The payments landscape is changing rapidly. In this article we will provide some details on the Payments Value Chain.
Many organizations and solutions may be required in order to provide the merchant with the right solution. These solutions range in complexity.
ISO – Independent Sales Organization
An ISO’s primary function is to sell merchant services. In order to facilitate this the ISO will have relationships with numerous solution providers.
The term ISO is actually defined by Visa. MasterCard uses the term MSP (Merchant Service Provider). Generally, people refer to these organizations as ISO’s and consider the ISO and MSP programs/terms to be synonymous.
ISV – Independent Software Vendor
An ISV is a company that develops and sells a software package with some level of payments integration.
The ISV may sell directly to merchants, through VAR’s, or a Dealer network.
The ISV may have a relationship with an ISO.
The ISV may integrate payments functionality with a processor, gateway, or third-party middleware solutions.
Middleware Software Provider
The middleware providers provide a payment solution that is easily integrated with an ISV’s technology.
These middleware solutions come in various “flavors”. Some are hardware based solutions and others are thick client type solutions.
There is some level of installation and configuration performed in conjunction with the ISV (1x software development) and VAR/dealer (each merchant installation).
VAR – Value Added Reseller
A VAR is generally a company that integrates solutions and sells to merchants directly or through a dealer network.
They may offer support services and other value adds to merchants.
The VAR may or may not be the entity that provisions the payment solution. The VAR may have a relationship with an ISO.
A Dealer is generally a small company or individual that sells products to merchants directly. The Dealer may offer multiple solutions. The Dealer may have a relationship with an ISO.
Dealers are sometimes referred to as POS Software Dealers.
Many times the VAR and Dealer terms are used synonymously.
IPOS – Integrated Point Of Sale
An integrated point of sale solution may take multiple forms. Modern IPOS solutions generally use tablet technology based on the iPad or Android operating systems. However, there are many PC based IPOS solutions on the market.
IPOS solutions may process transactions using fully integrated payment interfaces (API’s, SDK’s, etc.) or through side-by-side terminal solutions.
Transactions are generally processed over the internet using local wireless networks and broadband connections.
The IPOS solution may be sold through the ISV/VAR/Dealer networks or as complete single-provider solutions (Square, etc.).
A payment gateway is generally an e-commerce payment application solution provider. In addition to e-commerce for online retailers, the gateway may provide Virtual Terminal and other functionality. The payment gateway may take multiple forms such as a Web application, API, SDK, or IFrame integration.
The gateway typically provides sophisticated solutions on top of the functionality provided by the frontend processors. These solutions may be tokenization, account updater, recurring billing, subscription management, etc.
The Acquirer/Processor is responsible for integration with the various payment solutions, communication networks, card schemes, and banks.
The Processor is generally made up of various systems including the frontend, backend, risk system, chargeback system, merchant accounting system, etc.
The Frontend processor publishes a set of foundational specifications (Custom HDC/TDC, ISO, BASE24, etc.) and a number of communications interfaces (IP, Dial, Wireless, VPN, Leased Lines, MPLS, etc.). The Frontend services are built upon by payment solution providers.