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Article published in Issue Number: 061202

Street SmartsSM:
The ins and outs of ISOship - Part II

By Michael Nardy, Electronic Payments Inc. (EPI)

I have seen numerous posts lately on the GS Online MLS Forum pertaining to ISO registration, and this article will attempt to sum up much of the discussion. There are really no right or wrong answers when it comes to registering - only an entirety of gray.

And, I can only draw on my knowledge of what my company, Electronic Payments Inc. (EPI), did when I got into the industry.

Some of this article will deal with real-world expenses involved in registration and day-to-day ISO operation. The article will also be speckled with commentary from Forum members who, like many others who post comments there, are enhancing the industry by sharing their experiences and knowledge with their peers.

To start, let's look at the recent comments by Forum members Coach Bob, Slick Streetman and ubc.

Should I register or not?

Coach Bob posted the following question: "How many of you would only deal through a registered ISO/MLS [merchant level salesperson] as opposed to just taking the best deal and service, regardless?

"I am very curious about the trust issue and also the issue of believing what you are getting price-wise as opposed to [being] swayed by the propaganda."

Knowing Coach Bob personally, I was happy to see him post this particular question, because, as many Forum members are aware from his comments, he is unregistered and looking into moving his business forward by registering. He has been in the industry for a long time and has submitted business to various entities over the years.

Coach Bob and others like him are wondering whether they would be seen as more authoritative and have a greater chance of earning the trust and resulting business of other ISOs and MLSs if they were registered. In a way, Coach Bob has answered his question just by posing it.

What's what in MLS programs

In college, I had tons of free time. I could count on one hand the number of textbooks I read cover to cover in those four years. And I didn't even need a hand to figure out how many papers I wrote before the night preceding the due date.

This afforded me the opportunity to begin what would later grow into EPI. I remember (and probably still have) the spreadsheets I created when comparing MLS programs.

Remember those? You would enter data for 20 different companies in an Excel spreadsheet and include their fees, bonuses, revenue splits and features in columns so as to compare them side by side and see which ISOs were the best. I know I did it, but I forgot that the things making ISO programs great or mediocre are not so easily defined.

Slick Streetman posted the following qualities he looks for in an ISO program:

  • "Getting my split from true interchange
  • Most competitive transaction/statement fee
  • Fast approval and quick file builds
  • Accurate, on-time residual payment
  • Prompt, professional customer service
  • AmEx signing bonuses (I understand that Discover's is now history.)
  • Incentives like free (to me) terminals or bonuses on conversions based on their volume."

I agree that many of these features are quite important. But returning to Coach Bob, the key question he wanted answered was, Do the MLSs on the Forum trust registered ISOs and MSPs (merchant service providers) more than nonregistered ones? In other words, does registration imply that an ISO or MSP is stable and trustworthy?

The responses to the question were myriad. Ubc's response provides a nice overall summation:

"I think any MLS who sends deals to a nonregistered ISO/MSP is crazy. ... There is credibility and stability with registration. It means a member bank, Visa and MasterCard have reviewed the ISO/MSP's financial statements (business and personal), reviewed bank statements, reviewed history in business and business plan.

"They have done a credit and criminal background check on the principals of the ISO/MSP. ...

"This does not mean every registered ISO/MSP is at the pinnacle of financial stability, has a brand they want to protect and overall is a credible organization. ... Regardless, that screening, however imperfect it may be, is still significantly better than flying blind and sending your deals to a nonregistered ISO."

I think many would agree. The fact that becoming a registered ISO/MSP is far more involved than just submitting a check for $10,000 is the reason why registering isn't just done as a matter of course when someone enters this business.

What are the registration requirements?

When I speak of registration, I can only discuss what EPI did, whether it was at Provident Bank, Merrick Bank or in our new relationship at BancorpSouth. Nonetheless, the registration process is quite similar from company to company, though some might be a bit more formal in their compliance requirements.

Here is a list of items that are generally required from a bank when you register:

  • Business plan, including business history, business projections and investor information
  • Two years of corporate income tax returns
  • Two years of personal income tax returns
  • Two years of profit and loss statements
  • Three months of business bank statements
  • Current residual statements
  • Profiles of corporate management.

As you can see, while most ISOs can produce this information, it is a lot of documents to assemble. And this still does not include the ISO agreement, Visa U.S.A. and MasterCard Worldwide registration forms and the on-site audit performed by the bank.

When registering, you can expect to submit these papers to the bank or ISO/MSP that is sponsoring your ISO to the card Associations. The process typically can take from four to six weeks to finalize once the bank submits your ISO agreement to the card Associations for review.

My shortlist of what to look for

The basics of this business are quite simple. Many of us know how to make money in the industry. But that's not the same as achieving registration and being capable of recruiting sales representatives under your own brand.

I would look for an ISO that is doing things that will help your office grow. This, of course, can come in many forms.

If you are signing with an ISO, consider whether it has bonus money available, a free terminal program to help you sign more deals or, perhaps, a path to registration with the ISO actually paying your registration expense once you reach that level.

What I would look for is the following (there may be similarities between Slick Streetman's punch list and mine):

  • Competitive pricing - $0.03 to $0.07 transaction fee and interchange pass-through
  • Low or zero bank identification number fees
  • Free equipment program(s)
  • Competent and thorough technical and customer support
  • Detailed online residual reporting (showing every category of interchange)
  • A path to registration and more income, such as your ISO offering more volume, a greater split when you generate more deals and even paying your registration expense at a certain tier level
  • An ISO that is on the cutting edge of programs offered to the ISO/MLS, for example, cash advances or loans to merchants, new equipment, or new technologies.

Doing business with a company that offers many of the benefits mentioned in this article is a good way to get your ISO off the ground and moving in the right direction.

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 ISOs and MLSs profitable partnership programs and cutting-edge tools to help their portfolios grow. To learn more about partnering with EPI, visit or e-mail Michael at

Article published in issue number 061202

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