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A Thing
Issue 02:09:02

Industry Leaders:
Getting Banks for Your Buck

Company Profiles

North American Bancard

Merchant Cards International


Be Afraid ... Be Very Afraid ... First of Many Sequels

Electronic Bills Make Money - and Customers - for Banks

Concord EFS Lowers Earnings, Prompts Lawsuit

Consumers' Private Information Still for Sale in California

IRS Investigating Use of Offshore Credit Cards for Tax Evasion

Visa/MC Suit Update

More Bad News from NextCard

New Products

An Add-On Payment Processor for Mobile and Wireless Devices

Taking Terminal Security to the Next Level


Schedule a Sales Sabbatical

Smile and Speak Up




Resource Guide


ISOs ... A Sales Channel of Choice

The ISO sales channel that serves the financial services industry is more than 20 years old and continues to be as robust as ever, with new business entrepreneurs and sales talent being attracted to the market each year. When most people in the industry talk "ISO," they are thinking about "bankcard acquiring." However, the sales channel has its roots in check services, and the check services companies, from verification to guarantee to conversion, continue today to depend on ISOs to make their business models viable.

In fact, the first ISO program in the U.S. was a check program, not a bankcard acquiring program. Before 1981, neither banks nor check companies utilized outside salespeople, and the first such effort was a deal struck between the now defunct Metro Check and a new independent sales organization called Unlimited Marketing Services Association (UMSA). (TeleCredit briefly experimented with a non-employee sales channel, Kemper Insurance Company, in the mid-1970s.)

Within a few months, UMSA had managed to talk Liberty National Bank (Kentucky) into letting it sell bankcard services on the street (this is before draft capture or electronic settlement), and the ISO model was born.

With the demise of Metro Check, TeleCredit (later Equifax, then Certegy) picked up the Metro Check business and ISO contracts with UMSA and began calling it its Independent Sales Channel (ISO). Following UMSA's deal with Liberty National Bank, it contracted with LandMark Bank of Florida, and finally in early 1983 Citicorp legitimized the practice with the UMSA successor company, American Marketing Corp. (AMCOR). The rest, as they say, is history.

While one might say that it was the change from paper to electronics in 1983 that made the ISO sales channel a viable option for banks and check companies, I would say that it was the recognition that a non-employee sales force created significant economic leverage. The use of an ISO sales force created considerable reach with a minimal investment; the only obvious perceived obstacle was some loss of control.

It is with this history and current environment that we stopped to ask some questions of industry representatives. We asked one of the true experts in the ISO game, Vaden Landers, President, Independent Sales Organizations, Global Payments.

Green Sheet:

With all of your experience, what have you learned about becoming an ISO?


Many people assume - erroneously, of course - that becoming an ISO is an easy thing to do because there have been so many success stories coming out of this industry. I am asked all the time, "Why haven't you started an ISO?" My answer: because it is hard and it takes a lot of time, capital, resources and industry knowledge - all of which are not readily available to the bulk of the people who are considering the ISO opportunity.

In fact, there aren't a whole lot of ISOs out there in today's market who would be considered well-capitalized or possess the knowledge level one would think is necessary in order to achieve success.


How, in your view, should you initiate an ISO sales channel?


This is what my experience tells me. An entrepreneur or prospective ISO should:

  1. Write a business plan or hire someone to do it for them. In fact, hire consultants and invest money in developing a strategy.

  2. Look for underserved or niche markets and focus their offerings around obvious needs.

  3. Carefully select their partners (processors, BIN sponsors, equipment vendors, other third-party service providers, etc.). Unwise or hasty decisions in this area will cost them whatever chances they have for success.

  4. Negotiate a favorable ISO agreement with their selected partners. And remember, price is not always the most important thing!

  5. Get registered with the card associations by securing a sponsor bank.

  6. Build a support infrastructure or find an outsourcing partner they can trust. Unless they have unlimited access to cash, they shouldn't try to do too much here - focus on driving revenue through sales and build an infrastructure as the cash-flow situation improves significantly.

  7. Surround themselves with the right people - if they don't know the business inside and out, they had better hire some people who do. If they fail to accomplish this very fundamental objective, success will certainly evade them. Don't take this chore for granted; there is limited talent available at the management levels in this industry. Most companies who are fortunate enough to have good people who are veterans of this business do not want to see them go. They shouldn't be afraid of offering equity in their business in order to attract the right talent. It will turn out to be much less expensive in the long run if they do things right from the onset.

  8. Work hard - sell accounts themselves. Don't rely on someone else to be the reason they succeed or fail. Build upon their own success and use their positive and negative experiences to teach others. Success breeds success!

  9. Structure a compensation plan that rewards their salespeople today and over the course of each merchant relationship.

  10. Know who they are dealing with when hiring salespeople. Run credit and background checks, call references and check employment history with other processors.

  11. Don't be tempted by the lure of easy money. This is a trap that will lead you straight to failure and maybe even to jail. If you want to write a success story, chart a course and stay all the way, regardless of how tough it gets. Do not do anything unethical and focus on servicing the needs of your customers. If you do, they will not leave for pennies, or at a very minimum, they will call you before they do.

  12. Put money away as a reserve against catastrophic losses - there is no quicker method of death in this business than a big-time fraud loss.


Are there specific terms that should be included or avoided when drafting the sales agreement with independent agents?



  1. Non-compete during term and five years after.
  2. Residual vesting.
  3. Residual buy-out clause.
  4. Exit penalties for early termination.
  5. Clearly spell out the pricing (wholesale and retail, if applicable).
  6. Obligations of both parties.
  7. How residuals are to be paid and under what circumstances they will not be.


  1. Fixed buy-out rates.
  2. Taking on all the liability and giving up a significant portion of the revenue. Make your agents responsible for merchant losses by tying their compensation to the overall profitability of the account.


In your view, are there management issues that a manufacturer or service provider should consider before negotiating with an ISO?


  1. Staying power - long-term viability.
  2. Length of time in business - level of industry knowledge.
  3. What is the ISO's productivity potential? Can they produce enough business to justify the investment you will have to make in them over the course of the relationship?
  4. What has been the history of the prospective ISO with its other processing partners?
  5. Who are the principals and what might there be in their pasts that is a sign of things to come?
  6. Are the business and/or principal(s) capable of running a sustainable business from a financial perspective? In other words, what would happen if the ISO experienced a significant loss? Would it put him or her out of business?
  7. Can the ISO afford to put up a cash reserve and contribute to it monthly to protect all parties from a bad situation? Can they even pay the $10,000 registration fee?
  8. Do they have a plan?
  9. What kind of business are they going after, and does the ISO's strategy fit with yours?

Perhaps it's needless to say that Vaden is continuing to find the people and players who are making the choices that he suggests. While Vaden and others are continuing to grow their ISO sales channels for the bankcard acquiring businesses, many other individuals continue to focus on ISOs exclusively for check services.

We asked Dave Siembieda, President of CrossCheck, Inc., and Steve Eazell, Vice President of Sales, Secure Payment Systems:


With all of your experience, what have you learned about becoming an ISO?


Actually, the whole concept of ISO is as American as baseball, apple pie and the flag. It goes to the heart of capitalism and the free-market economy, which made this country what it is today. The whole concept is about the entrepreneurial spirit, the freedom to attempt to succeed and "be somebody" without the constraints of any outside intervention besides the usual obstacles associated with starting up a business in a free-market, capitalistic economy. It's about the sovereignty to build something out of nothing but sheer determination and drive (a couple of bucks wouldn't hurt, either).

In the world of business, I believe that truly nothing has really changed. Just like cream that rises to the top, solid business principles will still prove to be true. I believe that all the adages about good business remain intact. It was the previous years that turned the business world upside down and changed the way we viewed what was a successful business. It was "build it and they will come," whereas in the old days of business one had to chart a course, make a plan and execute.

If you ask me, it is still the same. It is not necessarily cash flow as it is have a plan and execute it with skill and persistence. The ISO world is the same. Not all ISO organizations are successful. Most of those that have succeeded have done so with a solid plan and worked hard to make it happen.

There exists a symbiotic relationship between an organization that benefits from a sales staff that comes without the initial outlay of revenue and ongoing revenue necessary to support it, and those that derive both financial and personal gain from selling these products.


How, in your view, should you initiate an ISO sales channel?


It was almost 20 years ago that CrossCheck started working with a group of independent sales reps that were soon to become a leading force in bringing terminal processing to the country. Back then, we gave them the opportunity to sell check services, and now much of the success of our company has to do with our belief in independent representation. The beauty of the ISO world is that opportunity is available to big and small offices.

For a company such as CrossCheck, that means we can build a channel with "partners." We like to work with a variety of offices, some large and some small, and, depending on the size, we have different levels of recruitment. Small offices often come in as a referral or as a result of seeing our advertising in The Green Sheet, and we have an active group of recruiters and trainers to get them signed up and ready to sell. Large offices are often interested in our partnership programs, and we work with them to build a program specific to their needs.


Building an ISO channel starts with a plan. That plan needs to be focused on getting the maximum benefit in the shortest amount of time. That plan begins with a list of administrative tasks that include the development of how you will manage the agents or offices. Then you need to build your paperwork, including your merchant agreement and your ISO agreement.

It is because there still exists a certain "rogue" ethic within the hearts of many of those that want to be an ISO agent or office that, when drafting an agreement, it is imperative to keep that in mind without losing one's head. You need to be able to diplomatically control the actions of those that would otherwise take you to the proverbial cleaners with an appropriate agreement that reflects this.

It is very important to remember, however, that the only ones that are actually going to read the agreement that you draft are the ones you need not concern yourself with. It is because of the rest that the contract must be ironclad. The others will take care of themselves because they possess the professionalism and experience to recognize that this contract is there to protect the both of you.

Next, you need to work on your image. You must develop a presence in the marketplace. It is not just that you have an idea or a product that is better, but you have to make sure that someone knows about it. You therefore must focus on marketing yourself as the solution to a problem and make sure that you get the word out through advertising and marketing. This can happen through a host of ways, such as trade shows like the ETA, trade publications like The Green Sheet, training programs and some others. You need to get creative.

Then you must develop a solid list of prospects. It is imperative that you possess and utilize past and existing relationships - contacts, you might say. You then need to develop a tracking mechanism for keeping tabs on these prospects and following up on their progress.

It is then quite important to execute this plan with persistence and hard work. This is not the only plan; it is just something that has worked for me.


Are there specific terms that should be included or avoided when drafting the sales agreement with independent agents?


My advice is to make sure your legal counsel reviews any agreement that you offer. That said, make sure your agreement defines duties and responsibilities of both parties, states that the representative or office is acting as an independent contractor, and addresses matters of confidentiality.


In your view, are there management issues that a manufacturer or service provider should consider before negotiating with an ISO?


Take a look and ask yourself if this is an organization you would like to work for. In very broad strokes, do they treat their sub-reps and merchants with respect and honesty? If not, it's going to be a difficult relationship all around and probably not very long-lived.


As we bring ourselves to the present, not much has changed. Banks and check companies still see the economic leverage to their in-house sales efforts, and everyone in the industry has come to understand the considerable loss of control.

While various players are continuing to look for new ways to recruit sales individuals, entrepreneurs continue to be attracted to the industry, and the ISO presence shows no sign of letting up.

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