Isn't an ISO the same as a MIDDLE MAN?

The Middle Man Myth

Here are the main players and the role or core competency of each. Which one is the middle man?

Bankcard Associations (MasterCard, Visa, Discover)
Set Interchange and operating regulations

Issuing Member Bank
Issue cards

Acquiring Member Bank
Merchant bank


  • Front-end technology networks for authorization & settlement fees
  • Back-end technology networks for ACH funding, statement generation, chargebacks

Terminal/POS/Payment Gateways
Wholesale technology providers


  • Sales & marketing
  • Underwriting risk liability
  • Account management
  • Customer service

Each of the tasks above must be performed to bring a complete merchant services program to market. As explained in detail on this site, all banks, processors, ISO/MSP and merchants work from the exact same Interchange Reimbursement Rates and Fees schedule. The costs to perform these additional tasks however vary depending on the organizations productivity, fixed overhead, salaries, etc., while influence on profit margins can come in the form of pressure from investors.

While any organization can perform multiple roles, the real question is do you believe that the organization whose core competency is to be a bank or a network processor can perform the tasks of sales, underwriting, account management and customer service at lower overhead and with greater efficiency than can be achieved by outsourcing these services, thus giving them an advantage in the marketplace?

The bottom line is that outsourcing and partnerships work to deliver service with advantages to all parties. If they did not, in this highly competitive market, the ISO/MSP would have already been cut out of the picture. Instead, most all merchants in the U.S. are serviced by ISOs.

This is not to say that all ISO/MSP organizations are created equal. There are vast differences in experience, service levels, contract terms, marketing messages, pricing structures, incentives, testimonials, financial strength, etc.