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Education

internal audit compliance been stronger, Wirecard would 6. Diversification
not have become such a (seemingly) valuable stock.
Most ISOs rely on a single processor for the majority
A business does not need to be the size of Wirecard of their revenue. ISOs should invest in secondary
to establish a healthy balance between business and relationships that generate meaningful residuals so that
compliance. The smallest ISO should experience the if one processor disappears, the others will be substantial
tension of wanting to grow the business as quickly as enough to continue the ISO's operations.
possible, while at the same time not wanting to submit
false information or merchant applications that do not The first step in diversification for ISOs is to ensure that
meet compliance standards. each of their processing relationships is nonexclusive,
thereby allowing ISOs to create secondary relationships
5. Could it happen here? without putting themselves in breach of their ISO
agreements.
Yes, it could. .S. processors are increasingly international
and rely on large international auditing firms, like the Comparison of a typical U.S. ISO to Wirecard is perhaps
ones used by Wirecard, to ensure that their domestic and like comparing the turtle and the hare. Hopefully, the
foreign operations are properly supervised. Payments and steady, tireless effort of a typical ISO, although slower
processor financing are ever more international. than fintech sensations, will pay off in the long run. There
is no better expert at generating processing revenue than
I am not aware of imminent risk to any U.S. processor, but an ISO experienced in soliciting individual merchants.
the Wirecard example is eye opening for domestic ISOs,
because they carry the financial risk of the processors that
pay them. Before accepting a new ISO, a processor usually In publishing The Green Sheet, neither the author nor the publisher is
puts the ISO through a rigorous due diligence process. engaged in rendering legal, accounting, or other professional services.
Why not turn the tables? ISOs should take the time to If legal advice or other expert assistance is required, the services of a
understand the financial soundness of the processors for competent professional should be sought. For further information on
which they wish to sell so they, too, can assess the risk of this article, please contact Adam Atlas, Attorney at Law by email at
their most important business partners. atlas@adamatlas.com or by phone at 514-842-0886.

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