Any comments would be appreciated.
We are currently setting up a new company and would like some advice regarding the steps to set up our own third party processing company.
Any comments on what steps to follow?

Alternatively what is involved in becoming an ISO/MSP?

There are several partners in the company of different nationalities, so the options of where to incorporate the company is varied. US or Canada is possible.

I also realize we will have to invest a large amount on money, this is possible as we have several investors.

Anyone's comments or ideas would be highly appreciated, thanks alot.

My only comment is -- I have never found anyone willing to open a 3pp account regardless of financials. Good luck! I hope you yave more luck.

thanks for your comment custsrvcrep, I assume you have tried to do the same?
Do you have any words of wisdom regarding starting out as an ISO/MSP instead.
What kind of process did you follow in order to try to open a 3PP?

thanks again

What kind of process did you follow in order to try to open a 3PP?

Sorry, no words of wisdom. As a 3pp, you need to open an account as an IPSP -- and to quote an old song, "I searched the world over and thought I found true love", but I NEVER did find any provider willing to open IPSP accounts.

I'm sure they are out there - somewhere. But I never got close.


FYI: IPSPs are basically third party resellers for merchants who wish to sell online but who do not have their own merchant accounts, ... The IPSP resells the online merchant's products and services through its own merchant account, serving as an "umbrella" under which businesses process money under.

I still believe there is a market for smaller, more controlled IPSP services that enact better control, but getting an approved accout to do so is another story.

Becoming a 3PP - very difficult. Financials / time.

It almsot sounds like you are just wanting to fofer merchant accounts? You could become an affiliate of some, resellers, or ISOs / MSPs. Each one has their own responsibilities - especially, the ISO/MSP. You need to have (not as much) money to start as well as the registration fees with Visa. Check out Merchant Account Quesitons (http://www.webhostingtalk.com/showthread.php?t=463579)

Thanks for your comments.
custsrvcrep, may I ask; what were the reasons behind the lack of approval? Can you give me some idea of the process you followed in your attempt?

Corey you mention time and money - the keys to success :) well add to that some knowledge and you have a head start!
I have the time and can get the money, now trying to find the knowledge.
We do want to offer merchant accounts BUT not to any companies incorporated in US. Our target market is Middle East, Maldives, Seychelles, plus some other travel destinations. Our clients are well established and we know them all personally, now we want to provide solutions.
I actually read the thread you linked here the other day. It doesn't really help because I have not had any success finding an ISO/MSP who can provide a solution to my target market for a reasonable transaction fee.

Any other help, greatly appreciated.

Ohh, the old song again... forget about 3PP, this business model is dead now. To become registered ISPS with Visa/MC you can't even imagine what you will have to go through. And it's not only money involved, but also experience and knowlege of the industry. Not mentioning that another word for 3PP is "aggregation", which Mastercard simply prohibits. My advice - forget about it.

What you MAY do though is to find a bank which would agree to open what they call "high-risk merchant account" for your clients where you will be a service and support provider. If you need a technology solution for this I will be glad to consult you. Good luck.

I think that the main question to ask initially is - what is your ultimate business goal/objective that you are trying to achieve?

Often times, there is a much simpler solution to achieve your goals than starting up as your own ISO/MSP or IPSP. A lot of it comes down to the type & location of merchants that you want to approve as well as the kind of transaction volume that you will be processing.

Becoming an ISO/MSP in the U.S. won't do you any good, for instance, if you want to underwrite international merchants. And if you want to underwrite high risk merchants, it will be difficult to even become an ISO/MSP since most acquiring Member Banks simply don't want the risk exposure and potential problems when they can stay focused on low risk conventional merchants and make just as much from their BIN sponsorship fees.

I can also tell you first hand that there are a wide array of costs & logistical issues that come into play to run a merchant services operation in-house. Not only do you need to establish your front-end authorization network and back-end settlement network relationships - provided you complete all of the necessary registrations with Visa, MasterCard and your sponsoring bank - you also need to determine how you are going to manage your chargeback/exception processing, risk management, underwriting and deployment.

This means additional expenses, hiring of experienced staff for each of these areas and a definite learning curve if you haven't done these things before... and it is also important to keep in mind that losses are a reality in the merchant processing industry.

If you don't manage risk & underwriting appropriately, you can easily get burned by clever fraudsters as well as taking losses due to unpaid debits & chargebacks from your merchants if you manage your risk too loosely... and if you are overly stringent, you can have a lot of merchant attrition. So it is a real balancing act.

In most circumstances that I've seen, a company who wants to actively acquire merchant accounts is usually better off first starting as an agent for an existing ISO/MSP to learn the ropes of the industry.

That way, you can work out the kinks and then - if your volume is sufficient and your app count is high enough - you can always invest to take it to the next level and you'll be much better prepared to do so.

Now with regard to non-U.S. merchant accounts, that unfortunately is still very much a minefield in many ways.

If you can find an offshore processor that delivers as they promise, that activates accounts in a reasonably prompt manner, pays out to both the merchants & resellers on a timely basis and you can trust them - my advice is to work with them and never leave.

When a merchant account is issued, it is issued to you. The bank / MAP has reviewed your application and allowed yuo to accept credit cards. And only you. If you accept a credit card for a friend (this is done thousands of times at a trade show), it is against your merchant account agreement and you could lose your account.

Basically you are adding another entity in the middle to this process that already has so many parties involved.

Depending on your needs / client based, you might even look at your own cards - i.e. pre-loaded cards. There are scores of companies out there that will set you up with these, if the consumer base is correct.

The only reason I pointed you to the other thread was one of your comments:
Do you have any words of wisdom regarding starting out as an ISO/MSP instead.

If you can find an offshore processor that delivers as they promise, that activates accounts in a reasonably prompt manner, pays out to both the merchants & resellers on a timely basis and you can trust them - my advice is to work with them and never leave.

Do you know any? :s I would definitely like to see some processors like you've described above.

Hi FashionPoint et al.
I 2nd that. If anyone could point me in even the slighest direction to find:
Originally Posted by cdgcommerce
An offshore processor that delivers as they promise, that activates accounts in a reasonably prompt manner, pays out to both the merchants & resellers on a timely basis and you can trust them -

I originally had an agent agreement with Chronopay. I started selling the service to my clients under the understanding that my clients were not incorporated in the EU or US and once I signed up the 1st client (or almost) Chronopay came back and said, oh by the way, we're not accepting any customers who are not incorporated in the EU.
Made me and my company look like complete idiots.

So, I am very nervous to start again with a new processor. I want to explore all avenues before commiting again.

agreement with Chronopay

So far, I am NOT impressed with my conversations with chronopay.

I asked them a very specific question.

They responded:

To be able to offer you our services and acquire a merchant account for you, you need to have an operational company incorporated within the EU.

From the online application you have filled in earlier I understand that you
are not able to meet this requirement, therefore we are not able to offer
you our services at this moment.

Now, they didn't ask me in the app whether I had an EU organization; nor did I tell them it was for me or that I was not assisting someone else who was EU based.

And they didn't bother to answer the question I posed since I didn't "meet their requirements".

I wrote back asking "do you normally just turn people away without knowing if they can meet any merchant requirements necessary? "

I thought it was really bad business and immediately soured me on Chronopay.

In answer to your question, Fashionpoint, I really wish that I could give you all a recommendation on an offshore processor that is a proven entity who I'd feel comfortable referring openly but I don't have one to really point to as of yet... at least none that I've had enough first hand experience with.

There have been a few times in the past when I thought I had found one but then there were issues of one kind or another so I'm extremely reluctant at this point to mention any offshore processor.

The offshore processing marketplace is still very much the "wild wild west" of the bankcard industry.

I like your reference to the wild wild west! It's so perfect.
So, back to my original issue...since I can't find anyone who I can trust, I'm left with the only other option...do it myself.

I would definately prefer to be an agent for an ISO BUT, since I can not seem to find one which fulfills the above criteria, I can't see any other option.

Next step....?

ditto,

open a bank. Jokes aside, it is not that easy to become a 3pp, but it is possible if you have certain connections and fairly big budget.

Ditto,

You may honestly just want to interview a list of offshore processors and start by determining which ones are agents and which ones are the actual offshore bank... and then ask for references and start weeding them out as you do your due diligence.

You may even need to setup more than one partnership to serve the various categories and geographic locales of your clients. While this will be a difficult and painstaking process, I think it will still be the better choice than trying to put together your own system from scratch.

Plus, if you do later final put together your own system, you'll have learned the ropes of the industry first which will be an invaluable tool for you from the knowledge and experience you'll gain from it.

I really wish that I had more concrete that I could give you but it's been 10+ years for me and I still don't have a proverbial list of "ideal high risk and/or offshore processors."

Thanks for all your comments. I actually hadn't thought about partnering with more than one company. I still have ALOT of research to do. Will keep plugging on.