Who is your contract really with when you sign up through an ISO or a payment facilitator?
Summary
In most cases, with the acquirer: the bank that sponsors your business on the card networks. Visa says a seller who signs with an ISO is signing with the acquirer, and that a payment facilitator signs sellers on the acquirer's behalf and collects their settlement money. Either way, the acquirer stays responsible to Visa for every company standing between it and you.
Four kinds of company Visa puts between a shop and its acquirer
Visa's 2024 guide "Beyond the Acquirer" sorts them by two powers: signing a merchant agreement for the acquirer, and receiving settlement proceeds for the seller.
| Type | What Visa says it does | Receives your settlement money? |
|---|---|---|
| ISO | Acts as the acquirer's agent; signing with it is signing with the acquirer | No |
| Payment facilitator | Signs sellers for the acquirer and collects their proceeds | Yes |
| Marketplace | Sells many sellers' goods on one branded platform and processes for them | Yes |
| Third party servicer | Hired by the acquirer for payment services | No |
A company that performs only one of the two facilitator functions still counts as a payment facilitator.
ISOs sell and service; they do not process
An ISO does not process transactions, does not receive settlement funds, and does not see your customers' card data. If it starts processing, Visa reclassifies it as a third party servicer. The OCC's merchant processing handbook describes the same job from the bank's side: the ISO solicits merchants and handles applications and chargebacks for the acquirer.
The $1 million line for sub-merchants
Sellers under a facilitator are called sponsored merchants, or sub-merchants, and every Visa rule applies to them as if they had signed with an acquirer directly. Once a sponsored merchant's annual Visa sales pass US$1,000,000, the facilitator has to add the acquirer to that seller's merchant agreement.
In Mastercard's wording, a payment facilitator is a provider that an acquirer registers so it can handle transactions for submerchants. Registration runs through the acquirer, and Mastercard publishes a list of registered facilitators on its site.
On a marketplace, the seller never contracts with an acquirer at all. The marketplace holds that contract. A site that does not process payments for its sellers is not a marketplace in Visa's sense.
The acquirer carries the liability
Visa writes that the acquirer remains responsible for the acts of sellers and of every entity working between it and them. Registration with Visa is required for third party agents and most of the other entities in the guide, and sellers are expected to make sure the service providers they use are registered by their acquirer. A company a seller hires directly, without going through the acquirer, is a merchant servicer, and the seller has to tell its acquirer about it.
The OCC handbook explains why banks care. Card network rules make the acquiring bank liable to the network for its third parties, the bank can be liable for losses from merchant fraud, and its contingent liability for chargebacks runs for as long as 180 days.
Sources
- usa.visa.com/content/dam/VCOM/global/support-legal/documents/visa-acce…
- mastercard.com/global/en/business/overview/start-accepting/payment-fac…
- occ.gov/publications-and-resources/publications/comptrollers-handbook/…
Related on this site
- Who is the acquirer in a card payment, and how is it different from the card issuer?
- Is a merchant account just another business bank account?
- What are you actually buying when you sign up for merchant services?
- Do you need a merchant account, a processor, and a gateway, or can one company cover all three?
- What a 'get a quote' button is for
- Every provider we hold, and which publish a rate
Written by Kaz (pen name). Figures are copied from providers' published pricing pages on the dates shown. We have not used these products. Corrections: contact form.