deals. That’s why many agents and ISOs ensure they have straightforward and documented rights to their respective residual streams.
Signs of a well-structured deal include:
- Full portfolio ownership
- No expiration dates on commission agreements
- The ability to sell or transfer your merchant portfolio / residual stream.
- Guaranteed minimum payouts
Before signing any agreement with a processor, ensure you’ve read and understood each contract line. If you find this step overwhelming or confusing, consider having a lawyer review this agreement.
Common Mistakes: What New ISOs and Agents Should Know to Avoid
A part of starting in any new field is watching out for mistakes. New ISOs and agents often hit the same snags, especially when they’re new in their careers. Here are several common pitfalls to watch out for:
- Overpromising: Whether intentionally or not, never make claims to clients you can’t back up. Merchants often feel burned after learning their agent can’t eliminate all fees or provide the promised initial rate.
- Not Educating Clients: Merchants who don’t understand the value of their agent or ISO might be more likely to switch providers.
- Never Tracking Your Residuals: Not keeping an eye on your merchant services portfolio can leave you guessing how to run your business. It could also reveal nasty surprises when it’s time to sell your portfolio.
Start Smart to Grow Strong
New ISOs and agents should know a lot before entering the payments industry. The right knowledge, discipline, and processor partnerships can make a world of difference, especially when just starting out.
While you’re in the sales industry, it’s not all about using tactics and closing deals. It’s about protecting your future. That means understanding key terms and contracts while avoiding easy-to-make mistakes.
Ready to Grow Smarter? Contact Velocity Funding
Velocity Funding specializes in helping agents and ISOs maximize the value of their portfolios, whether you’re new to this industry or are an experienced professional ready for a buyout. We never hide things in hidden costs and fees. Get started today with a 100% free merchant services portfolio valuation.
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Dean Caso is a Managing Partner at Velocity Funding, which he founded with this company’s other Managing Partner, David Caso, in 2006. Caso graduated in 1983 from Babson College with a Bachelor’s degree in Finance and Investments. With over 35 years of experience, Caso has acquired over 300 credit card processing portfolios. He has a superior eye for opportunity and an unwavering commitment to excellence. Caso’s leadership instills confidence, fosters innovation, and inspires those under his professional command. His decades of industry experience and proven track record of success continue to drive Velocity Funding’s growth and industry-leading presence.