Letters to the Editor
To: The Green Sheet
I'm a Treasury employee working on an informal finance-ten-years-out study. I find lots of ideas in your newsletter.
Regards
Dick Wexelblat
I have been doing some research on the bankcard industry and have had a difficult time finding specific information on the number of registered ISOs in the U.S. I also understand that there is a secondary group called "sub-ISO/ affiliate." What would your best guess be on how many of them there are? I would appreciate any help you could send my way.
Thank You,
Claude Ricks
To: Claude Ricks
We continue to get this question in various forms, and I am always surprised at how difficult it is to answer this question without a series of qualifications. First, is the question of, "What is an ISO?" From the bankcard industry's point of view, any organization that is not a "Bank," and is performing any function related to the issuance, advertising, or sale of Visa or MasterCard branded products, is by definition an ISO. Now of course, these organizations are not referred to as ISOs, but rather Member Service Providers, Bankcard Service Providers, and other such terms, but basically not banks.
Next, they come in all sizes. A one person organization with a direct contract with a bank to sell bankcard services and registered with Visa and/or MasterCard is an ISO. First Data Resources (FDR), an organization controlling more than half of all bankcard processing in the U.S., is and ISO as well. These two organizations look nothing alike, but are by definition the same thing, a non-bank Independent Sales or Service Organization.
It should not be difficult to determine the number of registered bankcard ISOs in the U.S., it is simply the list of names that Visa or MasterCard has on their rosters, but not reported anywhere. My guess is that you do not care about the issuing side of the business, or even perhaps the "processor" type organizations, but rather what I would call a "real" ISO, the organization that sells new bankcard accepting relationships. For this answer I would guess that there are less than 250. This organizational number is consistent with the number that are paying members of an organization such as ETA.
Finally, as you are undoubtedly aware, many other companies utilize the services of the "selling" type ISO, and of course do not have such "registration" cost or rules. Perhaps these organizations are a better judge of the actual number of ISOs in the marketplace. It is from this perspective that I tell you that the number of ISOs in the marketplace today is 3,500 to 4,000 organizations.
These organizations range from one person to many hundreds, and several hundred of these organizations have sub-ISO relationships. Currently The Green Sheet reaches about 85-90% of this marketplace. I hope this gives you some of the answers you were looking for.
Good Selling!SM
Paul H. Green
Editor
It appears that there is a lot of merger and acquisition going on in the ISO/MSP level of this industry as The Green Sheet has so reliably reported. I'm concerned by this development. My question in regards to this issue then is how can I set up my company so that it retains the titles to the acquired accounts? So that in the event that the company might be sold in the future, I will receive some compensation for my effort!
Your prompt reply is greatly appreciated.
Jon
Jon:
All that you are concerned about is addressed through the agreement that you have with your bank, or the up-stream sales organization. I can tell you that numerous changes have taken place over the years with the contracts that I had with Landmark Bank, which was sold and/or merged six times since 1983.
The same is true for my Citicorp Bank contract, that is now in the hands of FDR. We have continued to be paid, and all of our agents have continued to be paid for over 14 years, because the contract required continued payment. Each of the agents were given a copy of the bank agreement, and their contracts also clearly required continued payment.
So one might tell you that the only way to assure continued payment is to have a contract directly with a bank, but this is no panacea. The written agreement is the key, and with clear language you can defend you rights to payment even in court.
Finally, I can tell you from my own experience, which is considerable, that very few ISOs have failed to get paid due to a sale or merger of their accounts. It is true that a number of ISOs have not been paid, because the up-stream organization they work with failed to fulfill some contractual obligation, real or imagined. This argument can happen with a bank as easily as an up-stream ISO organization. (I experienced it with a direct bank relationship and was forced to resolve it in court). Your sales organization could also end up in the same place. Again, the agreement is the key to the resolution of this problem.
Hope this helps
Good Selling!SM
Paul H. Green
Editor
Thanks for getting back to me on the subject of credit card authorization which will run on the Mac.
In addition, last night I did an Alta Vista search on the Internet and discovered that a company called Tellan Software offers such a program. (They apparently also make a Windows version.) Their Web site is at www.tellan.com.
I called the company and was told that the Mac program is similar to the Windows version in function, so I plan to download their Windows demo and give it a whirl this weekend.
Again, thanks for your help.
John S. Baker
Southwestern Merchant Services
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