ISO vs. ISV in Payment Processing: Key Differences Explained

ISOs and ISVs both play crucial roles in the payment processing industry. They both work directly with businesses to provide a range of solutions and often a more personalized touch compared to direct payment processors.

But it’s not always easy to understand the differences between these two very similar acronyms—especially because their services and sales pitches are tough to distinguish apart.

I’ve worked directly with ISOs and ISVs throughout my career, so I created this guide to clarify things and ultimately help you make the most informed decisions for your company.

What is an ISO?

An ISO (Independent Sales Organization) is a third-party company authorized to sell merchant services on behalf of an acquiring bank. 

ISOs are essentially middlemen or intermediaries between businesses and payment processors. They handle onboarding, support, and account management—but they don’t actually process payments in-house. Instead, they rely on acquiring banks to process payments on the backend. 

ISOs come in all shapes and sizes.

Large banks like Wells Fargo and Bank of America are both ISOs that resell Fiserv’s payment processing services. They leverage relationships with businesses using their traditional banking solutions and then upsell those businesses on payment processing services.

Other times, ISOs can be much smaller and provide industry-specific solutions. For example, Bluefin is an ISO of Elavon’s payment processing services, and they specifically target dental and orthodontics practices.

What is an ISV?

In the payments world, ISV stands for Independent Software Vendor. 

ISVs develop and sell payment software to businesses—typically specializing in integrated payment processing solutions. 

In addition to providing applications with built-in processing capabilities, ISVs also develop and sell POS systems, ecommerce platforms, and similar software. 

Greyfinch is one example of an ISV. They provide orthodontics practice management software that includes built-in payment processing capabilities. So practices can manage things like appointments, patient information, telehealth visits, SMS and emails, and online forms while accepting payments from the same platform. 

Key Differences Between ISOs and ISVs

Let’s look a bit closer at how ISOs are different from ISVs when it comes to specific criteria. This will give you more context about how these organizations operate and work directly with merchants. 

Primary Services Offered

ISOs (independent sales organizations) primarily sell merchant accounts and payment processing services. 

As the name implies, ISVs (independent software vendors) sell software—and mostly software that focuses on integrated payments capabilities. 

Certification Requirements

It’s much more challenging to become certified as an ISO than an ISV.

ISOs must be registered with the card networks and get sponsorship from an acquiring bank. ISOs also must meet strict compliance requirements to operate.

These rules don’t apply to ISVs.

Customization Options

ISVs typically offer far more advanced customizations for businesses. Since ISVs develop the software that they sell, they can really do whatever they want with it (if they choose to do so).

So if a merchant has some type of request for a unique function or capability that isn’t part of the base software offering, the ISV can decide to build it for them. 

ISOs’ customization options are limited to services that they’re reselling. For example, if an ISO is reselling Fiserv’s acquiring services, the customization options will be limited to whatever Fiserv offers.

Revenue Model

An ISO’s revenue model is mostly based on commissions for the services it sells. In addition to a one-time fee for onboarding a new customer, they’ll continue to earn a percentage of the payment processing fees and other services provided by the backend processor. 

ISVs generate revenue from selling or licensing the software products. This often comes in the form of a one-time purchase, ongoing subscription rate, or pricing based on usage (and sometimes a combination of these).

Interaction With Customers

Both ISOs and ISVs are customer-facing.

For ISOs, they handle all interactions with the merchant, from sales to billing and support. Again, let’s stick with the example of an ISO reselling Fiserv’s services. 

While Fiserv’s name may appear on the merchant’s statement, all questions or problems would go through the ISO. The merchant would never have to contact Fiserv directly.

Similarly, ISVs also directly handle customer interactions through sales, billing, and support. The only difference is that they are doing this for the software and services that they’re actually providing. 

Technology

ISVs are tech-forward organizations. Everything about what they do relies on having innovative tech—as this is how they can stand out from other solutions and processors.

ISOs don’t develop their own technology. Instead, they just look to resell any hardware or software that’s provided by their backend processor. 

Costs For Businesses

Merchants are typically going to pay more if they’re using an ISO or an ISV to set up payment processing. 

For ISOs, their services need to be priced accordingly so they can turn a profit on the processing solutions that they’re reselling. 

High-volume merchants processing tens of millions annually would be able to get a better rate by doing directly to a payment processor instead of a third-party ISO. However, smaller businesses might actually get a better deal, as ISOs can get bulk rates for working with so many merchants—rates that a small business may not have access to if they want directly to a processor.

ISVs offering integrated payment solutions are always going to be slightly more expensive. They leverage these customized systems to justify higher rates. If you want to process payments from an application or portal that you’re using for other business processes, you’ll need to be willing to pay a premium for it. 

Navigating the Blurred Lines Between ISOs and ISVs in an Era of Modern Payment Solutions

Payments technology has really advanced in recent years. The demand for high-tech systems has really shifted the way these independent companies operate. 

ISOs have been around for decades, reselling credit card processing services on behalf of larger processors. But lately, ISOs have also started to resell solutions that would typically be offered by ISVs.

One reason for this is that processors are offering new technology and even acquiring software companies. For example, Clover used to rely on First Data to process payments for its POS system until First Data ultimately acquired the software vendor. Then Fiserv acquired First Data—meaning they also acquired Clover.

So today, resellers of Fiserv are also reselling Clover technology, which is a semi-integrated software (although not quite as advanced as true ISV solutions).

Greyfinch is another example. They were always an ISV, and they just got the licensing to do credit card processing, but they rely on Bluefin (an ISO) to handle this for them on the backend.

These are just a couple examples of how ISOs and ISVs are becoming even harder to tell apart as their services are starting to overlap. And the way these companies market themselves to merchants, they all seem to offer all-in-one solutions for whatever the business needs (regardless of what’s happening behind the scenes).

At the end of the day, it doesn’t really matter whether you get your services from an ISO or ISV. 

What matters most is that you’re getting a good rate and you’re set up with the payments infrastructure that works best for your business.