Starting my own ISO

I was given the task of researching all I could about merchant processing. My “investor” wants to start an ISO/MSP, but wants me to do all of the legwork.
Where do I start? How much is it to get everything up and running? What components are needed to run a successful business in this industry?

If they don’t anything about it they probably shouldn’t be doing it. There are high startup and annual costs plus an investigation into his background as well as the business’. And that’s just to get started. They will need an infrastructure to manage their portfolio, handle sales, and handle customer service. And if they wish to have sales agents they’ll need to be able to manage them as well.

I suggest being a reseller first and learning the industry before becoming a MSP/ISO.

I have to agree. I don’t think you can build a successful business without knowing a lot about that business and industry…

I would suggest you and your investor work in the credit card processing industry for a while and learn the ins and outs before putting time and money starting a business.

9 out of 10 startups fail, and I believe it’s because the majority of those people didn’t know what they were getting into.

It’s hard enough for experienced business people to make it – don’t stack the cards in your competitor’s favor by going into a business blind.

Check out Green Sheet for some information. It can be done - but it will cost money and time. First Data can do a lot of it for you as well. A lot of their agents have become ISOs etc and still let First Data do the risk analysis / management, customer service.

Decide what you want to outsource and what you want to maintain yourself.

I highly recommend becoming an agent with a reputable ISO. At least get your feet wet, sign up some accounts, and learn more about selling and the industry in general. Find an ISO and let them know up front that you plan to eventually become your own ISO. Make sure that when you do sign an agent contract you are not signing a ‘non-compete’ or exclusive contract. Basically, you want to make sure you will keep any residual income if you become your own ISO. You will probably want a lawyer to verify the contract for you, just be sure.

The vast majority of agents don’t stay in the business for more than few months. It is an extremely competitive business and many people find that it isn’t worth the effort.

If you still want to go forward and become an ISO yourself, you have a few options. You can sign with a large ISO (FDMS, Nova, Global Payments) or a medium ISO (there’s lots of these). There are benefits to both types of ISO, but for someone new to processing, I strongly suggest going to a medium ISO and not a super large one. This will have a few advantages for you. First off, the support you get is almost always better with the smaller company. Secondly, the support you need to provide yourself (Customer service, technical support, reprogramming, etc.) is ‘often’ (Not always) much less with a medium sized ISO. Business owners in general tend to get better service with smaller companies, so you will generally have less problems related to customer support. If you go with too small of an ISO they may not provide any tech or customer service, which would put a huge load on you, so there is a happy medium. You will need to research to figure this one out. Lastly, large ISO’s often have strict requirements for business types (Ex: FDMS - can’t accept <1 year internet businesses) and you will want to have some option for those types of businesses.

As far as cost goes, this is very dependant on how much support you plan on doing yourself. Generally, you can ISO with about the same responsibilites as an agent except you can use your own name. You can also partner with a company that will give you a full or partial BIN. To get a good BIN contract you should be doing almost all of your customer service, most technical support, most downloads / terminal programs, and risk management (This sucks). A BIN will give you a better buy-rate, but you are taking on some or all liability for your customer’s transactions and potential fraud. You should probably have a few million in the bank if you go for any type of contract where you are taking on risk.

Your hard cost in any situation is going to be $10,000 for ISO registration, $5,000 per year afterwards, plus any legal fees from a bankcard lawyer (You will want one), and the actual fees to incorporate, establish, and setup your business.

Anyway, this is a very general overview, and in reality it’s a very expensive, complicated and time-consuming process. I’d be happy to give you some more info if there is anything specifically you want to know.