Independent Sales Organizations (ISOs) vs. Independent Software Vendors (ISVs)

An ISO (Independent Sales Organization) is a third-party company that manages merchant accounts. They are contracted by banks to acquire and manage merchant relationships on their behalf. They use this relationship to help businesses obtain merchant accounts, which in turn allows businesses to accept credit card payments.

ISOs act on behalf of banks and payment processors as independent representatives. ISOs are neither a part of the merchant nor a part of the organization they represent. For merchants that utilize an ISO, most day-to-day tasks will be handled by the ISO instead of the end service provider they represent.

While an ISO is not a part of the financial institution they represent, they are responsible for the day-to-day tasks associated with the institution. An ISO will help with all the ins and outs of the payment process: defining which cards you can accept, what fees you will be subject to, acquiring POS (point-of-sale) equipment, and providing customer support.

From a merchant’s perspective, ISOs may seem like just an extra cog in the machine. But for service providers, ISOs allow them to keep up with continued customer demands. As such, they are a necessary part of modern payment processing.

An ISV (Independent Software Vendor) is a software producer in charge of distributing software. They differ from both hardware manufacturers and banks, even though those may also distribute and sell software. The main difference is that ISVs offer specialized solutions in their field that many primary hardware manufacturers don’t offer.

While an ISV can both build and develop software, its main purpose is to sell software. ISVs distribute software or software as a service (SaaS) solution to consumers, enterprise customers, or larger ISVs. ISVs can either be a business or an individual, depending on the size of the ISV.

Larger solution providers, like software manufacturers or internet service providers, may use an ISV to fill a gap within their existing solutions. Larger ISVs will offer multiple services/solutions to create a complete product for consumers looking for a “one-stop-shop” for their software needs. ISVs are a crucial part of the IT industry as both creators and distributors of new technology solutions.

ISOs and ISVs within the payment industry both support businesses by providing specialized services that drive complex solutions. Often the two operate in tandem when it comes to POS (point-of-sale) systems, with ISOs delivering the payment terminal technology and ISVs creating compatible software for specialized needs. As payment systems continue to innovate (with both EMV chip technology and smartphone wallets becoming the new standard) the relationship between the two has never been more important.

Both ISOs and ISVs are leading the way in innovation, finding ways to simplify and consolidate their services to make it easier for their customers. As they do this, however, the line between the services the two provide has become blurred. ISOs, looking to provide the best solutions for merchants, are adopting software into their offerings. ISVs, looking to sell a comprehensive payments solution, may start integrating POS systems that complement their software into their solutions.

As the two converge, it’s important to keep the flexibility of your payment process in mind as you choose technology for your business. Choosing a PSP (Payment Service Provider) with a wide range of integrations is going to give your business the freedom it needs for complex solutions.

Choosing the right software solution can be a complex process for your business. Finding businesses that offer flexible solutions is the key aspect of building a working, and scalable, payment process. A flexible PSP will enable you to utilize all ISOs and ISVs have to offer your company.