Third Party Providers of Merchant Services – The Pros and Cons
Usually provided by banks and other financial institutions, providers of merchant services have stringent standards. After all, this transaction involves money that could amount to millions per month, not to mention the investment that has to be made per merchant service account holder. A good sales track record is one of the requirements of merchant service providers.
A third party provider (or an ISO or Independent Sales Organization) of merchant services can offer credit card processing services for the new business. Basically, what the ISO does is create a merchant account for the business. It is a form of investment for these third party providers, although it can be a risk, too. This option is a good alternative for those who cannot get merchant services the usual way.
The main benefit of a third party provider, needless to say, is that it allows businesses to set up their own credit card processor. Most third party processors also charge merchants a certain percentage on the sum of all credit card transactions made. The percentage, of course, is hefty (from 10 to 20 percent), but keep in mind that this is the only fee being charged.
the ISO still has to pay for monthly fees, transaction fees and set-up fees. The provider actually sets up a merchant account on your behalf. And as with any transaction with a middleman, the fees are only likely to be bigger. Third party processors may also take longer to clear payments, which means merchants and retailers will not instantly get the payment for their products or their services.