ISO vs ISV – What’s the Difference?

ISO vs ISV - Complete Guide

August 23, 2022

They may be only one letter apart, but there’s a big difference between an ISO and an ISV.

Traditionally, Independent Software Vendors (ISVs) and Independent Sales Organizations (ISOs) have performed separate functions for merchants and payment service providers but as the payments industry evolves, they’re finding more common ground. Overlapping areas of interest have given rise to new opportunities for both ISVs and ISOs as they adapt to digital trends. But before diving into their changing roles, let’s go back to basics – what does ISO mean, what is an ISV, and what services do they provide?


What is an ISO: ISO Definition


ISOs are the matchmakers of the payments industry, bridging the gap between payment processors and merchants. ISOs find merchants, sell them the solutions they need, and then handle any post-sale support. All processors have to do is manage the merchant’s transactions.

In taking on this type of client-facing role, ISOs serve an important function in the market. Payment processors typically hold large portfolios, with hundreds or thousands of merchant accounts. Dealing with each of these individually, as well as recruiting more, is a huge task – so they outsource it to a trusted Independent Sales Organization.

ISOs aren’t tied to a single processor however. As the name suggests, they’re independent operators who often work with multiple payment providers to find the right solutions for their merchants. Every merchant is different and depending on their size, industry, and goals, they need different solutions. It’s an ISO’s job to find that solution, which can involve vetting multiple third-party vendors.

But ISO services don’t always end when they’ve made their match. You may also see an ISO referred to as a merchant service provider or a wholesale ISO. That’s an indication that these companies perform underwriting tasks, manage fraud and risk, or offer additional services such as customer support, third-party payment gateway tools and other equipment.


How does the ISO revenue stream work?

An ISO’s revenue stream comes primarily from residuals – a percentage cut of every sale a merchant makes. This isn’t a huge amount as payment processors and other third parties all take a share too, but if an ISO has hundreds of merchants, performing thousands of transactions a day, they can see substantial profits.

Keeping track as these residuals pour in is one of the biggest back office challenges ISOs face, requiring high-performing analytical tools to process the huge volume of data.


What is an ISV: ISV Definition


ISOs sell payment platforms, ISVs create them. An Independent Software Vendor is anyone who publishes software. In the payments industry, this includes products such as automated onboarding platforms, digital risk management tools, data analytics, merchant monitoring, and any other software a payment processor or merchant acquirer needs.

ISVs are primarily B2B providers, selling their software to a wide range of businesses in the payments space, including payment facilitators (PayFacs), payment processors, and merchant acquirers. Many ISVs choose to narrow down their niche, specializing in specific verticals to hone in on certain stages of the merchant lifecycle or choosing certain industries such as hospitality or retail.


ISV Revenue Streams

Unlike ISOs, ISVs don’t rely on residuals. These organizations make their money selling ISV software directly to market, usually via licensing or Software-as-a-Service (Saas) agreements. Under this model, they can guarantee a steady stream of revenue through continual licensing fees – similar to a landlord collecting rent.


What are some well-known ISVs?

Well-known ISVs include:


With digital payments going mainstream in recent years, the ISV market has been enjoying strong growth. Analysts from Forrester predict there will be at least a million ISVs operating worldwide by 2025. This rise has caught the attention of merchant acquirers who are increasingly partnering with ISVs, hoping that this will give them an edge in the competitive marketplace.


ISOs and ISVs – Differences & Areas of Overlap


Before outlining the similarities and commonalities of ISOs and ISVs, it’s helpful to recap their key differences:

  • ISOs sell payment solutions to merchants, with wholesale ISOs offering additional services such as customer support. ISVs create software for companies in the payments industry.
  • ISOs rely mainly on residuals, a percentage of each merchant transaction. ISVs lease or sell their software, earning their money by providing Software-as-a-Service.

ISOs and ISVs do have a few things in common:

  • ISOs and ISVs are both B2B providers, working with merchants and the companies who serve them.
  • Larger ISOs and ISVs often have the same end goal in mind – to become payment facilitators with end-to-end control of the entire payment process.

Every company wants to grow, and ISOs and ISVs are no different. Their roles have been shifting in recent years as they seek to capitalize on the surging popularity of digital payments and cultivate multiple revenue streams.

Some ISVs now sell directly to merchants while wholesale ISOs buy up ISVs to round out their offering. Others are teaming up to combine forces. ISOs who would rather partner with an ISV than build their own solutions are turning to ISVs to help deliver the frictionless payment experience merchants are looking for.

While partnering is a natural consequence of the competitive state of the payments landscape, it’s not always easy. ISOs and ISVs can both find themselves out of their comfort zone and needing to quickly reframe their infrastructure and business model. Finding reliable and experienced third-party partners can help them navigate the complexity of the new cashless era.


How ISOs and ISVs can benefit from syncing their CRM to their underwriting platform


Both ISOs and ISVs need to stay focused on the merchant experience – offering solutions that streamline the onboarding and approvals process to deliver fast and efficient payment processing.

Agreement Express understands this. That’s why we partnered with IRIS CRM to save ISOs and ISVs time by speeding up their workflows. By integrating our automated merchant underwriting solution with IRIS’ market-leading CRM platform, users can instantly sync data between the two systems. This allows ISOs and ISVs to trigger risk reviews or enhanced due diligence right from their CRM.

See below the 4 steps wholesale ISOs can take to streamline their integration between their CRM and merchant underwriting tools.

  1. The merchant’s data is added to an ISO or ISV’s CRM and the integrated Merchant ScanXpress is activated, performing an underwriting review based on lead criteria. The software gives each account a risk score and/or flags it.
  2. Accounts with no flags are automatically approved while accounts with flags are instantly sent to underwriters.
  3. Underwriters approve the application or earmark it for further checks before approving.
  4. The data automatically returns to the user’s IRIS CRM so they can update their account information and let the merchant know without delay that they’ve been greenlit.


Streamline your underwriting and merchant data management workflows


With this innovative integration you’ll never have to re-key information from your CRM to your underwriting and risk monitoring processes. It puts an end to the frustrating back-and-forth of meticulously checking applications against compliance watchlists. You can also share data across departments in real-time, giving sales teams all the information they need to prioritize their outreach efforts and maximize their resources.

The IRIS CRM and Agreement Express integration is a game changer for ISO and ISV workflows, allowing for seamless merchant onboarding to most major processor platforms such as Global Payments, TSYS, Fiserv, Worldpay, Elavon, Paysafe, and more!

Streamline your processes so that your sales, compliance, and underwriting teams can focus on what matters most. To find out more, or schedule a demonstration, contact the Agreement Express team today.