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Street SmartsSM:
What is registration anyway?

By Michael Nardy

To learn more about Visa's and MasterCard's registration requirements visit www.greensheet.com/mlsportal/industryfaq.html


This article, the first of a three-part series, will break down much of Visa U.S.A.'s and MasterCard International's registration processes and the numerous myths and realities of the bankcard business. Think of it as a primer on registration and compliance.

Visa and MasterCard

Let's start by defining Visa and MasterCard. Visa and MasterCard are brands, registered trademarks and Associations. They are credit card brands issued by card-issuing banks; they are also corporate brands that sponsor the Olympics, the use of check cards or the new MasterCard PayPass program, for example.

Most of us are familiar with the slogan "Visa: It's everywhere you want to be," as well as MasterCard's "Priceless" advertising campaign. Advertising plays a large role in promoting the brands that ultimately promote the use of a card from a particular bank, such as Capital One's, "What's in your wallet?" campaign.

The banks that issue Visa- and MasterCard-branded cards are members of the Visa and MasterCard Associations. The purpose of these Associations is to market and further the acceptance of their respective card brands, as shown in the previous example, and to establish competitive interchange rates and fees to generate revenue for their member banks.

We can all argue about the phrase "competitive interchange rates," but Visa and MasterCard do not service merchants; rather, they only facilitate bankcard transaction processing to service their member banks. Yes, merchants are an integral part of the bankcard processing matrix; however, the Associations are designed to generate revenue for their member banks first.

Registration 101

To register with Visa and MasterCard means, quite simply, to have them recognize your business through a sponsorship of your sponsor bank (a bank that is a Visa or MasterCard member) so you can market Visa's and MasterCard's card-brand acceptance services under a name approved by them.

To register, a Visa and MasterCard member bank needs to sponsor you. For example, registering with Global Payments Inc. means that Global and its member bank HSBC (Hong Kong ShangHai Bank Corp.) are sponsoring you.

Thus, registration is an acknowledgement by the card Associations that you are offering bankcard processing services to merchants with the endorsement of (typically) a larger member organization and sponsor bank.

That's it, nothing more. No greater "split," no more responsibilities, no terminal-programming duties. Just Visa's and MasterCard's nod indicating, "Okay, this organization markets card acceptance under this name."

Your potential income, responsibilities and liability will ultimately all be assigned by the contract you have with your ISO, bank and network.

This is where many prospective registered organizations get confused. "Registering" as a term is purely related to Visa and MasterCard. However, to get there, you will usually make a decision and go through a bank or network (or both) that will assign certain duties for you and your company.

Thus, registering with Global or National Processing Co. (NPC), for example, becomes one part of a package. For the sake of making it easier to understand, the term "registration" applies to the entire packaged process.

Many will define registering using different terminology, and registering with a company such as Global or NPC will usually be part of a greater package that includes reserve amounts, in-house technical support requirements, deal commitments and more.

Such programs may provide for greater income on the part of the ISO/MSP, but registration on its own does not. After all, when was the last time you signed up for Visa's or MasterCard's ISO program?

In the following paragraphs, I will explain the different levels of the bankcard solicitation and marketing business and will touch upon the duties you may undertake when you register.

MLS - Merchant level salesperson

To market bankcard services, you do not need to register your organization. There are no licensing requirements as there are in the real estate or insurance industries (although this may change for our industry in the future). Almost anyone can become a sales agent and market bankcard processing.

Sales agents can engage in MLS agreements with other organizations (registered or unregistered) to offer bankcard services on behalf of a processor and sponsor bank.

They can also be hired as internal sales representatives or telesales employees to solicit potential merchants.

Thousands of people build careers out of this business but never become registered; even more never leave the employment of their ISO.

The individuals who make their living on the bankcard periphery, whether in technical support, customer service, underwriting, ISO support, internal telesales, risk management or deployment, far outnumber the MLSs who hit the streets to actively solicit potential merchants, and dwarf the numbers of registered ISOs in the United States.

It is important to understand, however, that even if you are a single MLS directly or indirectly employed by the ISO you represent, if you are unregistered, you must do business and sell merchant services in the name of the registered ISO/MSP for which you work.

Neither Visa nor MasterCard recognize MLSs, so the only way to properly sell merchant services is to do so through the ISO you represent.

MLSO - Merchant level sales organization

In this business, an MLSO can contact XYZ Merchant Services, for example, and market its services. In turn, XYZ may be a registered ISO of a member bank. Under this type of arrangement, you would represent XYZ when soliciting potential merchants.

When you put a deal through, it may be branded with the XYZ corporate logo and namesake, and XYZ would board the account and make it live upon approval into the member bank's internal systems and backend network.

In this arrangement, you also do not need to register your sales organization to market bankcard services for another company.

Your organization may engage in an MLSO contract with a company such as XYZ. Your organization would be able to market the processing services of XYZ as an "office" of XYZ.

Duplicitous Visa and MasterCard rules address registration of sales agents and MLSOs. Rule enforcement has increased dramatically in the last few years to ensure that those selling merchant services are compliant with the rules.

To aid in the enforcement of compliance, registered ISOs/MSPs have placed a much needed focus on providing letterhead, marketing materials, business cards and branded Web sites for their sales offices and MLSs.

Registered ISO/MSP - Recognized independent sales organization and member service provider

Registration is not just a process of paying the money and annual renewal fees.

Registrations that Electronic Payments Inc. (EPI) has gone through included due diligence such as onsite inspections, security audits and site visits by our banks. In addition, we have provided personal and corporate tax returns and financials, business continuity plans, drug testing policies, data security policies, a business plan and more.

Many think that registration is just a way to make more money in an ISO/MSP arrangement, but many organizations may not pass muster when a member bank is reviewing them.

Again, it is not always as simple as paying the money. But for the purpose of this series, my next article will address the types of organizations that would want to register, the process of registering and what ISO contracts at the registered ISO/MSP level might look like.

Michael Nardy is Chief Executive Officer of Electronic Payments Inc. (EPI), a founding sponsor of the National Association of Payment Professionals and one of The Green Sheet magazine's Industry Leaders. EPI is one of the nation's fastest growing privately held payment processing companies offering ISO and MLS profitable partnership programs and cutting-edge tools to help their portfolios grow. To learn more about partnering with EPI, visit epiprogram.com or e-mail Nardy at mike@elecpayments.com

Article published in issue number 060402

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