Mark Dunn
January 26, 2023
min read

Where do I establish my participation in payments?

The question I get asked most often is, which type of payments relationship is right for me?  Another way to ask this is how do I monetize the business relationships I have so I can establish a recurring residual stream from payments?

There are a number of possible alternatives for entry into the payments world to make a profit.  Here are a few:

Independent Sales Organization (ISO) format – where each merchant submits a completed application, is fully underwritten and upon acceptance, is given their own merchant ID number (MID) and boarded for merchant processing.

Relative roles within the ISO format:

  • Referral relationship
  • Sales agent
  • Registered retail ISO
  • Registered wholesale ISO

Payment Facilitator (Payfac) format – where the Payfac is the merchant of record and each merchant is signed up under them as a sub-merchant.  The merchant submits some basic information, passes a credit check, AML/OFAC check and if approved, is set up for processing in very short order.  

  • Payfac as a Service (sometimes called Payfac in a Box)
  • Registered Payment Facilitator

Should I have a referral relationship, a sales agent relationship, should I become a registered retail ISO or a registered wholesale ISO, should I become a registered payments facilitator or use a payments facilitator as a service?

And the answer is that it depends on a lot of factors and considerations.  Things like: what type of organization or company do you have?  How well funded is your plan to break into electronic payments?    How much experience do you have in the payments industry?  How much help will you need in getting started?  What’s your long-term plan or vision for what your company can be?  What’s your timetable for getting started?  What’s your budget for the start-up phase?

You will need to explore all of these areas and several more before you focus in on one format of participation.

The most important thing you can do is get accurate, detailed information from an informed neutral source with lots of experience in payments. That is, you should engage a consultant.

You need to look for a company that has concluded agreements on behalf of their clients for all of these formats.  

Here’s what you need to watch out for:  

  1. Most people in the payments industry make money off the efforts of others who are less informed.  So when you go to most industry “consultants”, what you will get is information that is slanted so as to enable you to provide an income stream for them.  In other words, you end up working for them and they get a piece of your business or a cut of your profits.
  2. The payments industry tends to be “siloed”.  That means that even people with 5-10 years of experience may have spent most or all of that time in only one “silo” of the business.  Payments has a lot of moving pieces and you need an advisor whose knowledge and experience is broad as well as deep.
  3. It’s possible to overpay for intelligence and advice.  You should take a careful look at what you’re getting for your money.  If you get a recommendation of an expert to call, always find out why they are making the recommendation.  I would also suggest you find out exactly who you will be working with after you sign a consulting agreement: executive consultant or junior staff advisor.  Also, I don’t recommend you pay the consultant a percentage of the business as a component of his/her fee.  In any case I recommend you talk to at least 2 consultants or advisors before deciding which to choose.

When you choose Field Guide as your consultant, you will always be working directly with a senior partner.  

For a reality check on your search for an advisor, give us a call.  We’ll be happy to talk you through your plan and make some recommendations.

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